Global Defense Contractors See Revenue Growth Amid Ongoing Conflicts

The world’s largest 100 defense contractors amassed $632 billion in combined revenue in 2023, a real-term annual growth of more than 4 percent that comes as conflicts in Ukraine and the Middle East continue to propel weapons demand, according to a new Stockholm International Peace Research Institute (SIPRI) report released today.

Rebound in Revenue Following 2022 Dip

The latest figures show that revenues have “bounced back after a dip in 2022,” as companies push to increase production capacity to meet a demand signal that shows no sign of subsiding in the near term, the report stated.

“There was a marked rise in arms revenues in 2023, and this is likely to continue in 2024,” said Lorenzo Scarazzato, a researcher with SIPRI’s military expenditure program. “The arms revenues of the Top 100 arms producers still did not fully reflect the scale of demand, and many companies have launched recruitment drives, suggesting they are optimistic about future sales.”

Regional Performance: U.S. vs. Russia

While US-based companies comprised 41 firms in the top 100—and accounted for half the total revenue recorded—Russian defense firms boasted the largest percentage increase in revenues in 2023, growing by 40 percent compared to 2022. The report attributed that gain to an intensified campaign by Russia’s Rostec defense conglomerate and United Shipbuilding Corporation to surge production capability for key weapon systems like missiles, aircraft, and drones needed to replace equipment lost while fighting against Ukraine.

According to the report, “this expansion was facilitated by several strategic adjustments, including increased state orders backed by a larger military budget, new administrative structures to manage production and ensure implementation of orders, and multi-shift working conditions at many arms manufacturing facilities.”

U.S. Defense Companies and Supply Chain Constraints

Overall, US defense companies saw their revenue increase by 2.5 percent in 2023. However, despite a growth in orders, the two largest contractors—Lockheed Martin and RTX—recorded a slight drop in real-term revenue due to ongoing supply chain constraints for specialized components and subsystems like solid rocket motors, which have posed challenges for the companies’ plans to expand production on key aerospace and missile defense programs. RTX experienced a 1.3 percent decline in defense revenues, totaling $40.7 billion in 2023, while Lockheed’s revenues dipped by 1.6 percent to $60.8 billion, according to SIPRI. Meanwhile, Northrop Grumman, identified by SIPRI as the third-largest defense contractor, reported a 5.8 percent revenue increase driven by higher ammunition sales following the conflict in Ukraine, alongside over 9 percent growth in its space division.

Mixed Fortunes for Chinese Defense Contractors

While Russian defense contractors enjoyed a surge in revenues, Chinese companies saw their year-over-year growth stagnate, with only a 0.7 percent increase—its lowest rate since 2019, the report noted.

Growth in Japan and South Korea’s Defense Industries

The stagnation in Chinese industrial growth coincided with a significant increase in defense revenues for Japanese and South Korean companies. South Korea’s defense revenues rose by 39 percent to $11 billion in 2023, with Hanwha, the nation’s largest defense contractor, marking a 53 percent increase after acquiring shipbuilder DSME and boosting exports of armored vehicles and artillery through contracts with Poland, Australia, and the United Kingdom.

Meanwhile, Japanese defense contractor revenues expanded by 35 percent to $10 billion, with Mitsubishi Heavy Industries leading the way with a 24 percent increase, while Kawasaki Heavy Industries recorded a 16 percent growth in defense revenues.

Middle East Defense Revenue Growth

After Russia, the Middle East saw the largest revenue growth in 2023, with six Israeli and Turkish companies in the top 100 achieving a combined 18 percent increase to reach $19.6 billion. Notably, Israel Aerospace Industries and Rafael achieved revenue increases of 15 percent and 16 percent, respectively. Turkish Aerospace Industries reported a 45 percent revenue growth, the highest for a Turkish company.

European Defense Contractors Face Mixed Results

Among the 27 European defense companies on the list, revenue growth was largely flat in 2023. The most notable gains were recorded by JSC Ukrainian Defense Industry, formerly known as Ukroboronprom, which saw arms revenues increase by 69 percent to $2.2 billion as it ramped up production of weapons for Ukraine’s military. The four German defense companies included in the top 100 experienced a 7.5 percent increase in revenue, while all seven UK-based defense firms reported revenue growth.

However, SIPRI reported that the combined revenues of five French companies declined by 8.5 percent, led by a 41 percent drop in defense revenue for Dassault Aviation Group due to reduced sales of its Rafale fighter. In Italy, both Leonardo and Fincantieri experienced a 10 percent reduction in Italy, both Leonardo and Fincantieri experienced a 10 percent reduction in defense revenue due to a decline in aircraft sales by Leonardo and the conclusion of an export deal between Qatar and Fincantieri.