Defense Contracting Service Market Report 2026

The defense contracting service market size has grown strongly in recent years. It will grow from $705.44 billion in 2025 to $743.39 billion in 2026 at a compound annual growth rate (CAGR) of 5.4%. The growth in the historic period can be attributed to expansion of military modernization programs increasing demand for outsourced logistics and maintenance services, rising reliance on private contractors for simulation and training solutions, growth in procurement of aviation, naval, and ground vehicle systems supplied by defense contractors, development of satellite-based services supporting communication and reconnaissance operations, increased complexity of defense supply chains driving demand for specialized management services.

The defense contracting service market size is expected to see strong growth in the next few years. It will grow to $905.51 billion in 2030 at a compound annual growth rate (CAGR) of 5.1%. The growth in the forecast period can be attributed to growing adoption of advanced digital tools to enhance contractor-led maintenance and lifecycle support, rising demand for integrated multi-domain platforms requiring specialized contractor expertise, expansion of satellite and space-based defense services delivered through private contracting, increasing focus on cybersecurity and secure supply chain management within defense contracts, development of autonomous and unmanned defense systems driving new contracting opportunities. Major trends in the forecast period include increasing outsourcing of mission-critical logistics and sustainment, rising demand for advanced simulation and training solutions, expansion of integrated lifecycle management services, growing adoption of performance-based contracting, surge in modernization programs needing engineering and technical support.

The rise in geopolitical tensions is expected to drive the growth of the defense contracting service market in the coming years. Geopolitical tensions refer to intensifying disputes or competition between nations stemming from political, military, or strategic factors. These tensions are largely fueled by territorial conflicts, as countries assert control over disputed regions, resulting in increased military activity, diplomatic standoffs, and regional instability. Defense contracting services help address such tensions by enabling governments to rapidly acquire advanced military technologies and strategic capabilities that enhance national security and deterrence, support allied missions, and maintain a competitive advantage in areas affected by conflict or instability. For example, in July 2024, according to the Armed Conflict Location and Event Data, a U.S.-based nonprofit organization, more than 165,273 incidents of political violence were recorded globally between July 2023 and June 2024, marking a 15% rise from the previous year. During this period, it is estimated that one in seven people worldwide were impacted by conflict. Therefore, the growing geopolitical tensions are contributing to the expansion of 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 companies operating 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 2025. Asia-Pacific is expected to be the fastest-growing region in the forecast period. The regions covered in the defense contracting service market report are Asia-Pacific, South East Asia, Western Europe, Eastern Europe, North America, South America, Middle East, Africa.

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.

Tariffs on industrial and electronic components have increased operational costs for defense contracting services, affecting aerospace and land system applications in import-dependent regions such as Europe and Asia-Pacific. These tariffs create project delays and higher procurement expenses but also accelerate domestic manufacturing, strengthen localized supply chains, and promote innovation in defense service capabilities.

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.

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 countries covered in the defense contracting service market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Taiwan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

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 that 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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