Global defence giants anticipate record profits

The world's largest aerospace and defence companies are poised to achieve record levels of cash flow over the next three years, fueled by a surge in government orders for new weapons amid escalating geopolitical tensions.

According to analysis by Vertical Research Partners, the top 15 defence contractors are expected to generate $52 billion in free cash flow by 2026, nearly double their combined cash flow from the end of 2021, Caliber.Az reports, citing foreign media.

The top five US defence companies are projected to generate $26 billion in cash flow by the end of 2026, more than double the amount from 2021. 

This forecast does not include Boeing, due to its recent challenges and significant focus on civil aerospace. In Europe, major companies such as BAE Systems, Rheinmetall, and Sweden's Saab, which have secured new contracts for ammunition and missiles, are anticipated to see their combined cash flow increase by over 40 per cent.

The industry is experiencing a significant boost from increased military spending as governments expand their budgets in response to Russia's invasion of Ukraine and rising tensions in the Middle East and Asia. 

In the United States, recent aid packages for Ukraine, Taiwan, and Israel have allocated nearly $13 billion for weapons production among the top five American defence companies — Lockheed Martin, RTX, Northrop Grumman, Boeing, and General Dynamics — and their suppliers. In the United Kingdom, the Ministry of Defence has committed 7.6 billion pounds over the past three years for military aid to Ukraine, including replenishing stockpiles.

While defence spending is expected to remain robust in the coming years, the recent surge in orders is likely to decrease, especially once the conflict in Ukraine concludes.