The arms industry is experiencing a surge in profits amid escalating conflicts in Gaza and Ukraine with global military expenditure estimated to grow at an annual rate of 2.74% from 2023 to 2024.
The global military expenditure is estimated to be $2,132.0 billion in 2024 from $2,012.1 billion in 2023, according to the Global Defense Industry Outlook for 2023/24 by MarketsandMarkets Research.
The defense sector, including major players like Lockheed Martin and BAE Systems, is experiencing dual dynamics—gaining from conflicts in regions like Gaza and Ukraine while facing challenges to meet rising demands, the report said. Shares of Lockheed Martin, General Dynamics, and Northrop Grumman are projected to rise between 5% and 7% over the next year, according to a Reuters report.
“Each day the munitions are being fired reinforces the need for substantive stockpiles,” Tim Cahill, who runs Lockheed’s Missiles and Fire Control business, told Reuters in an interview. “And I don’t see that going down.”
Increasing global security threats, geopolitical tensions, and evolving defense needs are prompting governments to direct a significant part of the defense budget toward military forces. This focus on reinforcing the army highlights the importance of maintaining a strong and up-to-date military capability.
BAE Systems, a British military equipment giant, reported a record order book and a 57% jump in net profits, due to increased defense spending by Western governments after Russia’s invasion of Ukraine in early 2022.
The UK government’s delivery of more than 300,000 artillery shells to Ukraine earlier this year, with plans to deliver tens of thousands more by end of 2023, contributed primarily to BAE Systems’ increasing profits. The military equipment manufacturer’s shares reportedly almost doubled since the Russia-Ukraine war.
The defense industry witnessed another boost following the ongoing war on Gaza by Israel, which started in October. BAE Systems’ shares gained more than 10%, after a long-term deal known as the Next Generation Munition Solution, valued at £2.4 billion.
Airborne platform expected to lead budget allocation in 2024
The Airborne platform is seeing fresh investments globally, accompanied by new programs and advancements. “This is due to an increased focus on precision engagement, rapid global mobility, agile combat support, electronic warfare, strategic mobility, and global reach,” the report noted.
These investments and related factors are expected to grow Airborne platform at an annual growth rate of 2.1% to $75 billion by 2024 from &72 billion in 2023, according to MarketsandMarkets Research.
Army expected to dominate 2024 budget analysis
The army segment, comprising personnel, training, operations, equipment procurement, research and development, and maintenance expenditures, is expected to dominate the defense budget analysis, according to the report.
The sub-segment is estimated to witness 2.7% year-over-year growth to $655.1 billion by 2024 from $621.3 billion in 2023. The growth is attributed to governments’ “primary focus on maintaining a capable and well-equipped military force to ensure national security and defense preparedness,” the report said.
Top 25 defense companies by revenue
The United States dominates with 12 defense companies in this list of world’s top 25 defense companies by 2022 revenues, according to Defense News data.
| Company | Revenues from Defense (USD billions) | Defense share of total revenue (%) |
|---|---|---|
| 🇺🇸 Lockheed Martin | $63.3 | 96% |
| 🇺🇸 RTX (formerly Raytheon) | $39.6 | 59% |
| 🇺🇸 Northrop Grumman | $32.4 | 89% |
| 🇨🇳 Aviation Industry Corporation of China | $31 | 37% |
| 🇺🇸 Boeing | $30.8 | 46% |
| 🇺🇸 General Dynamics | $30.4 | 77% |
| 🇬🇧 BAE Systems | $25.2 | 96% |
| 🇨🇳 China North Industries Group | $18 | 22% |
| 🇺🇸 L3Harris Technologies | $13.9 | 82% |
| 🇨🇳 China South Industries Group | $13.5 | 31% |
| 🇮🇹 Leonardo | $12.9 | 83% |
| 🇳🇱/🇫🇷 Airbus | $12 | 20% |
| 🇺🇸 HII (Huntington Ingalls Industries) | $10.6 | 100% |
| 🇫🇷 Thales | $9.6 | 52% |
| 🇨🇳 China Aerospace Science and Technology Corporation | $9.6 | 21% |