Britain’s BAE Systems positions for ‘new era’ of defense spending

BAE Systems attracted record orders in 2025, and now the UK defense staple is setting its sights on years of growth amid a global ramp-up in spending.

Its shares rose 3.6% on Wednesday after its full-year earnings report showed sales soared 10% last year to reach a record £30.7 billion ($41.7 billion).

That helped push operating profits to £2.93 billion, a 9% year-on-year increase, as revenues grew 8% to £28.3 billion.

The FTSE 100-listed company, which manufactures a range of aircraft, weapons, munitions and warships, saw its order backlog hit £83.6 billion, a £5.8 billion increase from 2024.

Now, BAE is preparing to capitalize on years of future growth as geopolitical fissures usher in what CEO Charles Woodburn called a “new era of defense spending” driven by “escalating security challenges.”

The company expects sales to grow by between 7% and 9% in 2026, with guidance for cumulative free cash flow between 2026 and 2028 in excess of £6 billion.

“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,” Woodburn said in a statement accompanying Wednesday’s earnings.

“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.”

BAE Systems’ share price is up 22.6% year-to-date, and more than 57% over the past 12 months.

Last year, the company secured £36.8 billion of orders. Highlights included a £4.6 billion deal between the UK and Turkey for 20 Typhoon aircraft and an associated weapons package, as well as a £10 billion agreement with Norway’s government to provide Type 26 frigates for its warship program.

It also secured a $1.2 billion contract to provide space-based missile-tracking capabilities and other satellite equipment to the U.S. Space Force.

Bernstein analysts recently named BAE Systems as one of four European defense stocks that will be critical to the growing push for greater military sovereignty in the region, as nations there turn to continental suppliers for arms and equipment and away from U.S. manufacturers.

—CNBC’s Sam Meredith contributed to this report.