European Defense Industry Dynamics in 2025
In 2025, Europe saw unprecedented levels of defense expenditures, funneling funds into a broad array of military assets including munitions, tanks, air defense systems, and naval vessels. Among the primary beneficiaries of this defense spending spree were Germany’s Rheinmetall, Sweden’s Saab, and the UK’s BAE Systems.
Conversely, France’s Naval Group experienced a downturn, failing to secure multiple contracts throughout the year. Additionally, a collaborative project between France, Germany, and Spain aimed at developing a futuristic fighter jet encountered significant delays due to ongoing disputes between leading contractors, Dassault Aviation and Airbus.
Despite varied outcomes, the general increase in defense budgets across Europe generally boosted the sector. Defense News local correspondents have identified several key winners and losers in the European defense industry for the year 2025:
Standout Performers
Saab had a remarkable year, highlighted by France’s acquisition of two GlobalEye early warning and control aircraft. Poland chose Saab’s A26 submarines for its Orka program in November. The company also secured deals for Gripen aircraft with Thailand and Colombia, delivered short-range air defense systems to Sweden, Czechia, and Latvia, provided electronic warfare systems for Germany’s Eurofighters, and received approval for continued conceptual studies on future fighters by the Swedish Defence Material Administration. In October, Saab increased its forecast for organic sales growth in 2025 to between 20% and 24%.
Rheinmetall reported another exceptional year, securing billions in orders and multi-year contracts, supplying the German military with vehicles and ammunition, and delivering Skyranger anti-drone cannons to the Netherlands. Additionally, in a joint venture with Leonardo, it secured an inaugural order from Italy for the Lynx combat vehicle. Rheinmetall further expanded its defense reach by acquiring a German shipyard to venture into warship production and, in partnership with ICEYE, won a contract to provide a satellite-intelligence constellation for the German Armed Forces. Sales in Rheinmetall’s defense sector grew by 28% in the first nine months of 2025.
BAE Systems secured significant achievements in 2025, including Norway’s choice of the British firm’s Type 26 frigates in a deal valued at £10 billion. BAE also succeeded in penetrating the US market, securing a $1.7 billion contract to supply laser-guidance kits to the U.S. Navy and benefiting from the sale of 20 Eurofighter Typhoon jets to Turkey, a contract potentially worth £8 billion. Following strong performance in the first half of the year, BAE upgraded its full-year sales and operating profit forecasts in July.
The pan-European missile manufacturer MBDA capitalized on increased European investment in air defense, with Denmark selecting the SAMP/T air-defense system, an MBDA-led initiative, over the American Patriot system. France and Italy also placed additional orders for Aster missiles. In response to heightened demand, MBDA ramped up missile production across France, Italy, and the UK, reflecting the prioritization of air and missile defense by both the EU and NATO. The firm also secured a contract to deliver a laser weapon system to the UK’s Royal Navy, marking its expansion beyond traditional missile systems.
The Global Combat Air System (GCAP) project made significant strides in 2025 despite challenges faced by competing programs. Noted defense analyst Bill Sweetman commented on the program’s progress, highlighting its quiet but steady advancement. Although Japan expressed concerns about the pace of development and Italy lamented the UK’s reluctance to share all its technology, the program’s development continued with minimal public discourse. A potential challenge could arise as more nations express interest in joining the program as it approaches its projected 2035 completion.
The European Union’s defense policy saw substantial development in 2025 with the release of the bloc’s first defense white paper in March and the implementation of a €150 billion loan program for joint defense procurement under the ReArm Europe initiative. This plan links EU defense policy with significant financial mechanisms. Key milestones also included a political agreement on the European Defence Industry Programme and the adoption of the Defence Readiness Roadmap 2030 in October.
The French-German armored vehicle manufacturer KNDS benefited from a surge in European demand for land systems, spurred by the conflict in Ukraine. The company secured several billion-euro contracts for the Leopard 2 A8 main battle tank, marking the model’s first new production since 1992. KNDS also saw robust demand for its artillery, including new orders for the RCH 155 howitzer and ongoing deliveries of the PzH 2000 and Caesar systems. In October, KNDS and its partner Rheinmetall secured a €3.4 billion contract to supply over 200 infantry fighting vehicles based on the Boxer wheeled chassis to Germany and the Netherlands.
Underperformers
While the EU made significant strides in enhancing collective defense spending and capability in 2025, France and Germany faced considerable setbacks in their collaboration on the Future Combat Air System (FCAS). Disagreements persisted throughout the year, casting doubt on the project’s future. Dassault Aviation’s CEO, Eric Trappier, expressed uncertainty about the program’s viability, reflecting ongoing tensions with Airbus over leadership and collaborative dynamics within the tri-national initiative.
Naval Group struggled throughout 2025, losing several key contracts to international competitors. Notably, Canada chose Hanwha and TKMS over Naval Group for its new submarine program, and Saab was preferred for Poland’s Orka submarine project. In Norway, Naval Group was outbid by BAE Systems for new frigates. While continuing to fulfill existing contracts, including frigate deliveries to the French and Greek navies, Naval Group reported no significant new international contracts for the year.
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Jamal Peterson reports on defense, aerospace, and tech policy. With a military background and a strategic mind, he dissects complex subjects with clarity, offering readers sharp, reliable insights.
