BAE sales hit record amid new global arms race
By Frank Prenesti
Date: Wednesday 18 Feb 2026
(Sharecast News) - Weapons maker BAE Systems on Wednesday reported a better-than-expected rise in annual profits after sales soared to a new record as it cashed in on higher government defence spending amid rising geopolitical tensions.
The Typhoon fighter jet and warship maker said full-year underlying operating profit jumped 12% to £3.32bn, beating expectations of a 9% - 11% increase, with its order backlog hitting a record £83.6bn. Free cash flow fell 14% to £2.16bn, but net debt was cut by 22% to £3.84bn.
Sales surged by 10% to £30.66bn as growing threats from Russia and China, combined with a pivot away from Europe by US President Donald Trump forced governments to ramp up spending on military equipment. Orders rose 9% to £36.8bn boosted by orders from Turkey worth £4.6bn for 20 new Typhoon fighter jets, $3.3bn in electronic systems and $1.7bn for US combat vehicles.
"It's hard to escape the sense that the brutal conflict in Ukraine has fast-tracked more than a decade's worth of defence technology evolution into just a few years," chief executive Charles Woodburn told reporters after the results.
UK Prime Minister Keir Starmer told the recent Munich Security Conference that higher and more sustained defence spending was needed to meet the threat from Russia and his government was reportedly considering accelerating plans to spend 3% of GDP on defence.
Looking ahead, BAE guided for a 9% - 10% increase in 2026 profits and sales growth of 7% - 9% from last year's £30.6bn.
Richard Hunter, Head of Markets at interactive investor said the results reflected "the unfortunate sign of the times that defence stocks are squarely back in fashion, as governments around the world look to protect their interests and lands from growing tensions. For shareholders, however, this has resulted in significant rewards".
"Headwinds may be few and far between but for investors, they need to be considered. The lack of a share buyback announcement could result in some minor disappointment even though the rationale is sound as the group diverts resources elsewhere for investment and debt reduction purposes," he added.
"The meteoric share price rise has left the valuation well above the recent multi-year averages, suggesting that the shares are not obviously cheap, while with punchier valuations come higher expectations and more pressure to keep growing earnings to stay in line. Supply chain issues and production delays can also be a cost of doing business, while some may be deterred from investing in the sector on ethical grounds."
"Even so, for the medium term at least the future looks bright for BAE. Equally, the geopolitical backdrop is a reminder that brittle relationships are seemingly never far away, ranging from potential and actual conflicts in the likes of Venezuela, between China and Japan and Russia and Ukraine. "
"BAE shares have risen by 52% over the last year, as compared to a gain of 20.4% for the wider FTSE100, and by 127% over the last three years. The resultant higher valuation has done little to deter investors, with the market consensus of the shares remaining at a buy and the price reaction at the open a further reflection of optimism for the foreseeable future."
Reporting by Frank Prenesti for Sharecast.com
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