Report Overview

NATO Defense Market - Industry Trends & Forecast Report, 2031

NATO Defense Market size was estimated to be worth USD 1,661 billion in 2024. During the forecast period between 2025 and 2031, NATO Defense Market size is projected to grow at a CAGR of 4.31% reaching a value of USD 2,232 billion by 2031. Major growth factors for NATO Defense Market include intensifying geopolitical tensions across Europe, heightened security concerns, and rising military expenditures. NATO Defense Market is the total defense expenditures, including the spending on equipment, personnel, operations, and infrastructure to meet collective defense needs, as reported by the NATO Allies. The steady growth of NATO Defense Market is driven by escalating geopolitical tensions with hostile countries and organizations, heightened security imperatives, and a surge in investments in military operations with pronounced expansion. For example, in June 2025, NATO announced a new benchmark of 5% of national annual GDP to be invested in ‘core defence requirements as well as defence- and security-related spending’ by 2035. For instance, the total value of Germany’s five-year defense spending plan will be more than double its usual military spending, primarily due to the country’s aim to meet the NATO’s (the North Atlantic Treaty Organization) newly increased spending target of 3.5% of GDP on defense by 2029. In 2025, the German government allocated EUR 86 billion (approximately USD 101 billion) or 2.4% of GDP to the Bundeswehr (German Federal Defence). The country’s spending plan for defense includes an annual provision of EUR 9 billion (more than USD 10 billion) for Ukraine, fighting the prolonging war with Russia. The significant increase in budgetary allocation for the military spending is expected to boost the growth of players in NATO Defense Market in the coming years.

Source: BlueWeave Consulting

NATO – Overview

North Atlantic Treaty Organization (NATO) is a political and military alliance between its 32 members countries (including United States, Canada, United Kingdom, and Germany) located on both side of the Atlantic Ocean to guarantee the freedom and security of its members. NATO’s three main purposes are “deterring Soviet expansionism, forbidding the revival of nationalist militarism in Europe through a strong North American presence on the continent, and encouraging European political integration.” On April 04, 1949, 12 founding member countries signed the North Atlantic Treaty.

NATO Defense Market – Overview

Defense refers to a nation's military actions aimed at safeguarding its sovereignty, territorial integrity, and national security by countering aggression, subversive activities, and terrorism. NATO defines defense expenditures “as payments made by a national government specifically to meet the needs of its armed forces, those of Allies or of the Alliance.” NATO Defense Market is witnessing steady growth due to the rising adoption of integrated defense technologies, which combine multiple systems to enhance security capabilities. Advancements in automation and data analytics are driving modernization efforts, improving operational efficiency. The growing need for a highly adaptable and technologically advanced military is fueling demand for modern defense systems to support evolving security requirements.

NATO Defense Market

Growth Drivers

Intensifying Military and Political Threat across Europe

Escalating geopolitical tensions across Europe and other regions are boosting the growth of NATO Defense Market at a significant CAGR, with countries increasing their military expenditures to enhance security and strategic capabilities. Further spreading of prolonging Russia-Ukraine war reflects broader security concerns and is contributing to a rise in defense investments across the European region. The NATO, meanwhile, continues to increase defense expenditures. As part of NATO’s 2014 Defence Investment Pledge, members countries agreed to spend about 20% of their defense expenditures on major equipment spending. In June 2025, NATO Allies committed to investing 5% of GDP yearly on defense by 2035. For instance, The German Federal Government announced its plans to increase defense spending to 3.5% of the country GDP by 2029. The shift toward larger military budgets is shaping a new defense market cycle, benefiting defense contractors and encouraging advancements in military technology, including unmanned weapon systems and drones, naval fleets, and aerospace and cyber defense. As geopolitical and military power dynamics shift and conflicts persist, defense spending is set to remain a key priority for many nations, driving long-term growth of NATO Defense Market.

Challenges

Rising Costs for Modern and Advance Defense Systems

Rapidly increasing costs for R&D and maintenance of advanced weapons and modern defense systems could significantly restrain the growth of NATO Defense Market. The advanced defense technologies required for modern defense systems, such as next generation aircraft, naval vessels, and cyber defense solutions, demands substantial investments. Additionally, ongoing maintenance and upgrades of existing military assets further strain budgets. These financial burdens could limit the ability of nations to expand or modernize their forces. As a result, high costs could hinder military readiness and slow the adoption of innovative defense technologies, potentially impacting overall growth of NATO Defense Market.

Impact of Escalating Geopolitical Tensions on NATO Defense Market

Escalating geopolitical tensions, particularly prolonging and further spread of  Russia-Ukraine war could significantly impact NATO Defense Market by driving increased defense spending as NATO Allies prioritize military preparedness. Heightened conflicts and regional instabilities push countries to enhance their defense capabilities, leading to larger defense budgets and investments in advanced defense technologies. This surge in demand for military equipment, such as aircraft, weapons systems, and cybersecurity solutions, fuels the growth of NATO Defense Market. Additionally, geopolitical uncertainties accelerate arms race dynamics and fosters strategic partnerships, further expanding the defense market. However, it also creates challenges, including rising competition, and the need for rapid innovations to address emerging security threats.

NATO Defense Market

Segmental Coverage

NATO Defense Market – By Armed Forces

NATO Defense Market by armed forces is segmented into Air Force, Army, and Navy segments. The air force segment holds the largest share of NATO Defense Market by armed forces. The modernization of aircraft capabilities in NATO is expected to drive significant growth in the air force segment. The navy segment, followed by air force segment, holds a significant market share in NATO Defense Market by armed forces.

Source: BlueWeave Consulting

NATO Defense Market – By Type

On the basis of type, NATO Defense Market is divided into Fixed Wing Aircraft, Rotorcraft, Naval Vessels,  and Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Systems; Weapons & Ammunition; Protection & Training Equipment; and Unmanned Aerial Vehicles (UAVs) segments. The military personnel training and welfare segment dominates NATO Defense Market by type. It is driven by the NATO member countries’ strategic focus on enhancing their defense personnel’s preparedness and security in building efficient armed forces to ensure battle-ready defense units. The NATO Allies allocate a significant share of their military expenditures on their army personnel’s salaries, pensions, training, and their safety. The spending share on military equipment, on the other hand, is expected to grow at the fastest CAGR over the forecast period. It is mainly due to the countries’ increasing focus on R&D and acquisition of advanced unmanned weapon systems with modern technologies including AI, machine learning, and predictive analytics.

NATO Defense Market – By Operation

Based on operation, NATO Defense Market is bifurcated into Autonomous Defense Equipment and Manual segments. NATO, like other major countries across the world, is rapidly adopting unmanned systems, such as unmanned aerial vehicles (UAVs), unmanned combat vehicles, and autonomous drones, for various military applications, such as surveillance, reconnaissance, search and rescue operations, and tactical missions. Unmanned systems are equipped with advanced sensors, 360-degree situational awareness capabilities, and autonomous technologies, enabling them to operate remotely or make autonomous decisions without human intervention. It enhances operational efficiency, reduces risk to personnel, and improves mission outcomes. The surging demand for unmanned systems is also reflected by advancements in commercial and civilian sectors, where drones are used for purposes ranging from agriculture and delivery to infrastructure inspection. As research and innovations in unmanned systems continue to evolve, these technologies offer an expanding array of applications and further fuel the growth of unmanned systems in NATO Defense Market.

NATO Defense Market – By Country

The In-depth research report on NATO Defense Market covers United States (US), Canada, United Kingdom (UK), Germany, France, Turkey, Italy, and Rest of NATO Member Countries. The US dominates NATO Defense Market. For example, the defense expenditure of the US was USD 822.8 million in 2024. In the same year, Canada and other NATO Allies’ combined military expenditures were valued at USD 482.4 billion. The US is expected to continue to lead NATO Defense Market during the forecast period as well.

Source: BlueWeave Consulting

Competitive Landscape

NATO Defense Market is highly competitive, as a number of companies are competing to gain a significant market share. Key players in the market include Airbus SE, BAE Systems plc, The Boeing Company, General Dynamics, L3Hariss Technologies, Lockheed Martin Corporation, Northrop Grumman, Rheinmetall AG, RTX Corporation (formerly Raytheon Technologies), and Thales Group. To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Recent Developments

• In October 2025 - BAE Systems is reportedly to recognize about GBP 4.6 billion from the agreement between the United Kingdom and Turkey for the purchase of 20 Typhoon aircraft.

• In September 2025 – Rheinmetall AG announced its plan to acquire Blohm+Voss shipyards, a Germany-based shipbuilding and engineering company.

• In April 2025 - The U.S. administration requested USD 27 billion for the "Golden Dome" system, including 14 new warships, to bolster missile defense. Concurrently, the Pentagon was seeking further USD 400 million for Boeing's F-47 sixth-generation stealth fighter development.

• In 2025 – United States granted the USD 982-million contract to Mistral Inc and UI Inc., to acquire Hero-120 drones.

Scope of the Report

By Armed Forces

• Airforce

• Army

• Navy

By Type

• Personnel Training & Welfare

• Fixed Wing Aircraft

  • Fighter Jets

  • Transport Aircraft

• Rotorcraft

  • Helicopters

• Ground Vehicles

  • Tanks

  • Armored Fighting Vehicles

• Naval Vessels

  • Aircraft Carriers

  • Submarines

  • Destroyers

• Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Systems

• Weapons & Ammunition

• Protection & Training Equipment

• Unmanned Aerial Vehicles (UAVs)

By Operation

• Autonomous Defense Equipment

• Manual

By Country

• United States (US)

• Canada

• United Kingdom (UK)

• Germany

• France

• Turkey

• Italy

• Rest of NATO Member Countries

1. Research Framework
   1. Research Objective
   2. Product Overview
   3. Market Segmentation
2. Executive Summary
3. NATO Defense Market Insights
   1. End User Value Chain Analysis
   2. DROC Analysis
      1. Growth Drivers
         1. Rising Geopolitical Tensions
         2. Increasing Defense Budgets
         3. Growing Threat of Cyber Warfare
      2. Restraints
         1. High Development & Maintenance Costs
         2. Regulatory Challenges & Export Retractions
      3. Opportunities
         1. Growing Demand for Unmanned Systems
         2. Rising in Space-based Defense Initiative
      4. Challenges
         1. Supply Chain Disruptions
         2. Geopolitical Sanctions & Trade Barriers
   3. Technological Advancements/Recent Developments
   4. Regulatory Framework
   5. Porter’s Five Forces Analysis
      1. Bargaining Power of Suppliers
      2. Bargaining Power of Buyers
      3. Threat of New Entrants
      4. Threat of Substitutes
      5. Intensity of Rivalry
4. NATO Defense Market: Marketing Strategies
5. NATO Defense Market: Pricing Analysis
6. NATO Defense Market Overview
   1. Market Size & Forecast, 2019–2031
      1. By Value (USD Billion)
   2. Market Share & Forecast
      1. By Armed Forces
         1. Air Force
         2. Army
         3. Navy
      2. By Type
         1. Personnel Training & Welfare
         2. Fixed Wing Aircraft
         3. Rotorcraft
         4. Ground Vehicles
         5. Naval Vessels
         6. Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) Systems
         7.  Weapons & Ammunition
         8.  Protection & Training Equipment
         9.  Unmanned Aerial Vehicles (UAVs)
      3. By Operation
         1. Autonomous Defense Equipment
         2. Manual
      4. By Country
         1. United States
         2. Canada
         3. United Kingdom
         4. Germany
         5. France
         6. Turkey
         7. Italy
         8. Rest of NATO Member Countries
7. United States Defense Market
   1. Market Size & Forecast, 2019–2031
      1. By Value (USD Billion)
   2. Market Share & Forecast
      1. By Armed Forces
      2. By Type
      3. By Operation
8. Canada Defense Market
   1. Market Size & Forecast, 2019–2031
      1. By Value (USD Billion)
   2. Market Share & Forecast
      1. By Armed Forces
      2. By Type
      3. By Operation
9. Germany Defense Market
   1. Market Size & Forecast, 2019–2031
      1. By Value (USD Billion)
   2. Market Share & Forecast
      1. By Armed Forces
      2. By Type
      3. By Operation
10. United Kingdom Defense Market
    1. Market Size & Forecast, 2019–2031
       1. By Value (USD Billion)
    2. Market Share & Forecast
       1. By Armed Forces
       2. By Type
       3. By Operation
11. France Defense Market
    1. Market Size & Forecast, 2019–2031
       1. By Value (USD Billion)
    2. Market Share & Forecast
       1. By Armed Forces
       2. By Type
       3. By Operation
12. Italy Defense Market
    1. Market Size & Forecast, 2019–2031
       1. By Value (USD Billion)
    2. Market Share & Forecast
       1. By Armed Forces
       2. By Type
       3. By Operation
13. Rest of NATO Allies Defense Market
    1. Market Size & Forecast, 2019–2031
       1. By Value (USD Billion)
    2. Market Share & Forecast
       1. By Armed Forces
       2. By Type
       3. By Operation
14. Competitive Landscape
    1. List of Key Players and Their Offerings
    2. NATO Defense Company Market Share Analysis, 2024
    3. Competitive Benchmarking, By Operating Parameters
    4. Key Strategic Developments (Mergers, Acquisitions, Partnerships)
15. Impact of Escalating Geopolitical Tensions on NATO Defense Market
16. Company Profiles (Company Overview, Financial Matrix, Competitive Landscape, Key Personnel, Key Competitors, Contact Address, Strategic Outlook, SWOT Analysis)

17. Key Strategic Recommendations
18. Research Methodology
    1.  Qualitative Research
       1.  Primary & Secondary Research
    2.  Quantitative Research
    3.  Market Breakdown & Data Triangulation
       1.  Secondary Research
       2.  Primary Research
    4.  Breakdown of Primary Research Respondents, By Region
    5.  Assumptions & Limitations

*Financial information of non-listed companies can be provided as per availability.

**The segmentation and the companies are subject to modifications based on in-depth secondary research for the final deliverable

List of Figures

Figure 1        NATO Defense Segmentation

Figure 2        NATO Defense Market Value Chain Analysis

Figure 3        Company Market Share Analysis, 2024

Figure 4        NATO Defense Market Size, By Value (USD Billion), 2019–2031

Figure 5        NATO Defense Market Share, By Armed Forces, By Value (USD Billion), 2019–2031

Figure 6        NATO Defense Market Share, By Type, By Value (USD Billion), 2019–2031

Figure 7        NATO Defense Market Share, By Operation, By Value (USD Billion), 2019–2031

Figure 8        NATO Defense Market Share, By Country, By Value (USD Billion), 2019–2031

Figure 9        United States Defense Market Size, By Value (USD Billion), 2019–2031

Figure 10      United States Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 11      United States Defense Market Share, By Type, By Value, 2019–2031

Figure 12      United States Defense Market Share, By Operation, By Value, 2019–2031

Figure 13      Canada Defense Market Size, By Value (USD Billion), 2019–2031

Figure 14      Canada Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 15      Canada Defense Market Share, By Type, By Value, 2019–2031

Figure 16      Canada Defense Market Share, By Operation, By Value, 2019–2031

Figure 17      Germany Defense Market Size, By Value (USD Billion), 2019–2031

Figure 18      Germany Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 19      Germany Defense Market Share, By Type, By Value, 2019–2031

Figure 20      Germany Defense Market Share, By Operation, By Value, 2019–2031

Figure 21      United Kingdom Defense Market Size, By Value (USD Billion), 2019–2031

Figure 22      United Kingdom Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 23      United Kingdom Defense Market Share, By Type, By Value, 2019–2031

Figure 24      United Kingdom Defense Market Share, By Operation, By Value, 2019–2031

Figure 25      Italy Defense Market Size, By Value (USD Billion), 2019–2031

Figure 26      Italy Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 27      Italy Defense Market Share, By Type, By Value, 2019–2031

Figure 28      Italy Defense Market Share, By Operation, By Value, 2019–2031

Figure 29      France Defense Market Size, By Value (USD Billion), 2019–2031

Figure 30      France Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 31      France Defense Market Share, By Type, By Value, 2019–2031

Figure 32      France Defense Market Share, By Operation, By Value, 2019–2031

Figure 33      Rest of NATO Allies Defense Market Size, By Value (USD Billion), 2019–2031

Figure 34      Rest of NATO Allies Defense Market Share, By Armed Forces, By Value, 2019–2031

Figure 35      Rest of NATO Allies Defense Market Share, By Type, By Value, 2019–2031

Figure 36      Rest of NATO Allies Defense Market Share, By Operation, By Value, 2019–2031

List of Tables

Table 1         NATO Defense Market Size, By Value (USD Billion), 2019–2031         

Table 2         NATO Defense Market Size, By Armed Forces, By Value (USD Billion), 2019–2031          

Table 3         NATO Defense Market Size, By Type, By Value (USD Billion), 2019–2031  

Table 4         NATO Defense Market Size, By Operation, By Value (USD Billion), 2019–2031

Table 5         NATO Defense Market Size, By Country, By Value (USD Billion), 2019–2031

Table 6 United States Defense Market Size, By Value (USD Billion), 2019–2031

Table 7 United States Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 8 United States Defense Market Share, By Type, By Value, 2019–2031

Table 9 United States Defense Market Share, By Operation, By Value, 2019–2031

Table 10       Canada Defense Market Size, By Value (USD Billion), 2019–2031

Table 11       Canada Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 12       Canada Defense Market Share, By Type, By Value, 2019–2031

Table 13       Canada Defense Market Share, By Operation, By Value, 2019–2031

Table 14       Germany Defense Market Size, By Value (USD Billion), 2019–2031

Table 15       Germany Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 16       Germany Defense Market Share, By Type, By Value, 2019–2031

Table 17       Germany Defense Market Share, By Operation, By Value, 2019–2031

Table 18       United Kingdom Defense Market Size, By Value (USD Billion), 2019–2031

Table 19       United Kingdom Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 20       United Kingdom Defense Market Share, By Type, By Value, 2019–2031

Table 21       United Kingdom Defense Market Share, By Operation, By Value, 2019–2031

Table 22       Italy Defense Market Size, By Value (USD Billion), 2019–2031

Table 23       Italy Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 24       Italy Defense Market Share, By Type, By Value, 2019–2031

Table 25       Italy Defense Market Share, By Operation, By Value, 2019–2031

Table 26       France Defense Market Size, By Value (USD Billion), 2019–2031

Table 27       France Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 28       France Defense Market Share, By Type, By Value, 2019–2031

Table 29       France Defense Market Share, By Operation, By Value, 2019–2031

Table 30       Rest of NATO Allies Defense Market Size, By Value (USD Billion), 2019–2031

Table 31       Rest of NATO Allies Defense Market Share, By Armed Forces, By Value, 2019–2031

Table 32       Rest of NATO Allies Defense Market Share, By Type, By Value, 2019–2031

Table 33       Rest of NATO Allies Defense Market Share, By Operation, By Value, 2019–2031    

Table 34       Airbus SE Company Overview

Table 35       Airbus SE Financial Overview

Table 36       BAE Systems Plc Company Overview

Table 37       BAE Systems Plc Financial Overview

Table 38       The Boeing Company: Company Overview

Table 39       The Boeing Company Financial Overview

Table 40       General Dynamics Company Overview

Table 41       General Dynamics Financial Overview

Table 42       L3Hariss Technologies Company Overview

Table 43       L3Hariss Technologies Financial Overview

Table 44       Lockheed Martin Corporation Company Overview

Table 45       Lockheed Martin Corporation Financial Overview

Table 46       Northrop Grumman Company Overview

Table 47       Northrop Grumman Financial Overview

Table 48       Rheinmetall AG Company Overview

Table 49       Rheinmetall AG Financial Overview

Table 50       RTX Corporation (formerly Raytheon Technologies) Company Overview

Table 51       RTX Corporation (formerly Raytheon Technologies) Financial Overview

Table 52       Thales Group Company Overview

Table 53       Thales Group Financial Overview