The UK defence giant’s order backlog is now three times its annual revenue, surpassing the UK government’s entire defence budget.
UK defence major BAE Systems reported a 12 per cent rise in annual operating profit and a record order backlog last week, citing elevated defence spending across its core markets.
The UK-based defence prime said underlying operating profit for the year to 31 December 2025 rose to £3.32bn, up from the previous year. Revenue also increased by 10 per cent to £30.6bn.
The group’s order backlog meanwhile climbed to a record £83.6bn, with order intake again exceeding sales during the year, providing what the company described as strong multi-year visibility across its portfolio of air, maritime and electronic systems programmes.
BAE’s share price on the public market had a bumper year in 2025, rising 31 per cent. The annual report said underlying earnings per share rose 10 per cent.
Since January 2026, BAE stock has soared 27 per cent on the back of growing geopolitical volatility and deepened defence commitments.
Chief executive Charles Woodburn said BAE was operating in a ‘new era of defence spending’, driven by heightened geopolitical tensions and long-term capability investment among NATO and allied governments.
Free cash flow was reported as £2.16bn, supporting both dividend growth and a reduction in net debt, which fell 22 per cent to £3.84bn. The board recommended an increased full-year dividend, maintaining its progressive distribution policy.
The results reflect a sustained uplift in defence budgets since 2022, with governments committing to replenish stockpiles and modernise armed forces following Russia’s invasion of Ukraine.
BAE, one of Europe’s largest defence contractors by revenue, has been a principal beneficiary of that shift, given its exposure to long-cycle, sovereign-funded programmes and it’s deep embedment in the UK defence ecosystem. The group will help deliver 20 Typhoons to Türkiye and is also a founding member of the Global Combat Air Programme with Italy and Japan. BAE also has ship-building facilities in the US.
Looking ahead, the company forecasts revenue growth of 7–9 per cent in 2026 and underlying operating profit growth of 9–11 per cent, suggesting continued momentum as existing contracts convert into production and delivery.
While supply chain pressures persist across parts of the industry, BAE said its strong order book and cash generation position it well to meet increased production requirements, with the backlog providing a substantial cushion against short-term volatility.
The scale of contracted work — now equivalent to nearly three years of annual revenue, and more than the UK’s entire defence budget — places the group among the best-positioned European defence giants as governments formalise multi-year defence spending plans.