Military golden age: record revenues of defense giants against the backdrop of geopolitical threats

War has always been a brutal and unpredictable phenomenon, but recently it has acquired new financial nuances that are transforming global markets. The well-known Ukrainian proverb “to whom is the war, and to whom is the mother” becomes particularly relevant in this period. It reflects the absurd reality of our time, where conflicts and crises not only cause human suffering, but also create huge opportunities for the profit of large defense corporations. Today’s global military conflicts not only push states to new strategies and solutions, but also significantly affect financial flows in the defense industry. Huge demand for modern military technology, including high-tech fighter jets, missile systems and anti-aircraft systems, leads to record profits for the world’s defense giants.

Global growth factors

Global military conflicts, growing geopolitical tensions and persistent security threats are making significant adjustments to the financial landscape of the global defense and aerospace industry. Today’s predictions are impressive: according to reports from Vertical Research Partners and the Financial Times, the world’s largest defense companies are preparing for record revenues that could reach $52 billion by 2026. This figure is almost double the aggregate free cash flow at the end of 2021 and is a direct result of global turmoil and conflict, but it is not a coincidence.

At the center of this growth is geopolitical instability, which has directly affected the defense spending of countries around the world. In particular, Russia’s full-scale invasion of Ukraine at the beginning of 2022 became a significant impetus for the revision of security strategies in NATO countries and their allies. This invasion forced governments to significantly increase their defense budgets, directing huge sums of money to modernize and purchase the latest weaponry. As a result, defense companies such as Lockheed Martin, Boeing, Northrop Grumman, Raytheon Technologies, and General Dynamics are receiving huge orders, providing them with record financial results.

However, geopolitical factors are not limited to the European context. Tensions in the Middle East and Asia are also a key driver of defense spending growth. Escalating conflicts and contradictions in these regions, including growing threats from Iran and North Korea, are prompting countries to invest heavily in military equipment and new technologies. This translates into powerful financial flows that feed the defense industry, contributing to its expansion and development.

Forecasts for the coming years show that these factors will only intensify. According to the latest analytical reports, the world’s defense companies will continue to receive large profits from growing government orders for the latest military systems. This, in turn, encourages investment in research and development, contributing to the creation of new technologies and innovations in the field of security.

Financial prospects of major players

In the United States, the largest defense companies are seeing significant growth in financial indicators thanks to record orders for the latest military equipment. According to experts, the five key players in the American defense market — Lockheed Martin, Boeing, Northrop Grumman, Raytheon Technologies and General Dynamics — expect to increase their profits to $26 billion over the next three years.

This forecast is supported by the huge government contracts that have emerged as a result of recent aid bills for Ukraine, Taiwan and Israel. In particular, the US has allocated almost 13 billion dollars for the production of weapons for these countries, which will provide solid funding for the defense giants and their suppliers. These funds are aimed at the production and supply of modern fighters, missile systems, air defense systems and other critical equipment.

Thanks to massive government contracts and significant increases in arms spending, the US defense industry is experiencing a period of unprecedented growth. As a result of recent bills providing aid to Ukraine, Taiwan and Israel, American defense companies have received huge orders that have radically changed the situation in the market, the five largest players in the American defense market expect a significant increase in profits. It is important to note that this growth is not a temporary phenomenon, but is the result of long-term strategic changes. After a period of relative stagnation in the defense sector due to a reduction in military spending in previous years, the current surge in orders opens up new opportunities for development and innovation in the industry. However, despite the positive forecasts, there are certain risks associated with possible changes in the political and economic environment.

Therefore, the American defense industry is currently experiencing a period of unprecedented growth, which is due not only to an increase in orders, but also to the need to quickly respond to new global challenges. This provides companies with a stable financial flow and opportunities for further development, although long-term stability remains in question due to possible political and economic changes.

In Europe, the situation also looks promising. Companies such as BAE Systems, Rheinmetall and Saab show significant potential for growth. It is projected that their combined free cash flow could grow by more than 40%. This growth is the result of increased military orders and the need to modernize weapons amid the growing threat from Russia and instability in other regions. In particular, the British Ministry of Defense allocated 7.6 billion pounds for military aid to Ukraine over the past three years. These funds include not only the supply of new equipment, but also the replenishment of stocks of already available weapons. Such significant financing helped not only Ukraine, but also became an important incentive for European defense companies.

As we can see, the military actions in the countries directly affect the growth of orders in the USA and Europe, creating a significant financial profit and new opportunities for their defense industry. The growth of financial indicators of these companies not only strengthens their market position, but also directly affects the general capital market. At the same time, investors are increasingly paying attention to the defense sector as stable and profitable, which can affect the dynamics of markets in other industries. It may also facilitate further expansion of technological innovation in the military domain, which in turn will affect civilian technology.

How wars used to affect profits

Wars and military conflicts not only now, but have always had a significant impact on the world economy, especially the defense industry. Thus, after the Second World War, the United States experienced an economic boom in part due to a significant increase in the production and export of military equipment, which provided a large number of jobs and increased production. During the Cold War in the 1980s, US defense spending rose to record levels, leading to increased revenue from contracts for the production of weapons and new technologies. After the terrorist attacks of September 11, 2001, US military spending also increased sharply: in 2001, it amounted to about $300 billion, but since then the amount has exceeded $700 billion.

During the 2003-2011 Iraq War, companies like Halliburton and Blackwater (now Academi) won billions in contracts to supply goods and services. Halliburton, for example, increased its revenues by $4.5 billion as a result of contracts with the military.

We should also mention the war in Afghanistan, which contributed to the accelerated development of unmanned aerial vehicles (UAVs). For example, the company General Atomics has earned billions of dollars thanks to contracts for the supply of UAVs for reconnaissance and attack. The conflicts in Syria and Iraq also increased the demand for the latest cyber security systems and military information, which allowed Raytheon Technologies to significantly expand its financial capabilities.

The war in Yemen, which has been ongoing since 2015, has fueled demand for precision munitions and air defense systems that have brought significant profits to companies such as Raytheon and Lockheed Martin. The conflict in Libya, which took place in 2011, created new opportunities for the supply of weapons and equipment. It was used in the war, which allowed defense companies to profit from contracts for the supply of military equipment.

After the start of the war in Ukraine in 2022, European countries increased their defense budgets. For example, Germany announced a plan to increase its defense budget to 2% of GDP, equivalent to approximately $100 billion per year. In addition, after the annexation of Crimea by Russia in 2014, the companies of the US defense sector – Lockheed Martin and Northrop Grumman – recorded an increase in orders for missile systems and equipment for air defense.

It is important to note that global defense spending is projected to reach $2.2 trillion by 2026, which will open up new opportunities for defense companies. The expansion of the arms market, driven by increasing conflicts and new threats, will drive further gains in this sector.

Consequently, wars and military conflicts become a powerful driver of financial growth in the defense industry. They are not only causing destruction and suffering, but are also transforming global financial landscapes, creating unprecedented opportunities for defense giants. Given how the world’s profits from defense contracts have soared, the question is: can we hope for peace when it comes to the interests of such powerful players? The answer is not simple.