The next wave of defense spending

The $2.7 trillion global defense industry is undergoing a structural transformation driven by heightened geopolitical tensions and the urgent need for increased production capacity. In the United States, the Pentagon is shifting toward multi-year procurement contracts and profit-sharing mechanisms to incentivize contractors to scale production of critical munitions and advanced systems. Simultaneously, the industry is balancing the development of "exquisite" high-tech platforms with the integration of cheaper, autonomous, and space-based technologies to maintain military superiority. In Europe, defense spending is rising as nations move toward higher GDP targets, though the sector remains fragmented by national champions. European countries are increasingly prioritizing supply chain sovereignty and faster procurement cycles, often looking beyond traditional U.S. suppliers to fill gaps left by the decline in Russian arms exports. Equity analysts Zach Alexander and Caroline Janin provide these insights into the evolving landscape of global defense markets.