BAE Systems upgrades 2026 guidance after strong first-half performance

BAE Systems has upgraded its financial guidance for 2026 after reporting strong first-half results driven by rising global defence spending, robust programme execution and record order backlog growth.

The UK defence giant increased sales by 9% on a constant currency basis to £15.8 billion, while underlying EBIT rose 11% to £1.7 billion and underlying earnings per share increased 13% to 38.9p. Free cash flow swung to a £1.79 billion inflow, supported by significant customer advances, while order intake reached £16.4 billion, lifting the company’s record order backlog to £84 billion.

The stronger-than-expected performance prompted BAE Systems to raise its full-year outlook. The company now expects:

• Sales growth of 8% to 10% (previously 7% to 9%)
• Underlying EBIT growth of 10% to 12% (previously 9% to 11%)
• Underlying EPS growth of 11% to 13% (previously 9% to 11%)
• Free cash flow of more than £2 billion, up from previous guidance of more than £1.3 billion. 

Woodburn: Global security environment continues to drive demand

Chief Executive Charles Woodburn said the results reflected strong execution across the business and confidence in continued growth.

“Across the business, our outstanding teams have delivered another strong period of operational and financial performance, which gives us the confidence to upgrade our full year guidance.”

Woodburn said the company continues investing to expand production and accelerate innovation.

“Alongside our focus on meeting our customers’ needs today, we continue to invest in our business to accelerate innovation, drive efficiencies and boost capacity, so we can get mission-critical capabilities into the hands of those who need them, faster.”

He highlighted new collaborative development of combat aircraft alongside investments in US manufacturing facilities to support increased missile production.

“The global threat picture remains highly volatile, and governments are responding with sustained increases in their defence budgets. The combination of our proven execution, diverse geographic footprint and continued investment in our technology and facilities, alongside our healthy order backlog and growing opportunities across our markets, positions us to keep delivering long-term growth.” 

Defence spending tailwinds strengthen outlook

Rising defence budgets across Europe, North America and Asia-Pacific support BAE’s long-term growth.

The company sees strong opportunities across:

• Combat aircraft
• Missile defence
• Precision-guided munitions
• Autonomous systems and drones
• Space systems
• Nuclear submarines

Its investor presentation highlighted the UK’s planned increase in defence spending to 3.5% of GDP by 2035, proposed increases in the US defence budget and growing defence investment across Europe and Asia-Pacific. 

Major programme milestones

During the first half, BAE secured or advanced several major programmes, including:

• Support contract for Türkiye’s 20 Eurofighter Typhoons
• The first international contracts worth more than £5 billion for the Global Combat Air Programme (GCAP) through Edgewing
• A seven-year US framework agreement to quadruple THAAD missile infrared seeker production
• Additional US Army M109A7 Paladin contracts worth $535 million
• More than $380 million in Swedish artillery system orders
• A new £5.9 billion UK Dreadnought submarine contract announced in July
• The unveiling of Brontanax, described as the UK’s first autonomous collaborative combat aircraft, at the Farnborough International Airshow. 

Air and electronics lead growth

Every business sector delivered higher sales during the first six months.

The Air sector grew sales by 11% to £4.9 billion, helped by increased Eurofighter Typhoon production and continued work on the Future Combat Air System (FCAS).

Electronic Systems also expanded by 11% to £3.9 billion, with its Space & Mission Systems business growing by 29% as demand for military space capabilities increased.

Platforms & Services recorded 12% growth, driven by European demand for combat vehicles and artillery, while Maritime benefited from progress on the UK’s Dreadnought submarine programme. 

Investment continues

BAE continues investing in production capacity and technology, including:

• A $135 million expansion of precision-guided munitions facilities in Texas and New Hampshire
• More than $300 million of investment in Sweden’s Hägglunds combat vehicle operations
• A new engineering facility in Utah supporting US missile programmes
• Launch of its Launchpad defence technology incubator
• A €50 million commitment to European defence technology venture capital funds. 

The company also announced it will streamline its reporting structure from five operating sectors to four, effective January 2027, as part of wider efficiency improvements.