Saudi Arabia Defense Market Size & Share Analysis - Growth Trends and Forecast (2026 - 2031)

Saudi Arabia Defense Market Trends and Insights

Sustained Growth in Defense Spending Aligned with Vision 2030 Priorities

Vision 2030 integrates defense funding into the Kingdom's industrial strategy, shielding budgets from fluctuations in commodity prices and anchoring long-term localization objectives. The Public Investment Fund's ownership of Saudi Arabian Military Industries (SAMI) links each multi-year program to job creation and technology transfer, which in turn strengthens political support when oil revenues decline. The SAR 272 billion (USD 72.53 billion) defense allocation for 2025 preserves the momentum for modernization, despite a planned SAR 27 billion (USD 7.20 billion) fiscal deficit, demonstrating the ring-fenced status of military outlays within macro budget planning. Localization climbed from 4% in 2018 to 24.89% by the end of 2024, adding more than 800 direct jobs through National Guard contracts alone. As the share of local content rises, the Saudi Arabia defense market distributes expenditure across domestic supply chains instead of foreign balance sheets, creating constituencies that resist future cuts.

Defense Localization and Offset Mandates Strengthening Domestic Manufacturing

Offset clauses have become a gatekeeper for every major award. The Ministry of National Guard requires a minimum of 60% local content on its weapons-sustainment agreement signed in January 2025. GAMI’s licensing portal blocks foreign investors who fail to demonstrate domestic value creation, steering primes toward joint ventures such as Baykar’s Akinci UAV line, which includes 70% Saudi production, and Lockheed Martin’s THAAD partnerships with Middle East Propulsion Company. BAE Systems folded two long-standing entities into BAE Systems Arabian Industries in May 2025 to align with new thresholds. Tier-2 and tier-3 ecosystems lag, however, forcing primes to import precision parts and use training credits to satisfy offset ratios, which dilutes industrial depth.

Rising UAVs, Missiles, and Counter-UAS Requirements from Regional Security Threats

Persistent Houthi UAV raids on Aramco assets and anti-ship missile launches in the Red Sea have elevated C-UAS capability to a top budgeting priority. The Red Sands 2025 exercise evaluated 20 systems and preceded a USD 100 million order for 2,000 APKWS rockets, configured for UAV interception.^{[1]Ashley Roque, “Saudi Arabia buys APKWS for counter-drone missions,” Breaking Defense, breakingdefense.com} Saudi Arabia fields a layered construct that combines kinetic interceptors, laser effectors, and jammers, enabled by the September 2024 delivery of a gallium-nitride AN/TPY-2 radar optimized for discriminating small targets. Cost-per-kill metrics favor this combined approach when confronting low-cost UAV swarms, setting a regional benchmark that NATO states are studying.

Increasing Investment in Space-Based ISR and Satellite Surveillance Capabilities

Neo Space Group’s launch in May 2024 signaled that satellite ISR has moved into the funded mainstream of the Saudi Arabia defense market. Earth observation revenues are forecasted to rise from USD 80.80 million in 2024 to USD 111.80 million by 2030, supporting real-time border monitoring, maritime domain awareness, and energy-infrastructure security. Agreements with Thales Group and Leonardo S.p.A. aim to establish both sovereign collection and analytics capabilities, thereby reducing reliance on US National Technical Means. Indigenous satellites will ultimately enable unilateral targeting options, altering future coalition dynamics.

Oil-Price Volatility Affecting Long-Term Defense Procurement Planning

Brent trading between USD 70 and USD 90 per barrel in 2024-2025 forced planners to publish a SAR 27 billion (USD 7.20 billion) deficit for 2025, tightening multi-year contract flexibility. Although defense remains ring-fenced, primes now seek advance payments, which lock fiscal headroom and shift preference toward modular upgrades over headline mega deals.

Limited Maturity of Local Tier-2 and Tier-3 Defense Supplier Ecosystem

Localization reached 24.89% by the end of 2024; however, the deep industrial capacity lags behind this target. Precision machining, radar modules, and EW subsystems still rely on imports, as ITAR restrictions block complete technology transfer.^{[2]Rahaf Jambi, “Kingdom achieves 24.9% localization in military spending by 2024,” Arab News, arabnews.pk} Aggressive offset targets risk, incentivizing low-value assembly relocation without nurturing high-margin subcomponent production, a gap Vision 2030 agencies aim to close through targeted SME financing.

Segment Analysis

By Armed Forces: Naval Modernization Accelerates Fastest

The Saudi Arabia defense market size allocated to naval forces is projected to grow at a 5.31% CAGR through 2031, faster than any other branch.^{[3]Halna du Fretay, “US and Saudi Arabia Sign Record 142 Billion Arms Deal,” Army Recognition, armyrecognition.com} Four Tuwaiq-class frigates valued at about USD 6 billion are under construction, with the first hull launched in December 2025, and eight Avante 2200 corvettes will be delivered by 2027. These surface combatants integrate COMBATSS-21 and Mk 41 launchers, equipping the Royal Saudi Navy for layered missile defense and anti-surface warfare. Red Sea and Gulf shipping lanes face UAV boats and anti-ship ballistic missiles, so the Navy’s share within the Saudi Arabia defense market climbs as policymakers seek a persistent maritime presence rather than episodic air sortie coverage.

Air forces held the largest 41.76% slice of 2025 expenditure, underpinned by 228 F-15 variants and 72 Typhoons. Germany’s 2024 veto reversal opened the door for 48 additional Typhoons, while an open competition for roughly 50 next-generation fighters pits Rafale, F-15EX, and Typhoon upgrades against one another. Sustainment, not acquisition, now drives most Air Force line items, which moderates growth relative to the Navy. Army allocations focus on 300 newly ordered M1A2 SEPv3 tanks, as well as indigenous 8x8 howitzers under the SAMI program.

Note: Segment shares of all individual segments available upon report purchase

By Type: Unmanned Systems Surge While Vehicles Dominate

Vehicles captured 26.53% of the 2025 spending, reflecting a commitment of USD 7.2 billion to 300 new Abrams tanks and continued upgrades to the LAV. This category retains numerical dominance, yet Unmanned systems posts the strongest 7.25% CAGR, signaling a shift toward attritable airframes that can complicate adversary defenses at lower unit cost. Baykar's USD 3 billion Akinci program includes a dedicated production line in Saudi Arabia, incorporating 70% local content. This approach meets offset requirements while also enhancing deployment speed.

Weapons and Ammunition budgets spike with recurring missile packages, including the USD 3.5 billion AMRAAM lot and the USD 655 million Hellfire buy in 2024. C4ISR and EW investments are mounting as Leonardo DRS and L3Harris Technologies, Inc. integrate cyber-secure displays and autonomous vessel payloads. Space and Cyber Systems, although still small, are recording rapid gains through Neo Space Group's satellite roadmap and Raytheon-Aramco's cyber joint ventures. Collectively, these shifts indicate that the Saudi Arabia defense market share of legacy heavy platforms will gradually cede ground to networked, multi-domain capabilities.

By Domain: Space Investments Outpace Traditional Segments

Space budgets are rising at a 7.32% CAGR, the fastest among operational domains, backed by Neo Space Group capitalization and forecast growth in earth-observation revenue to USD 111.8 million by 2030. Satellite ISR aims to offset human-intelligence gaps in Yemen and the Gulf littoral, enabling the Kingdom to self-cue precision weapons without allied targeting data.

Land remains the spending heavyweight at 42.33% due to vehicle fleets and border-security sensors, yet incremental growth lags as force structure stabilizes. Air domain priorities emphasize life-cycle upgrades, missile defense refreshes, and counter-UAV layers rather than significant new aircraft blocks. Naval programs continue to expand through the acquisition of frigates, corvettes, and indigenous fast interceptor boats, which are manufactured in partnership with French companies. Cyber and spectrum operations integrate across all domains through the Essential Cybersecurity Controls framework, positioning local firms for regional export.

Note: Segment shares of all individual segments available upon report purchase

By Procurement Nature: Indigenous Production Gains Despite Foreign Dominance

Foreign awards still account for 70.01% of 2025 budgets, underpinned by the USD 142 billion US-Saudi strategic defense agreement, which includes F-35s, tanks, and missile-defense upgrades. Even so, Indigenous Production shows a 4.86% CAGR as Vision 2030 enforces 50% localization by the end of the decade. SAMI’s January 2025 National Guard sustainment contracts achieved more than 60% local content, and BAE’s Arabian Industries venture consolidates training and logistics within KSA borders.

US primes still dominate complex systems but face ITAR constraints that slow component transfer, leaving space for Turkey’s Baykar and South Korea’s Hanwha, both of which structure deals around local assembly and technology hand-offs. The Saudi Arabia defense market share attributed to homegrown manufacturing will continue to expand, yet capability gaps in high-end subsystems may persist unless parallel non-US supply chains mature.

Geography Analysis

Saudi Arabia allocated SAR 272 billion (USD 72.53 billion) to defense in 2025, cementing its status as one of the global top five spenders, despite a projected deficit of SAR 27 billion (USD 7.20 billion). Riyadh centralizes decision-making through the MoD, GAMI, and the Public Investment Fund, while the Eastern Province hosts heavy industry, including Zamil Offshore and Aramco’s critical energy assets. Jeddah anchors BAE Systems Arabian Industries and provides deep-water access for naval deliveries.

Southern regions Najran and Jizan deploy dense air and counter-UAS systems to blunt Houthi threats, whereas ports along the Red Sea reinforce naval presence in response to anti-ship missile activity. The Red Sands 2025 counter-UAS exercise conducted in western test ranges highlighted this geographic shift in defense priorities. The May 2024 establishment of Neo Space Group in Riyadh positions the capital as the hub for space R&D and operations, underscoring how new domains tend to cluster near policy centers.

Supplier diversity unfolds unevenly across regions. Korean multifunction radars integrate first near eastern oil fields, while Turkish UAV lines operate in central industrial parks to leverage shared test airspace. Each new facility inserts skilled jobs into Vision 2030 economic clusters, reinforcing political support for defense outlays even during oil-price downcycles. Oil volatility, nevertheless, forces finance officials to prefer incremental procurement that can be paused without breaching contract penalties, thereby shaping a modular geography of production.