BAE Systems profits leap amid ‘new era’ of defence spending

BAE Systems has set new records with its annual results amid a ramping-up in global defence spending as geopolitical uncertainty remains heightened.

Europe’s biggest defence contractor reported better-than-expected underlying earnings before interest and taxes of £3.32 billion for 2025, up 12% on the previous year, as sales jumped 10% to a record high of £30.66 billion.

The aerospace and weapons manufacturer said its order backlog also hit a record £83.6 billion as of the end of December while its order intake stood at £36.8 billion.

Chief executive Charles Woodburn said: “In a new era of defence spending, driven by escalating security challenges, we’re well-positioned to provide both the advanced conventional systems and disruptive technologies needed to protect the nations we serve now and into the future.

“With a record order backlog and continuing investment in our business to enhance agility, efficiency and capacity, we’re confident in our ability to keep delivering growth over the coming years.”

The firm forecast further growth in 2026, albeit at a slower pace, with the firm pencilling in underlying earnings growth of between 9% to 11% and sales to rise by between 7% and 9%.

BAE – which makes weapons ranging across missiles and artillery systems, tanks, planes and warships – has been boosted as countries worldwide increase spending on defence, with Europe in particular re-arming itself.

In the UK, Prime Minister Sir Keir Starmer said earlier this week that Britain needed to “go faster” in increasing military spending and is reportedly looking at accelerating plans to commit 3% of UK gross domestic product (GDP) to defence.

BAE said notable orders last year include a contract from Turkey for 20 Typhoon aircraft, expected to be worth £4.6 billion to the firm and support 20,000 UK jobs, as well as an order from Norway for Type 26 frigates.

Shares in BAE lifted 4% in Wednesday morning trading, having risen by nearly a fifth since the start of 2026 alone and more than trebling since Russia invaded Ukraine in 2022, which sparked a boom in defence spending worldwide.

Richard Hunter, head of markets at Interactive Investor, said BAE’s better-than-forecast figures reflect the “unfortunate sign of the times that defence stocks are squarely back in fashion, as governments around the world look to protect their interests and lands from growing tensions”.

He added: “The geopolitical backdrop is a reminder that brittle relationships are seemingly never far away, ranging from potential and actual conflicts in the likes of Venezuela, between China and Japan and Russia and Ukraine.

“The backdrop has led to a number of governments pledging a higher percentage of GDP to defence spending over the next decade, which in turn means that opportunities remain within the burgeoning defence sector.”