Market Overview
| Study Period | 2019 - 2030 |
|---|---|
| Base Year For Estimation | 2024 |
| Forecast Data Period | 2025 - 2030 |
| Market Size (2025) | USD 133.54 Billion |
| Market Size (2030) | USD 184.24 Billion |
| Growth Rate (2025 - 2030) | 5.51% CAGR |
| Market Concentration | High |
Major Players
*Disclaimer: Major Players sorted in no particular order Image © Mordor Intelligence. Reuse requires attribution under CC BY 4.0. |
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Europe Defense Market Analysis by Mordor Intelligence
The Europe defense market size stands at USD 133.54 billion in 2025 and is forecasted to reach USD 184.24 billion by 2030, advancing at a 5.51% CAGR. Intensifying geopolitical tension, especially the Russia-Ukraine conflict, pushes 23 NATO members to meet the 2% of GDP spending pledge in 2024, more than double the 2023 total. Germany’s March 2025 approval of a EUR 1 trillion (USD 1.18 trillion) defense and infrastructure package makes it the world’s fourth-largest military spender. Poland’s 4.7% of GDP allocation underpins the region’s fastest growth. Modernization now emphasizes multi-domain operations, with land systems still dominant but uncrewed platforms and space assets expanding fastest. Indigenous production strengthens as Europe seeks strategic autonomy and more resilient supply chains. Consolidation accelerates through headline deals such as the Leonardo–Rheinmetall tank partnership, signaling a shift toward larger, cross-border programs.
Key Report Takeaways
- By armed forces, the army segment held 42.67% of the European defense market share in 2024; the navy segment is expected to record the fastest growth of 5.82% through 2030.
- By type, vehicles captured a 48.85% share of the European defense market in 2024, while unmanned systems expanded at a 7.24% CAGR to 2030.
- By domain, land systems accounted for a 45.16% share of the European defense market in 2024; space capabilities posted the highest 7.75% CAGR through 2030.
- By nature of procurement, indigenous production dominated with a 66.22% share in 2024, leading to growth at a 5.88% CAGR.
- By geography, Russia retained a 31.23% share of the European defense market in 2024; however, Poland is projected to grow fastest at an 8.01% CAGR through 2030.
Europe Defense Market Trends and Insights
Drivers Impact Analysis
| Driver | (~) % Impact on CAGR Forecast | Geographic Relevance | Impact Timeline |
|---|---|---|---|
| NATO 2% defence spending threshold accelerates national budget alignments | +1.2% | Alliance-wide, strongest in Eastern Europe | Short term (≤ 2 years) |
| EU defence fund incentives boost cross-border R&D and capability programs | +0.8% | EU members, Nordic partnerships | Medium term (2-4 years) |
| Russia–Ukraine conflict intensifies defence preparedness and threat awareness | +1.5% | Continental Europe, Baltic states | Short term (≤ 2 years) |
| Adoption of multi-domain operations reshapes European force planning | +0.9% | Major NATO powers | Long term (≥ 4 years) |
| Rapid prototyping pathways (EDIDP, ASAP) | 0.8% | EU member states, defense industrial base | Medium term (2-4 years) |
| Sovereign missile defence development gains traction through initiatives like Sky Shield | 1.0% | European Sky Shield Initiative members, NATO allies | Medium term (2-4 years) |
| Source: Mordor Intelligence | |||
NATO Defense Spending Threshold Accelerates National Budget Alignments
The 2%-of-GDP target has become a real budget, with 23 members achieving the mark in 2024. Poland dedicates 4.7% of GDP, and Germany’s unprecedented package further locks in multi-year procurement cycles. Baltic states sustain above-2.5% allocations, turning collective buying power into quick contract awards. The threshold legitimizes programs once seen as unaffordable, and NATO’s plan to raise guidance toward 3.5% by 2035 keeps the Europe defense market on a long growth runway.
EU Defense Fund Incentives Boost Cross-Border R&D and Capability Programs
The European Defence Fund’s EUR 7.30 billion (USD 8.61 billion) envelope and schemes such as EDIRPA and ASAP lower national risk while backing multinational projects. Thales leads the AI-enabled STORE and AIDA initiatives, which pool 48 partners and illustrate spillovers into local supply chains.[1]Thales Group, “STORE Project: AI-Assisted Optronics,” thalesgroup.com Requirements for joint bids steer technology standards toward European suppliers, accelerating the commercialization of Indigenous innovations.
Russia–Ukraine Conflict Intensifies Defense Preparedness and Threat Awareness
Active conflict has moved spending from peacetime sustainment to wartime readiness. Ammunition shortages prompted the EU to raise propellant output by 50%. Manufacturers like Rheinmetall increased explosives capacity by 60% and ditched just-in-time logistics. Demand for uncrewed systems surged as Leonardo secured 13 EDF wins, while Poland ordered more than 150 major equipment items for delivery by 2025.
Adoption of Multi-Domain Operations Reshapes European Force Planning
Defense planners now integrate land, sea, air, space, cyber, and electromagnetic capabilities. Space investment grows fastest, supported by the EU Space Strategy for Security and Defence. Kongsberg’s microsatellite for Norwegian maritime surveillance shows how orbital assets enhance classical missions. Cyber elements are embedded in exercises such as NATO’s Cyber Coalition, using Indra’s situational-awareness tools.
Restraints Impact Analysis
| Restraint | (~) % Impact on CAGR Forecast | Geographic Relevance | |
|---|---|---|---|
| Budget constraints due to competing energy transition priorities | -0.4% | EU member states, cross-border defense trade | Medium term (2-4 years) |
| Supply chain disruptions in energetic materials | -0.7% | Germany, France, advanced manufacturing centers | Long term (≥ 4 years) |
| Inconsistent export licensing policies across EU member states | -0.4% | EU member states, cross-border defense trade | Medium term (2-4 years) |
| Limited availability of skilled labor for systems integration | -0.7% | Germany, France, advanced manufacturing centers | Long term (≥ 4 years) |
| Source: Mordor Intelligence | |||
Budget Constraints Due to Competing Energy Transition Priorities
Green Deal obligations divert fiscal resources, forcing trade-offs between wind farms and weapon systems. Germany tackles both with one package, yet smaller states delay programs or extend legacy platforms. Political scrutiny remains high as voters weigh energy resilience against defense readiness, particularly for big-ticket ships and aircraft.
Supply Chain Disruptions in Energetic Materials
Explosives and propellant shortages limit production despite full order books. Capacity expansion takes up to two years because of strict environmental permits and scarce skilled labor. The EU aims to lift explosives output by 30%, but near-term deliveries remain tight, compelling contractors to prioritize ongoing contracts and slowing new awards.
Segment Analysis
By Armed Forces: Land-Centric Spending Remains Pre-eminent
The Army accounted for a 42.67% share of the European defense market in 2024, reflecting a renewed focus on territorial defense. Spending flows to heavy armor programs, such as Italy’s EUR 20 billion (USD 23.59 billion) tank upgrade under the Leonardo–Rheinmetall venture.[2]Leonardo S.p.A., “Leonardo and Rheinmetall to Develop Main Battle Tank,” leonardo.com Eastern states are increasing their personnel levels, with Poland targeting 230,000 soldiers. Navy outlays grow fastest at 5.82% CAGR, supported by submarine modernization in Germany and the Netherlands. Air Force budgets rise through integrated air-and-missile defense initiatives, such as the European Sky Shield and Patriot procurement.
Ammunition and soldier-system demand translate into larger framework deals, typified by Rheinmetall’s record contract in February 2025. Naval priorities cover blue-water deterrence and Baltic security, illustrating how the European defense market responds to multiple threat axes. Inter-service interoperability is now mandatory, enabling quicker deployment of joint task forces across the continent.
Note: Segment shares of all individual segments available upon report purchase
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By Type: Vehicles Still Lead, Unmanned Systems Accelerate
Vehicles retained a 48.85% share of the Europe defense market size in 2024, underpinned by tracked and wheeled armor orders. Demand for tactical trucks and infantry fighting vehicles persists, yet Unmanned Systems grow 7.24% CAGR, 1.73 points above the market average. EDF grants boost counter-UAS and autonomous logistics, with E-CUAS spearheading pan-European drone defense.
C4ISR upgrades range from Spain’s new NASAMS to the Netherlands’ EUR 1 billion (USD 1.18 billion) Falcon IV radio contract. Soldier modernisation advances through integrated power packs and sensors rather than stand-alone kits. Space-enabled connectivity folds into vehicle and drone platforms, blending physical mobility with digital reach.
By Domain: Space Registers the Highest Growth
Land systems occupied 45.16% of the Europe defense market in 2024, yet the Space domain posts a 7.75% CAGR through 2030. The EU Space Strategy funds resilient satellite constellations, and Kongsberg’s latest microsatellite underpins maritime surveillance. Air and naval domains converge through integrated air-and-missile-defense networks spreading to 21 member countries.
Cyber and electromagnetic operations move from theory to practice, led by Indra’s NATO deployments. The seam between domains blurs further as future combat platforms bundle on-board compute, secure communications, and sensor fusion.
Note: Segment shares of all individual segments available upon report purchase
Get Detailed Market Forecasts at the Most Granular Levels
Download PDF
By Procurement Nature: Strategic Autonomy Drives Indigenous Output
Indigenous production captured 66.22% of the Europe defense market in 2024 and is projected to grow at a 5.88% CAGR. Suppliers reshore components after Ukraine-related disruptions. Cross-border European programs, rather than purely national lines, shape future production. Foreign procurement remains essential for time-critical needs such as Poland’s HIMARS and Apache buys, but offsets and technology transfer are standard clauses.
Long-term framework agreements replace spot buys, giving local industry predictable volumes to scale explosive, propellant, and composite-material facilities. EDF co-financing cements this pattern by stipulating EU-based manufacturing.
Geography Analysis
Russia retained a 31.23% share of the Europe defense market in 2024, reflecting deliveries booked before the invasion. Sanctions now divert contracts to NATO-aligned suppliers and spur domestic European capacity. Germany’s EUR 1 trillion (USD 1.18 trillion) program secures multi-year demand for submarines, frigates, and anti-aircraft assets, ensuring stable yards and electronics plants through 2030.
Poland registers the fastest 8.01% CAGR. Its PLN 186.6 billion (USD 51.75 billion) 2025 budget and 150 ongoing contracts span tanks, air defense, and artillery, reinforcing NATO’s eastern flank. The Netherlands leverages offset-heavy submarine and radio deals to nurture local shipyards and electronics firms.[3]Naval Group, “Netherlands Selects Naval Group for Submarine Replacement,” naval-group.com At the same time, Romania builds six ASW frigates for the Dutch and Belgian navies, highlighting new manufacturing hubs.
France capitalizes on export wins such as Greece’s additional FDI frigate and the Dutch Barracuda submarines. The United Kingdom remains active in mine-countermeasure innovation and cooperates closely with Nordic navies despite Brexit. Norway’s NASAMS buys and Sweden’s joint initiatives showcase Nordic pooling of resources, and Spain upgrades air defense with fresh NASAMS batteries.
Competitive Landscape
Consolidation defines today’s Europe defense market. The Leonardo–Rheinmetall vehicle venture secures Italy’s EUR 20 billion (USD 23.59 billion) tank program, while BAE Systems and Leonardo team with Japan on GCAP to share sixth-generation fighter costs. Thales coordinates 48-partner AI projects under EDF funding, giving it a first-mover advantage in cyber-secure optronics.
Scale and supply-chain resilience decide winners. Rheinmetall lifted explosive capacity by 60% since 2022, positioning itself as a reliable source during high-tempo operations. HENSOLDT posted a EUR 6.9 billion (USD 8.14 billion) backlog in Q1 2025, proving that broad sensor portfolios remain in demand. Smaller innovators, like Nordic Air Defence with its drone-defense technology, enter the ecosystem through targeted EDF contracts.
White-space opportunities emerge in space-based ISR, cyber-physical integration, and autonomous teaming. Contractors that bridge software and hardware claim outsized influence as European doctrines pivot toward multi-domain integration.
Europe Defense Industry Leaders
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Airbus SE
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BAE Systems plc
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Rheinmetall AG
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Thales Group
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Leonardo S.p.A
- *Disclaimer: Major Players sorted in no particular order
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Recent Industry Developments
- June 2025: Thyssenkrupp Marine Systems (TKMS) signed a ten-year service agreement worth over EUR 800 million (USD 943.11 million) to modernize and maintain the German Navy's six Type 212A submarines.
- February 2025: Rheinmetall Electronics GmbH secured a EUR 3.1 billion (USD 3.65 billion) framework contract from the Bundeswehr's Federal Office for Equipment, Information Technology, and In-Service Support (BAAINBw) to supply and modernize the Infantry Soldier of the Future—Enhanced System for the German armed forces through 2030, advancing the Bundeswehr's infantry digitization.
- December 2024: The French Defence Procurement Agency (DGA) awarded contracts valued at EUR 600 million (USD 707.25 million) to Thales Group, MBDA France, and KNDS France for the development of surface-to-air defence (DSA) and anti-drone (LAD) systems.
Europe Defense Market Report Scope
The European defense industry report includes an analysis of different defense equipment used to maintain the region's military strength.
The European defense industry is segmented based on equipment type, platform, and country. By equipment type, the market is segmented into personnel training and protection, communication, armament, and transport. By platform, the market is segmented into terrestrial, aerial, and naval. The report also offers the market size and forecasts for seven countries across the region. For each segment, the market sizing and forecasts have been done based on value (USD).
By Armed Forces
| Air Force |
| Army |
| Navy |
By Type
| Personnel Training and Protection |
| C4ISR and Electronic Warfare |
| Vehicles |
| Weapons and Ammunition |
| Unmanned Systems |
| Space and Cyber Systems |
By Domain
| Land |
| Air |
| Naval |
| Space |
| Cyber and Electromagnetic Spectrum |
By Procurement Nature
| Indigenous Production |
| Foreign Procurement |
By Geography
| United Kingdom |
| Germany |
| France |
| Italy |
| Spain |
| Sweden |
| Poland |
| Netherlands |
| Norway |
| Russia |
| Rest of Europe |
| By Armed Forces | Air Force |
| Army | |
| Navy | |
| By Type | Personnel Training and Protection |
| C4ISR and Electronic Warfare | |
| Vehicles | |
| Weapons and Ammunition | |
| Unmanned Systems | |
| Space and Cyber Systems | |
| By Domain | Land |
| Air | |
| Naval | |
| Space | |
| Cyber and Electromagnetic Spectrum | |
| By Procurement Nature | Indigenous Production |
| Foreign Procurement | |
| By Geography | United Kingdom |
| Germany | |
| France | |
| Italy | |
| Spain | |
| Sweden | |
| Poland | |
| Netherlands | |
| Norway | |
| Russia | |
| Rest of Europe |
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Key Questions Answered in the Report
What is the current value of the Europe defense market?
The Europe defense market is valued at USD 133.54 billion in 2025 and is set to reach USD 184.24 billion by 2030, advancing at a 5.51% CAGR.
Which segment holds the largest share of expenditure?
Army programs lead with 42.67% of Europe defense market share in 2024.
Which domain is growing fastest?
Space capabilities post the highest 7.75% CAGR through 2030.
Why is indigenous production so dominant?
Strategic autonomy goals and supply-chain lessons from the Russia-Ukraine conflict push Europe to keep 84.22% of procurement within regional industries.
Which country shows the highest spending growth?
Poland grows fastest, with an 8.01% CAGR supported by a 4.7%-of-GDP defense budget and over 150 equipment contracts.
How does NATO’s 2% target influence the market?
With 23 members now compliant, the target turns political intent into contracted programs, adding 1.2 percentage points to the forecasted CAGR.
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