Defense Contracting Service Market Report 2025

The defense contracting service market size has grown strongly in recent years. It will grow from $669.17 billion in 2024 to $705.44 billion in 2025 at a compound annual growth rate (CAGR) of 5.4%. The growth during the historic period can be attributed to escalating geopolitical tensions, rising terrorist threats, increased international defense exports, expansion of defense training programs, and greater adoption of autonomous combat vehicles.

The defense contracting service market size is expected to see strong growth in the next few years. It will grow to $862.66 billion in 2029 at a compound annual growth rate (CAGR) of 5.2%. The projected growth during the forecast period can be linked to escalating threats in digital warfare, rising demand for unmanned systems, increased defense budgets, growing need for secure defense infrastructures, and a heightened emphasis on defense modernization initiatives. Key trends expected in this period include technological innovations, the integration of artificial intelligence and machine learning, big data analytics, and progress in aerospace technology.

The rising geopolitical tensions are expected to drive the growth of the defense contracting service market in the future. Geopolitical tensions refer to increasing conflicts or competition between countries caused by political, military, or strategic issues. These tensions are largely fueled by territorial disputes, as countries assert control over contested areas, leading to increased military presence, diplomatic clashes, and regional instability. Defense contracting services help governments respond to these tensions by enabling the rapid acquisition of advanced military technologies and strategic capabilities. These services strengthen national security and deterrence, support allied missions, and help maintain a competitive advantage in conflict-prone regions. For example, in December 2023, a report by the Institute for Economics and Peace, an Australia-based think tank, noted that terrorist attacks became more deadly in 2022, with an average of 1.7 deaths per attack compared to 1.3 deaths per attack in 2021. Thus, rising geopolitical tensions are fueling growth in the defense contracting service market.

Leading companies in the defense contracting service market are developing innovative solutions such as advanced tactical directed energy systems, which offer cost-effective alternatives to conventional munitions. Tactical directed energy solutions are weapons that use focused energy sources like lasers or microwaves to accurately target and neutralize threats while minimizing collateral damage. For instance, in March 2025, Parsons Corporation, a U.S.-based technology firm, signed a cooperative research and development agreement (CRADA) with the U.S. Air Force Civil Engineer Center, Readiness Directorate (AFCEC/CX), and revealed its next-generation Zeus 4 directed energy system. This system is integrated onto the Joint Light Tactical Vehicle (JLTV) and features AI-powered targeting sensors along with a palletized, bolt-on design that enhances operational flexibility, reduces costs, and enables precise disposal of unexploded ordnance with minimal collateral damage. This development builds on the success of the earlier Zeus 3 system and signals a broader move toward mobile, scalable, and vehicle-agnostic directed energy technologies that can be quickly deployed in diverse combat environments.

In October 2024, CACI International Inc., a U.S.-based technology company, acquired Azure Summit Technology Inc. for about $1.28 billion. This acquisition allows CACI to broaden its defense technology portfolio and strengthen its presence in the maritime and airborne sectors, enhancing its ability to serve the U.S. Department of Defense and national security agencies. Azure Summit Technology Inc. is a U.S.-based company specializing in defense contracting services, particularly in the development and delivery of high-performance RF hardware and software-defined solutions.

Major players in the defense contracting service market are Science Applications International Corporation Inc., RTX Corporation, The Boeing Company, Lockheed Martin Corporation, Airbus SE, General Dynamics Corporation, Northrop Grumman Corporation, Honeywell International Inc., BAE Systems plc, L3Harris Technologies Inc., Leonardo S.p.A., Leidos Holdings Inc., Textron Inc., Amentum Government Services Holdings LLC, Huntington Ingalls Industries Inc., Booz Allen Hamilton Holding Corporation, Saab AB, CAE Inc., BWX Technologies Inc., AeroVironment Inc.

North America was the largest region in the defense contracting service market in 2024. Asia-Pacific is expected to be the fastest-growing region in the forecast period. The regions covered in defense contracting service report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East and Africa. The countries covered in the defense contracting service market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

Note that the outlook for this market is being affected by rapid changes in trade relations and tariffs globally. The report will be updated prior to delivery to reflect the latest status, including revised forecasts and quantified impact analysis. The report’s Recommendations and Conclusions sections will be updated to give strategies for entities dealing with the fast-moving international environment.

The sharp hike in U.S. tariffs and the associated trade disputes in spring 2025 are notably impacting the aerospace and defense sector by raising costs for titanium, carbon fiber composites, and avionics materials largely sourced from global suppliers. Defense contractors, locked into fixed-price government contracts, absorb these added costs, while commercial aerospace firms face airline pushback on higher aircraft prices. Delays in component shipments due to customs bottlenecks further disrupt tight production schedules for jets and satellites. The industry is responding by stockpiling critical materials, seeking waivers for defense-related imports, and collaborating with allied nations to diversify supply chain.

Defense contracting involves private companies supplying goods, services, or expertise to military or defense agencies through formal agreements. These services cover logistics, maintenance, research and development, construction, and other critical support roles essential to defense operations. Defense contracting plays a vital role in national security by ensuring that armed forces receive the necessary resources, equipment, and expertise to function efficiently.

The main categories of defense contracting services include engineering and technical support, logistics and sustainment, training and simulation, cybersecurity, program management, and professional services. Engineering and technical services provide specialized assistance such as systems engineering, technical guidance, analysis, and advisory roles that support defense programs from initial design through deployment. Contract types vary and include fixed-price, cost-reimbursement, time and materials, and indefinite delivery/indefinite quantity contracts. Key application areas encompass aerospace, land systems, maritime systems, information technology, cybersecurity, intelligence, and homeland security. The primary users of these services are government agencies, military branches, defense contractors, and industry collaborators.

The defense contracting service market research report is one of a series of new reports that provides defense contracting service market statistics, including defense contracting service industry global market size, regional shares, competitors with a defense contracting service market share, detailed defense contracting service market segments, market trends and opportunities, and any further data you may need to thrive in the defense contracting service industry. This defense contracting service market research report delivers a complete perspective of everything you need, with an in-depth analysis of the current and future scenario of the industry.

The defense contracting service market includes revenues earned by entities providing services such as supply chain management, simulation services, and satellite services and related products such as aviation systems, naval systems, and ground vehicles. The market value includes the value of related goods sold by the service provider or included within the service offering. Only goods and services traded between entities or sold to end consumers are included.

The market value is defined as the revenues that enterprises gain from the sale of goods and/or services within the specified market and geography through sales, grants, or donations in terms of the currency (in USD, unless otherwise specified).

The revenues for a specified geography are consumption values and are revenues generated by organizations in the specified geography within the market, irrespective of where they are produced. It does not include revenues from resales along the supply chain, either further along the supply chain or as part of other products.

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