The Europe defense market was valued at USD 221.0 billion in 2025. It is estimated at USD 263.0 billion in 2026 and is projected to reach USD 493.7 billion by 2036, growing at a CAGR of 6.5% over the 2026-2036 forecast period. This report assesses the market in depth, covering European defense spending trends, NATO and EU policy and funding frameworks, arms trade flows, the defense industrial base, key technologies, the value chain, and the competitive landscape, with analysis across more than 30 countries.
The market is defined as defense investment by European governments, which combines buying new equipment, defense R&D, and keeping existing equipment in service through repair, overhaul, and upgrades. Its scope runs from armored vehicles, artillery, and munitions to fighter, transport, and uncrewed aircraft, helicopters, warships and submarines, air and missile defense, C4ISR and electronics, and space and cyber assets. Spending on personnel, pensions, and general operations is not included. Geographically, the study covers all 27 EU members plus the U.K., Norway, Switzerland, Türkiye, Ukraine, and the remaining non-EU states of Europe, with Russia and Belarus excluded.
SIPRI data show that European military spending climbed 14% to USD 864 billion in 2025, the core of the region's biggest rearmament since the Cold War, with the 29 European NATO members spending USD 559 billion, their sharpest annual increase since 1953. The European Defence Agency (EDA) reported that EU member states spent EUR 418 billion on defense in 2025, a 20% rise and a cumulative 47% increase since 2022, with equipment procurement alone at EUR 115 billion, and it expects spending to reach EUR 454 billion in 2026. External dependence remains high, however. According to SIPRI's March 2026 data, European arms imports in 2021-25 were more than three times their 2016-20 level, and the U.S. accounted for 58% of what European NATO members imported.
Growth is held back by Europe's continued reliance on non-European suppliers, chiefly the U.S., for complete systems such as combat aircraft, air defense, and armored vehicles, which diverts part of the spending away from European industry and exposes buyers to foreign export controls. Budget pressure and uneven commitment also matter: according to SIPRI, British spending fell 2% and French spending grew only 1.5% in 2025, and only five countries had signed SAFE loan agreements by late May 2026. Procurement remains fragmented, with collaborative purchases at 24% of EU equipment spending in 2025 against an EU benchmark of 35%, according to the EDA. Uncertainty over the war in Ukraine and U.S. policy makes industry cautious about building capacity without long-term contracts. Further challenges include reaching NATO's 3.5% core target, keeping spending definitions transparent, turning EU instruments into contracts quickly, and scaling plants, workforces, and supply chains.
Opportunities lie in industrial cooperation with Ukraine, whose military spending rose 20% to USD 84.1 billion in 2025 according to SIPRI, and which can join common procurement under SAFE. Air and missile defense, drones, and counter-drone systems are in high demand as drone incursions and hybrid attacks spread, and Poland and Estonia have placed these capabilities at the center of their new spending plans. European preference rules and rising R&D budgets also favor domestic suppliers in next-generation aircraft, tanks, air defense, and space. Key trends include the frontloading of investment, with the EDA expecting investment to make up 36% of EU defense spending in 2026, the leading role of NATO's eastern flank, and fast catch-up by large Western and Southern European spenders.
By domain, the report covers six areas, namely land systems & ammunition, air systems, naval systems, air & missile defense, space & cyber, and C4ISR & electronics, with further splits into platforms such as main battle tanks, artillery, combat aircraft, submarines, uncrewed systems, and counter-drone systems. Land systems & ammunition is expected to hold the largest share in 2026, as governments are buying armored vehicles, artillery, and ammunition at scale to rebuild stocks depleted by deliveries to Ukraine and to equip forces on the eastern flank, where high-intensity land warfare shapes requirements. Air & missile defense is expected to grow at the highest CAGR, driven by drone and missile threats, layered air defense programs combining long-range interceptors with inexpensive counter-drone tools, and the priority given to air defense in Polish, Baltic, and Nordic spending plans. Air systems also remain a major domain, supported by orders for combat aircraft, including F-35A deliveries to European air forces.
By spending type, the market is divided into equipment procurement, research & development, and sustainment & MRO. Equipment procurement is expected to account for the largest share in 2026, reflecting the urgent purchase of new platforms and munitions to close capability gaps; the EDA reported that EU equipment procurement rose from EUR 88 billion in 2024 to EUR 115 billion in 2025. Research & development is expected to grow at the highest CAGR, as governments fund next-generation combat aircraft, tanks, air defense, drones, and space programs, and the EDA projects EU defense R&D to rise from EUR 17 billion in 2025 to EUR 20 billion in 2026. Sustainment & MRO grows alongside the larger fleets and higher readiness levels now required.
By procurement mode, the report compares national procurement with collaborative procurement. National procurement is expected to hold the larger share in 2026, since most countries still buy through their own ministries and programs, often with national variants of tanks, frigates, and air defense systems. Collaborative procurement is expected to grow at the higher CAGR, supported by SAFE's requirement for common purchases, the cost and delivery benefits of pooled orders, and EU efforts to reduce fragmentation and improve interoperability. Joint buying involving Ukraine and EEA-EFTA countries is also permitted under SAFE, broadening the scope for shared programs.
By supplier origin, the market is split by where the supplier is based: Europe, the U.S., or other non-European countries. European suppliers are expected to account for the largest share in 2026, as most spending on sustainment, ammunition, land systems, and naval programs goes to domestic and regional industry. European suppliers are also expected to grow at the highest CAGR, helped by SAFE funding, European preference rules, and new production lines for ammunition, missiles, and armored vehicles. U.S. suppliers nonetheless remain important for combat aircraft and air defense, and South Korean and Israeli companies have won large contracts in Poland and other Eastern European countries.
Western Europe is expected to remain the leading sub-region in 2026, since Germany is the largest defense spender among European NATO members and has pledged to reach 3.5% of GDP by 2029, the U.K. remains one of the world's top military spenders and a major arms importer, and France combines a large budget with growing arms exports. Italy, the Netherlands, Belgium, and Switzerland are also significant markets, and the region hosts many of the leading prime contractors, which supports domestic procurement.
Central & Eastern Europe is expected to record the fastest growth through 2036, led by Poland, which spent 4.5% of GDP on defense in 2025 according to SIPRI and secured the largest SAFE allocation, while Romania, Hungary, Czechia, Slovakia, Bulgaria, and Croatia are also expanding budgets. The Nordic countries are set for strong growth given their proximity to Russia and the NATO accession of Finland and Sweden, and the Baltic states are among the highest spenders relative to GDP, focused on air defense, long-range fires, and border protection. Southern Europe is accelerating, led by Spain. Türkiye has a large and export-oriented defense industry, and Ukraine is a distinct market whose wartime spending and drone production are increasingly linked with European suppliers.
Supply comes from large European primes, specialist national champions, and leading defense groups from the U.S. and other overseas countries: European primes are expanding output of munitions, missiles, armored vehicles, and air defense systems, while U.S. companies supply combat aircraft and air defense, and South Korean and Israeli firms have secured major orders in Poland and Eastern Europe. Companies compete on capability, speed of delivery, industrial participation in buyer countries, interoperability, and government relationships, with delivery capacity now the main differentiator. Key strategies include new plants, joint ventures and cross-border partnerships, local production in customer countries, cooperation with Ukrainian industry, and the development of drones, counter-drone systems, and next-generation platforms.
Key companies profiled in the report include Rheinmetall AG (Germany), BAE Systems plc (U.K.), Airbus Defence and Space (Germany/France/Spain), Thales S.A. (France), Leonardo S.p.A. (Italy), Safran S.A. (France), MBDA (France/U.K./Italy/Germany), KNDS N.V. (France/Germany), Saab AB (Sweden), Naval Group (France), Fincantieri S.p.A. (Italy), thyssenkrupp Marine Systems GmbH (Germany), HENSOLDT AG (Germany), Kongsberg Gruppen ASA (Norway), Indra Sistemas, S.A. (Spain), Polska Grupa Zbrojeniowa S.A. (Poland), Czechoslovak Group a.s. (Czechia), Nammo AS (Norway), Dassault Aviation S.A. (France), ASELSAN A.S. (Türkiye), Lockheed Martin Corporation (U.S.), and Hanwha Aerospace Co., Ltd. (South Korea).
The market is defined as defense investment by European governments, which combines buying new equipment, defense R&D, and keeping existing equipment in service through repair, overhaul, and upgrades. Its scope runs from armored vehicles, artillery, and munitions to fighter, transport, and uncrewed aircraft, helicopters, warships and submarines, air and missile defense, C4ISR and electronics, and space and cyber assets. Spending on personnel, pensions, and general operations is not included. Geographically, the study covers all 27 EU members plus the U.K., Norway, Switzerland, Türkiye, Ukraine, and the remaining non-EU states of Europe, with Russia and Belarus excluded.
SIPRI data show that European military spending climbed 14% to USD 864 billion in 2025, the core of the region's biggest rearmament since the Cold War, with the 29 European NATO members spending USD 559 billion, their sharpest annual increase since 1953. The European Defence Agency (EDA) reported that EU member states spent EUR 418 billion on defense in 2025, a 20% rise and a cumulative 47% increase since 2022, with equipment procurement alone at EUR 115 billion, and it expects spending to reach EUR 454 billion in 2026. External dependence remains high, however. According to SIPRI's March 2026 data, European arms imports in 2021-25 were more than three times their 2016-20 level, and the U.S. accounted for 58% of what European NATO members imported.
Market Dynamics
Rearmament on a record scale is the main growth driver: Germany raised its military spending by 24% in 2025 and passed the 2%-of-GDP mark for the first time in over three decades, Spain lifted its budget by half, and Poland carried the heaviest defense burden in NATO, according to SIPRI. Longer-term budgets are anchored by the June 2025 Hague summit, where NATO allies committed to spend 5% of GDP on defense and security by 2035, including 3.5% for core defense. EU financing adds further momentum: the European Commission's ReArm Europe Plan/Readiness 2030 aims to unlock more than EUR 800 billion, partly by letting countries use the Stability and Growth Pact's national escape clause and partly via SAFE (Security Action for Europe), a EUR 150 billion loan program which 19 member states fully took up and which favors joint purchases by two or more countries.Growth is held back by Europe's continued reliance on non-European suppliers, chiefly the U.S., for complete systems such as combat aircraft, air defense, and armored vehicles, which diverts part of the spending away from European industry and exposes buyers to foreign export controls. Budget pressure and uneven commitment also matter: according to SIPRI, British spending fell 2% and French spending grew only 1.5% in 2025, and only five countries had signed SAFE loan agreements by late May 2026. Procurement remains fragmented, with collaborative purchases at 24% of EU equipment spending in 2025 against an EU benchmark of 35%, according to the EDA. Uncertainty over the war in Ukraine and U.S. policy makes industry cautious about building capacity without long-term contracts. Further challenges include reaching NATO's 3.5% core target, keeping spending definitions transparent, turning EU instruments into contracts quickly, and scaling plants, workforces, and supply chains.
Opportunities lie in industrial cooperation with Ukraine, whose military spending rose 20% to USD 84.1 billion in 2025 according to SIPRI, and which can join common procurement under SAFE. Air and missile defense, drones, and counter-drone systems are in high demand as drone incursions and hybrid attacks spread, and Poland and Estonia have placed these capabilities at the center of their new spending plans. European preference rules and rising R&D budgets also favor domestic suppliers in next-generation aircraft, tanks, air defense, and space. Key trends include the frontloading of investment, with the EDA expecting investment to make up 36% of EU defense spending in 2026, the leading role of NATO's eastern flank, and fast catch-up by large Western and Southern European spenders.
Segment Analysis
The report analyzes the market by domain, spending type, procurement mode, supplier origin, and country, helping stakeholders understand where European defense budgets are being directed and which areas will expand fastest.By domain, the report covers six areas, namely land systems & ammunition, air systems, naval systems, air & missile defense, space & cyber, and C4ISR & electronics, with further splits into platforms such as main battle tanks, artillery, combat aircraft, submarines, uncrewed systems, and counter-drone systems. Land systems & ammunition is expected to hold the largest share in 2026, as governments are buying armored vehicles, artillery, and ammunition at scale to rebuild stocks depleted by deliveries to Ukraine and to equip forces on the eastern flank, where high-intensity land warfare shapes requirements. Air & missile defense is expected to grow at the highest CAGR, driven by drone and missile threats, layered air defense programs combining long-range interceptors with inexpensive counter-drone tools, and the priority given to air defense in Polish, Baltic, and Nordic spending plans. Air systems also remain a major domain, supported by orders for combat aircraft, including F-35A deliveries to European air forces.
By spending type, the market is divided into equipment procurement, research & development, and sustainment & MRO. Equipment procurement is expected to account for the largest share in 2026, reflecting the urgent purchase of new platforms and munitions to close capability gaps; the EDA reported that EU equipment procurement rose from EUR 88 billion in 2024 to EUR 115 billion in 2025. Research & development is expected to grow at the highest CAGR, as governments fund next-generation combat aircraft, tanks, air defense, drones, and space programs, and the EDA projects EU defense R&D to rise from EUR 17 billion in 2025 to EUR 20 billion in 2026. Sustainment & MRO grows alongside the larger fleets and higher readiness levels now required.
By procurement mode, the report compares national procurement with collaborative procurement. National procurement is expected to hold the larger share in 2026, since most countries still buy through their own ministries and programs, often with national variants of tanks, frigates, and air defense systems. Collaborative procurement is expected to grow at the higher CAGR, supported by SAFE's requirement for common purchases, the cost and delivery benefits of pooled orders, and EU efforts to reduce fragmentation and improve interoperability. Joint buying involving Ukraine and EEA-EFTA countries is also permitted under SAFE, broadening the scope for shared programs.
By supplier origin, the market is split by where the supplier is based: Europe, the U.S., or other non-European countries. European suppliers are expected to account for the largest share in 2026, as most spending on sustainment, ammunition, land systems, and naval programs goes to domestic and regional industry. European suppliers are also expected to grow at the highest CAGR, helped by SAFE funding, European preference rules, and new production lines for ammunition, missiles, and armored vehicles. U.S. suppliers nonetheless remain important for combat aircraft and air defense, and South Korean and Israeli companies have won large contracts in Poland and other Eastern European countries.
Regional Analysis
The report covers Western Europe, the Nordic countries, Central & Eastern Europe, the Baltic states, Southern Europe, Türkiye, Ukraine, and the rest of Europe (including the Western Balkans), with country-level analysis of 32 countries; Ireland & Luxembourg and Cyprus & Malta are assessed as country pairs. The analysis considers military spending levels and growth, NATO commitments, SAFE allocations, procurement priorities, arms imports, and local industrial capability.Western Europe is expected to remain the leading sub-region in 2026, since Germany is the largest defense spender among European NATO members and has pledged to reach 3.5% of GDP by 2029, the U.K. remains one of the world's top military spenders and a major arms importer, and France combines a large budget with growing arms exports. Italy, the Netherlands, Belgium, and Switzerland are also significant markets, and the region hosts many of the leading prime contractors, which supports domestic procurement.
Central & Eastern Europe is expected to record the fastest growth through 2036, led by Poland, which spent 4.5% of GDP on defense in 2025 according to SIPRI and secured the largest SAFE allocation, while Romania, Hungary, Czechia, Slovakia, Bulgaria, and Croatia are also expanding budgets. The Nordic countries are set for strong growth given their proximity to Russia and the NATO accession of Finland and Sweden, and the Baltic states are among the highest spenders relative to GDP, focused on air defense, long-range fires, and border protection. Southern Europe is accelerating, led by Spain. Türkiye has a large and export-oriented defense industry, and Ukraine is a distinct market whose wartime spending and drone production are increasingly linked with European suppliers.
Competitive Landscape
The report reviews key growth strategies, competitive benchmarking, the competitive dashboard (industry leaders, market differentiators, vanguards, and emerging companies), and a 2025 market share/rank analysis, together with company profiles of European prime contractors and systems suppliers and of major non-European suppliers to Europe, covering business overview, financial overview, product portfolio, strategic developments, and SWOT analysis.Supply comes from large European primes, specialist national champions, and leading defense groups from the U.S. and other overseas countries: European primes are expanding output of munitions, missiles, armored vehicles, and air defense systems, while U.S. companies supply combat aircraft and air defense, and South Korean and Israeli firms have secured major orders in Poland and Eastern Europe. Companies compete on capability, speed of delivery, industrial participation in buyer countries, interoperability, and government relationships, with delivery capacity now the main differentiator. Key strategies include new plants, joint ventures and cross-border partnerships, local production in customer countries, cooperation with Ukrainian industry, and the development of drones, counter-drone systems, and next-generation platforms.
Key companies profiled in the report include Rheinmetall AG (Germany), BAE Systems plc (U.K.), Airbus Defence and Space (Germany/France/Spain), Thales S.A. (France), Leonardo S.p.A. (Italy), Safran S.A. (France), MBDA (France/U.K./Italy/Germany), KNDS N.V. (France/Germany), Saab AB (Sweden), Naval Group (France), Fincantieri S.p.A. (Italy), thyssenkrupp Marine Systems GmbH (Germany), HENSOLDT AG (Germany), Kongsberg Gruppen ASA (Norway), Indra Sistemas, S.A. (Spain), Polska Grupa Zbrojeniowa S.A. (Poland), Czechoslovak Group a.s. (Czechia), Nammo AS (Norway), Dassault Aviation S.A. (France), ASELSAN A.S. (Türkiye), Lockheed Martin Corporation (U.S.), and Hanwha Aerospace Co., Ltd. (South Korea).
How This Report Helps
- Provides reliable market size estimates and long-term forecasts for the Europe defense market through 2036, measured as defense investment.
- Explains how record rearmament, the NATO 5% commitment, and EU financing through ReArm Europe and SAFE are shaping procurement budgets.
- Assesses the impact of import dependence, fiscal limits, fragmented procurement, and industrial capacity constraints on market growth.
- Identifies high-growth opportunities across domain, spending type, procurement mode, supplier origin, and country.
- Tracks priority capability areas such as air and missile defense, drones and counter-drone systems, long-range fires, and space and cyber.
- Benchmarks European prime contractors and major non-European suppliers on portfolios, capacity, partnerships, and competitive position.
- Supports business development, localization, partnership, and investment decisions for defense suppliers, investors, and policy stakeholders.
Key Questions Answered
- How large is the Europe defense market today, and how will it grow through 2036?
- How will the NATO 5% target and EU instruments such as SAFE affect defense investment across European countries?
- What are the main drivers, restraints, opportunities, challenges, and trends shaping the market?
- Which domains, such as land systems, air systems, naval systems, and air and missile defense, will receive the most spending and grow the fastest?
- How will the balance between national and collaborative procurement change over the forecast period?
- How much of Europe's defense spending will go to European suppliers compared with U.S. and other non-European suppliers?
- Which sub-regions and countries offer the most attractive opportunities, and how is the eastern flank reshaping demand?
- What role will Ukraine play as a defense market and industrial partner?
- Who are the leading companies in the market, and what capacity investments and partnerships are shaping competition?
Table of Contents
1. Introduction
2. Research Methodology
4. Market Overview
5. Europe Defense Market, by Domain
6. Europe Defense Market, by Spending Type
7. Europe Defense Market, by Procurement Mode
8. Europe Defense Market, by Supplier Origin
9. Europe Defense Market, by Country
10. Competitive Landscape
11. Company Profiles
12. Appendix
LIST OF TABLES
LIST OF FIGURES
Companies Mentioned
- Rheinmetall AG
- BAE Systems plc
- Airbus Defence and Space
- Thales S.A.
- Leonardo S.p.A.
- Safran S.A.
- MBDA
- KNDS N.V.
- Saab AB
- Naval Group
- Fincantieri S.p.A.
- thyssenkrupp Marine Systems GmbH
- HENSOLDT AG
- Kongsberg Gruppen ASA
- Indra Sistemas, S.A.
- Polska Grupa Zbrojeniowa S.A.
- Czechoslovak Group a.s.
- Nammo AS
- Dassault Aviation S.A.
- ASELSAN A.S.
- Lockheed Martin Corporation
- Hanwha Aerospace Co., Ltd.
