In 2023, global defense spending reached a historic high, transforming the industry into a beacon of growth amid economic uncertainties. Industrial multinationals in the defense sector outperformed global market averages, showcasing resilience and profitability that has drawn investor attention.
Defense Industry Outshines Global Markets
An analysis of over 330 leading industrial multinationals—representing €15.4 trillion in revenues and €30.3 trillion in market capitalization by year-end—reveals the defense sector’s extraordinary performance. The defense segment achieved a growth rate three times higher than the global stock index’s 7.1% increase. European defense firms led the charge, growing by an impressive 42.3%, significantly outpacing their U.S. counterparts, which grew by 8.6%. Standout performers included Germany’s Rheinmetall (+80.5%) and Hensoldt (+80.3%), Sweden’s Saab (+56.7%), and Italy’s Leonardo (+55.9%).
Global Spending Trends
World defense spending per capita hit $306 in 2023, the highest since 1990. This amounts to $0.84 per day per person, driven by geopolitical tensions and rising global insecurity. Total global defense expenditure reached $2.443 trillion, or 2.3% of global GDP—a 6.8% increase compared to 2022.
The United States remains the dominant spender, accounting for 37.5% of global expenditure ($916 billion). China follows with 12.1% ($296 billion), while Russia, India, and Saudi Arabia round out the top five. Italy ranked 12th, contributing 1.5% of global spending at $35.5 billion.
Top Defense Players by Revenue
The U.S. dominates the defense sector, with 15 of the world’s largest companies generating 74% of the industry’s revenues. European firms contribute 22%, while Asian companies hold a modest 4% share. The top earners include:
- Lockheed Martin (€55.0 billion)
- RTX (formerly Raytheon) (€36.8 billion)
- Boeing (€31.0 billion)
- Northrop Grumman (€30.6 billion)
- General Dynamics (€26.8 billion)
Europe’s top player, BAE Systems, generated €25.8 billion in revenues, followed by Leonardo (€11.5 billion).
Emerging Trends and Investments
Defense sector revenues are projected to grow another 6% in 2024, fueled by increased investments. The industry saw a 12.6% rise in R&D spending in 2023, reaching €13 billion. Companies such as Dassault Aviation (France) and Hensoldt (Germany) lead investment intensity, prioritizing innovation and technological advancement.
Employment and Profitability Insights
The defense industry employed over 1.4 million people globally in 2023, marking a 20.9% increase since 2019. U.S.-based companies employed 69% of this workforce. Despite revenue growth, profitability slightly declined, with average EBIT margins dropping to 7.2% in 2023 from 7.9% in 2019.
Stock Market Success
Defense stocks delivered remarkable returns over the past four years, with an aggregate growth of 68.7%, doubling the global stock index’s performance (+34.8%). U.S. giants like RTX (€120.1 billion in market capitalization), Boeing (€108.9 billion), and Lockheed Martin (€101.3 billion) dominate market value rankings.
Challenges and Regional Disparities
Despite its growth, the European defense industry lags behind its U.S. counterpart, primarily due to fragmented budgets and lower spending levels. Europe allocated €352 billion to defense in 2023—just over a third of U.S. expenditure.
Key Takeaways
The surge in global defense spending highlights the sector’s robust potential amid geopolitical instability. With investments rising and innovation at the forefront, the defense industry remains a golden opportunity for growth, particularly in the U.S. and Europe. As 2024 approaches, defense players are set to solidify their positions in an increasingly competitive and indispensable global market.