BAE Systems plc
BAE Systems plc provides defense, aerospace, and security solutions in the United States, the United Kingdom, the Middle East, Australia, Kingdom of Saudi Arabia, Europe, and internationally. The company operates through five segments: Electronic Systems, Platforms & Services, Air, Maritime, and Cyber & Intelligence. The Electronic Systems segment offers electronic warfare systems, navigation systems, electro-optical sensors, military and commercial avionics, and precision guided solutions and communications systems, as well as space electronics, spacecraft, and ground and tactical systems. The Platforms & Services segment manufactures and sells combat vehicles, weapons, and munitions; and offers naval ship repair services, as well as operates and manages two government-owned and contractor-operated ammunition plants. The Air segment develops future combat air systems and falconworks alongside edgewing, and eurofighter and MBDA. The Maritime segment provides maritime and land services, including submarine, ship build, and support programs. The Cyber & Intelligence segment offers cyber security services for national security, central government, and government enterprises. The company was formerly known as British Aerospace plc and changed its name to BAE Systems plc in May 2000. BAE Systems plc was incorporated in 1979 and is headquartered in London, the United Kingdom.
What does it do?
BAE Systems is one of the world's largest defense companies — think fighter jets, warships, submarines, and the electronics that go inside them. If a British or Australian navy ship needs a radar system, or the US Army needs electronic jamming equipment to confuse enemy missiles, BAE probably built it. They also make the hull of the UK's nuclear submarines and supply parts for the F-35 fighter jet, the most advanced warplane in the world. In plain terms: governments pay BAE to keep their militaries equipped.
Defense spending across NATO countries is rising fast — triggered by the war in Ukraine and growing concerns about China — and BAE is one of the biggest direct beneficiaries of that shift. The UK government has committed to raising its defense budget, and the US and European allies are doing the same, which means BAE's order book (the pile of contracts it already has waiting to be fulfilled) is growing. At a moment when most sectors face economic uncertainty, defense budgets are politically very hard to cut.
How does it make money?
BAE makes money by winning long-term government contracts — often worth billions and lasting decades — to build, maintain, and upgrade military hardware and software. Its five business units cover everything from electronic warfare systems and precision-guided weapons to cyber intelligence services. Revenue grew from $28.3B to $30.7B in the latest year, an 8.5% increase, driven largely by higher spending from the UK Ministry of Defence, the US Department of Defense, and Saudi Arabia. These aren't one-off sales — many contracts include years of follow-on maintenance and upgrades, creating sticky, recurring revenue.
Why do investors care?
The core growth story is simple: the world is rearming. NATO members are scrambling to hit their 2% of GDP defense spending targets, and several are pushing even higher, which directly fuels demand for BAE's products. The company also has a uniquely large order backlog — it regularly reports backlogs exceeding $70B — meaning revenue several years out is already largely locked in. For the thesis to fully play out, BAE needs to keep winning new contracts, avoid major cost overruns on complex programs, and continue expanding in the growing cybersecurity and electronic warfare segments.
Deep Dive
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