Europe Defense Market Size, Share, Trends, and Industry Forecast, 2026-2036 | Market to Reach US$493.7 Billion as NATO Spending and EU Funding Accelerate Strategic Investment

Dublin, Oct. 27, 2026 (GLOBE NEWSWIRE) -- "Europe Defense Market Size, Share, and Industry Analysis - Forecast to 2036" has been added to ResearchAndMarkets.com's offering.

The Europe defense market was valued at USD 221.0 billion in 2025 and is estimated to reach USD 263.0 billion in 2026. It is projected to grow to USD 493.7 billion by 2036, registering a CAGR of 6.5% during the 2026-2036 forecast period. The report examines defense spending, procurement priorities, NATO and EU funding frameworks, arms trade, industrial capacity, emerging technologies, competitive developments, and market opportunities across more than 30 European countries.

The analysis covers investment in equipment procurement, defense R&D, sustainment, repair, overhaul, and upgrades. Key capability areas include land systems & ammunition, air systems, naval systems, air & missile defense, C4ISR & electronics, space & cyber assets, and uncrewed platforms. Personnel, pensions, and general operating expenditure are excluded. Geographic coverage includes the 27 EU member states, the U.K., Norway, Switzerland, Turkiye, Ukraine, and other non-EU European countries, excluding Russia and Belarus.

Record Defense Spending Drives Market Expansion

European military spending increased 14% to USD 864 billion in 2025, according to SIPRI, reflecting the region's largest rearmament cycle since the Cold War. The 29 European NATO members spent USD 559 billion, recording their sharpest annual increase since 1953. The European Defence Agency reported that EU member states spent EUR 418 billion on defense in 2025, up 20% year over year and 47% cumulatively since 2022. Equipment procurement reached EUR 115 billion, while Total Fina Elf EU defense spending is expected to rise to EUR 454 billion in 2026.

Long-term demand is supported by NATO's June 2025 Hague summit commitment to allocate 5% of GDP to defense and security by 2035, including 3.5% for core defense. The European Commission's ReArm Europe Plan/Readiness 2030 could mobilize more than EUR 800 billion. SAFE (Security Action for Europe), a EUR 150 billion loan program supporting common procurement, provides additional momentum for joint purchases and European industrial participation.

Germany increased military spending by 24% in 2025 and exceeded 2% of GDP for the first time in more than three decades. Spain raised its defense budget by half, while Poland recorded NATO's highest defense burden. Investment is also accelerating across the Nordic countries, Baltic states, and Central & Eastern Europe as governments prioritize readiness, ammunition inventories, air defense, long-range fires, and border protection.

Import Dependence and Industrial Constraints Remain Key Challenges

Europe continues to depend heavily on non-European suppliers for combat aircraft, air defense, armored vehicles, and other complete systems. SIPRI data published in March 2026 show that European arms imports during 2021-25 were more than three times their 2016-20 level. The U.S. accounted for 58% of arms imported by European NATO members.

Additional constraints include fiscal pressure, uneven national commitments, fragmented procurement, limited production capacity, workforce shortages, and supply chain bottlenecks. Collaborative purchases represented 24% of EU equipment spending in 2025, below the EU benchmark of 35%. Uncertainty surrounding the war in Ukraine and future U.S. policy may also discourage manufacturers from expanding capacity without firm long-term contracts.

High-Growth Opportunities Across Defense Technologies

Air & missile defense is expected to record the highest CAGR among market domains as governments respond to missile threats, drone incursions, and hybrid attacks. Demand is rising for layered air defense, long-range interceptors, radar systems, drones, and counter-drone systems. Poland, Estonia, the Baltic states, and Nordic countries are placing these capabilities at the center of new procurement plans.

Land systems & ammunition is expected to hold the largest market share in 2026. Governments are purchasing armored vehicles, artillery, and munitions to replace stocks transferred to Ukraine and strengthen forces on NATO's eastern flank. Air systems will remain a major investment area, supported by combat aircraft modernization and F-35A deliveries to European air forces.

Equipment procurement is projected to represent the largest spending category in 2026. Research & development is expected to grow at the fastest rate as governments invest in Next -generation aircraft, tanks, air defense, drones, and space programs. EU defense R&D is forecast to increase from EUR 17 billion in 2025 to EUR 20 billion in 2026. Sustainment & MRO demand will expand as fleets grow and readiness requirements rise.

National procurement will retain the larger share in 2026, but collaborative procurement is forecast to grow more rapidly. SAFE requirements, pooled orders, interoperability objectives, and participation by Ukraine and EEA-EFTA countries are expected to support cross-border programs. European suppliers are also positioned for strong growth as preference rules and funding initiatives encourage regional production of ammunition, missiles, armored vehicles, and other priority systems.

Regional Market Outlook

Western Europe is expected to remain the leading sub-region in 2026. Germany is the largest defense spender among European NATO members, the U.K. remains a major global military spender and arms importer, and France combines a substantial domestic budget with strong defense exports. Italy, the Netherlands, Belgium, and Switzerland also offer significant opportunities supported by established industrial capabilities.

Central & Eastern Europe is projected to record the fastest growth through 2036. Poland spent 4.5% of GDP on defense in 2025 and secured the largest SAFE allocation. Romania, Hungary, Czechia, Slovakia, Bulgaria, and Croatia are also expanding procurement. The Nordic countries and Baltic states are prioritizing air defense, long-range fires, surveillance, and border security. Turkiye continues to develop its export-oriented defense industry, while Ukraine is becoming increasingly integrated with European procurement, drone production, and industrial cooperation.

Competitive Landscape

Competition is shaped by system capability, delivery speed, interoperability, local industrial participation, production capacity, and government relationships. Major strategies include new manufacturing plants, joint ventures, cross-border partnerships, localized production, cooperation with Ukrainian industry, and investment in drones, counter-drone systems, missiles, munitions, and Next -generation platforms.

Companies profiled in the report include Rheinmetall AG, BAE Systems , Airbus Defence and Space, Thales S.A., Leonardo S.p.A., Safran S.A., MBDA, KNDS N.V., Saab AB, Naval Group, Fincantieri S.p.A., ThyssenKrupp Marine Systems GmbH, HENSOLDT AG, Kongsberg Gruppen ASA, Indra Sistemas , S.A., Polska Grupa Zbrojeniowa S.A., Czechoslovak Group a.s., Nammo AS, Dassault Aviation S.A., ASELSAN A.S., Lockheed Martin Corporation, and Hanwha Aerospace Co., Ltd.

Key Benefits of the Report

• Provides Europe defense market size estimates and forecasts through 2036.
• Evaluates the effects of NATO spending commitments, ReArm Europe, and SAFE financing.
• Identifies opportunities across defense domains, spending categories, procurement models, supplier origins, and countries.
• Assesses air & missile defense, drones, counter-drone systems, long-range fires, space, cyber, and other priority capabilities.
• Examines import dependence, procurement fragmentation, fiscal constraints, and industrial capacity challenges.
• Benchmarks European and non-European defense suppliers by portfolio, production capacity, partnerships, and competitive position.
• Supports investment, localization, partnership, market entry, and business development decisions.

Key Topics Covered

1. Introduction
1.1. Market Definition
1.2. Market Ecosystem
1.3. Currency and Limitations
1.3.1. Currency
1.3.2. Limitations
1.4. Key Stakeholders

2. Research Methodology
2.1. Research Approach
2.2. Data Collection & Validation Process
2.2.1. Secondary Research
2.2.2. Primary Research & Validation
2.2.2.1. Primary Interviews with Industry Experts
2.2.2.2. Country-Level Analysis
2.3. Market Estimation
2.3.1. Bottom-Up Approach (Country Defense Investment Analysis)
2.3.2. Top-Down Approach (EDA, NATO, and SIPRI Expenditure Data)
2.3.3. Forecast Methodology
2.4. Data Triangulation
2.5. Assumptions

3. Executive Summary

4. Market Overview
4.1. Introduction
4.2. Market Dynamics
4.2.1. Drivers
4.2.1.1. Record Rearmament Across Europe
4.2.1.2. NATO Commitment to 5% of GDP by 2035
4.2.1.3. Unprecedented EU Defense Financing Instruments
4.2.2. Restraints
4.2.2.1. Continued Dependence on Non-European Suppliers
4.2.2.2. Fiscal Constraints and Uneven National Commitment
4.2.2.3. Fragmentation of Procurement
4.2.2.4. Uncertainty over the War and Transatlantic Relations
4.2.3. Opportunities
4.2.3.1. Industrial Cooperation with and Support for Ukraine
4.2.3.2. Air and Missile Defense, Drones, and Counter-Drone Capabilities
4.2.3.3. European Preference and Rising Defense R&D
4.2.4. Challenges
4.2.4.1. Meeting the 3.5% Core Spending Target
4.2.4.2. Transparency as Definitions of Defense Spending Broaden
4.2.4.3. Implementing EU Financing Instruments at Speed
4.2.4.4. Scaling Industrial Capacity and Supply Chains
4.3. Key Trends
4.3.1. Frontloading of Defense Investment
4.3.2. Leadership of the Eastern Flank
4.3.3. Rapid Catch-Up of Southern and Western Spenders
4.4. Defense Spending Analysis
4.4.1. European Military Expenditure, 2016-2025
4.4.2. Defense Investment, Procurement, and R&D Trends
4.4.3. Country Spending as a Share of GDP
4.4.4. Spending Outlook to NATO 3.5% and 5% Targets
4.5. Policy and Funding Landscape
4.5.1. NATO Hague Summit Commitments
4.5.2. ReArm Europe Plan/Readiness 2030
4.5.3. Security Action for Europe (SAFE) Allocations by Country
4.5.4. European Defence Fund and EDIP
4.5.5. National Escape Clause and Fiscal Rules
4.5.6. European Investment Bank Defense Financing
4.6. Arms Trade Analysis
4.6.1. European Arms Imports by Supplier
4.6.2. European Arms Exports
4.6.3. Transfers to Ukraine
4.7. Defense Industrial Base Analysis
4.7.1. Ammunition and Energetics Capacity
4.7.2. Missile and Air Defense Production
4.7.3. Land Systems Production
4.7.4. Shipbuilding
4.7.5. Aerospace and Combat Aircraft Programs
4.8. Technology Landscape
4.8.1. Drones and Counter-Drone Systems
4.8.2. Integrated Air and Missile Defense
4.8.3. Long-Range Fires and Deep Strike
4.8.4. Space and Cyber Capabilities
4.8.5. AI and Digital Battlefield
4.9. Value Chain Analysis
4.10. Porter's Five Forces Analysis

5. Europe Defense Market, by Domain
5.1. Introduction
5.2. Land Systems & Ammunition
5.2.1. Main Battle Tanks and Armored Vehicles
5.2.2. Artillery and Rocket Systems
5.2.3. Ammunition and Energetics
5.2.4. Soldier Systems
5.3. Air Systems
5.3.1. Combat Aircraft
5.3.2. Transport and Tanker Aircraft
5.3.3. Helicopters
5.3.4. Uncrewed Aerial Systems
5.4. Naval Systems
5.4.1. Surface Combatants
5.4.2. Submarines
5.4.3. Uncrewed Maritime Systems
5.5. Air & Missile Defense
5.5.1. Long-Range and Ballistic Missile Defense
5.5.2. Medium- and Short-Range Air Defense
5.5.3. Counter-Drone Systems
5.6. C4ISR & Electronics
5.7. Space & Cyber

6. Europe Defense Market, by Spending Type
6.1. Introduction
6.2. Equipment Procurement
6.3. Research & Development
6.4. Sustainment & MRO

7. Europe Defense Market, by Procurement Mode
7.1. Introduction
7.2. National Procurement
7.3. Collaborative Procurement

8. Europe Defense Market, by Supplier Origin
8.1. Introduction
8.2. European Suppliers
8.3. U.S. Suppliers
8.4. Other Non-European Suppliers

9. Europe Defense Market, by Country
9.1. Introduction
9.2. Western Europe
9.2.1. Germany
9.2.2. U.K.
9.2.3. France
9.2.4. Italy
9.2.5. Netherlands
9.2.6. Belgium
9.2.7. Switzerland
9.2.8. Austria
9.2.9. Ireland & Luxembourg
9.3. Nordic Countries
9.3.1. Norway
9.3.2. Sweden
9.3.3. Denmark
9.3.4. Finland
9.4. Central & Eastern Europe
9.4.1. Poland
9.4.2. Romania
9.4.3. Czechia
9.4.4. Hungary
9.4.5. Slovakia
9.4.6. Bulgaria
9.4.7. Croatia
9.4.8. Slovenia
9.5. Baltic States
9.5.1. Lithuania
9.5.2. Latvia
9.5.3. Estonia
9.6. Southern Europe
9.6.1. Spain
9.6.2. Portugal
9.6.3. Greece
9.6.4. Cyprus & Malta
9.7. Turkiye
9.8. Ukraine
9.9. Rest of Europe (including Western Balkans)

10. Competitive Landscape
10.1. Overview
10.2. Key Growth Strategies
10.3. Competitive Benchmarking
10.4. Competitive Dashboard
10.4.1. Industry Leaders
10.4.2. Market Differentiators
10.4.3. Vanguards
10.4.4. Emerging Companies
10.5. Market Share/Rank Analysis, by Key Player (2025)

11. Company Profiles
Business Overview, Financial Overview, Product Portfolio, Strategic Developments, and SWOT Analysis

European Prime Contractors and Systems Suppliers
11.1. Rheinmetall AG
11.2. BAE Systems
11.3. Airbus Defence and Space
11.4. Thales S.A.
11.5. Leonardo S.p.A.
11.6. Safran S.A.
11.7. MBDA
11.8. KNDS N.V.
11.9. Saab AB
11.10. Naval Group
11.11. Fincantieri S.p.A.
11.12. ThyssenKrupp Marine Systems GmbH
11.13. HENSOLDT AG
11.14. Kongsberg Gruppen ASA
11.15. Indra Sistemas , S.A.
11.16. Polska Grupa Zbrojeniowa S.A.
11.17. Czechoslovak Group a.s.
11.18. Nammo AS
11.19. Dassault Aviation S.A.
11.20. ASELSAN A.S.

Major Non-European Suppliers to Europe
11.21. Lockheed Martin Corporation
11.22. Hanwha Aerospace Co., Ltd.

12. Appendix
12.1. Related Reports
12.2. Customization Options

List of Tables [393]

List of Figures [57]

For more information about this report visit https://www.researchandmarkets.com/r/48lw0g

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