BAE Systems Lifts Guidance As Defense Spending Booms — Update

By Mauro Orru

BAE Systems raised its sales, profitability and cash flow targets for the year after a strong first half as governments keep spending on defense in the face of escalating geopolitical tensions.

The U.K. arms maker said it expected sales growth of 8% to 10% this year, above a prior forecast of 7% to 9%. Last year, sales amounted to 30.66 billion pounds, equivalent to $40.99 billion.

The group makes combat vehicles, ammunition, missile launchers and artillery systems, including the M777 howitzer that Ukraine has employed widely in its fight against Russia. It also provides cybersecurity services, electronic warfare and night vision systems, surveillance and reconnaissance sensors.

Like many of its European rivals, BAE Systems has witnessed sustained demand following Russia's invasion of Ukraine that pushed governments in Europe to spend more on defense to replenish their stockpiles after diverting weapons to Kyiv.

Last month, the U.K. government said it would commit 15 billion pounds in additional funding for its armed forces, raising investments that London has earmarked for defense over the next four years to about 298 billion pounds. Late Wednesday, the company said the government had awarded it a 5.9 billion-pound contract for work on nuclear deterrent submarines.

"The global threat picture remains highly volatile and governments are responding with sustained increases in their defense budgets," Chief Executive Charles Woodburn said.

The company said underlying earnings before interest and taxes--a key measure of profitability--should grow 10% to 12% this year compared to a previously-guided range of 9% to 11%. Underlying earnings per share, another closely watched metric, are expected to grow 11% to 13%, above a prior range of 9% to 11%.

Meanwhile, free cash flow should exceed 2 billion pounds compared to previous guidance of more than 1.3 billion pounds. The group also raised its cumulative free cash flow target from 2024 to 2026 above 6.7 billion pounds from above 6 billion pounds previously.

The boost comes after the group said it had logged 16.4 billion pounds in orders in the first half of the year, lifting its backlog to 84 billion pounds. It secured a contract from the U.K. government to provide Turkey with training, support equipment and services to 20 Typhoon aircraft that were ordered in October 2025.

It also signed a seven-year agreement with the U.S. government to quadruple production and accelerate delivery of infrared seeker for the Terminal High Altitude Area Defense, or THAAD, interceptor missile.

The group continued to ink deals after the first half came to a close. Ukraine recently struck an agreement that will allow a domestic arms maker to produce BAE Systems' L119, a lightweight howitzer that is towed into position or moved by helicopter and fires shells in a range of up to 10.5 miles.

Earlier this month, BAE Systems secured a contract valued at 4.6 billion pounds to develop a new stealth fighter jet in a joint venture with Italy's Leonardo and Japan's Mitsubishi Heavy Industries under the Global Combat Air Program, or GCAP.

In the first half, BAE Systems' sales climbed 9% on year to 15.77 billion pounds. Analysts had forecast 15.61 billion pounds in sales, according to a market consensus provided by the company.

The group reported a net profit of 1.02 billion pounds compared with 969 million pounds a year earlier, while pretax profit increased to 1.28 billion pounds from 1.19 billion pounds.

Underlying EBIT grew to 1.70 billion pounds from 1.55 billion pounds, with underlying EPS up to 38.9 pence from 34.7 pence. Analysts had forecast underlying EBIT of 1.66 billion pounds and underlying EPS of about 37.3 pence, according to the consensus.

Write to Mauro Orru at mauro.orru@wsj.com

(END) Dow Jones Newswires

July 30, 2026 03:05 ET (07:05 GMT)