Marcus Johannsen still remembers the morning his father came home from the Saab factory in Linköping, worried about layoffs. That was 2012, when Sweden’s defense industry seemed stuck in neutral, competing against giants like Lockheed Martin for scraps. Today, Marcus works at the same facility—but now it’s buzzing with activity, churning out submarines for the Netherlands and radar systems for Poland.
“We went from wondering if we’d have jobs to working overtime,” Marcus says, watching technicians assemble components for Sweden’s next-generation fighter jets. “Everything changed after Ukraine.”
His story captures the dramatic shift reshaping Europe’s defense landscape. Across the continent, record budgets are creating clear winners and losers in an industry suddenly flush with opportunity.
How Europe’s Defense Spending Boom Changed Everything
European defense spending in 2025 reached levels not seen since the Cold War ended. Countries that once hesitated to buy expensive military equipment now sign multi-billion contracts at breakneck speed.
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The logic is straightforward: refill emptied stockpiles, strengthen air defenses, and send Moscow a clear message about European resolve. But this spending surge isn’t lifting all boats equally.
Three companies emerged as the biggest Europe defense winners: Sweden’s Saab, Germany’s Rheinmetall, and Britain’s BAE Systems. Meanwhile, France’s ambitious Future Combat Air System (FCAS) program stumbled badly, raising questions about Europe’s ability to collaborate on mega-projects.
“The market completely flipped in 24 months,” explains defense analyst Sarah McKenzie. “Companies that positioned themselves right are now swimming in contracts, while others watch from the sidelines.”
The Big Winners and What They’re Selling
Saab’s transformation has been remarkable. The Swedish company landed massive submarine deals with the Netherlands and Poland, while its Gripen fighter jet found new buyers across Eastern Europe. Their radar systems became hot commodities as countries rushed to plug air defense gaps.
Rheinmetall capitalized on Europe’s desperate need for artillery ammunition and armored vehicles. The German manufacturer’s factories are running at full capacity, producing everything from tank shells to modern military trucks.
Here’s how the Europe defense winners stack up:
| Company | Country | Key 2025 Wins | Value |
|---|---|---|---|
| Saab | Sweden | Submarine contracts, Gripen exports | €8.5 billion |
| Rheinmetall | Germany | Artillery systems, ammunition | €12.2 billion |
| BAE Systems | UK | Naval programs, electronic warfare | €6.8 billion |
| MBDA | Multinational | Air defense missiles | €4.9 billion |
BAE Systems dominated naval contracts and electronic warfare systems, while pan-European missile maker MBDA saw orders surge for air defense systems. The UK-Italy-Japan Global Combat Air Programme (GCAP) also gained serious momentum as an alternative to struggling European projects.
- Poland ordered 32 additional submarines from Saab
- Germany increased artillery shell production by 400%
- Eastern European countries signed €15 billion in new defense contracts
- Air defense system orders jumped 280% year-over-year
“Everyone wants the proven stuff that works right now,” says military procurement expert Hans Weber. “There’s no time for experimental programs when threats feel immediate.”
What Went Wrong for the Losers
Not everyone benefited from Europe’s defense spending spree. France’s Naval Group struggled to secure major export contracts, losing ground to competitors offering faster delivery times and more flexible terms.
The biggest disappointment was FCAS, the ambitious Franco-German-Spanish fighter jet program meant to replace aging Eurofighters and Rafales. Political squabbling, cost overruns, and technical delays left the project looking increasingly uncertain.
“FCAS became a symbol of what’s wrong with European defense cooperation,” observes Brussels-based analyst Emma Larsson. “While they argued about workshare, Britain, Italy, and Japan moved ahead with their own fighter program.”
Several factors contributed to FCAS troubles:
- Disagreements over intellectual property rights
- Cost estimates that doubled from original projections
- Technical challenges with next-generation systems
- Political pressure to maintain national industrial bases
France’s insistence on maintaining control over key technologies clashed with German and Spanish demands for fair workshare. As deadlines slipped and costs soared, partner countries began exploring alternatives.
What This Means for European Security
The success of companies like Saab and Rheinmetall reflects a broader shift toward practical, battle-tested equipment over ambitious but risky development programs. European militaries want systems they can deploy immediately, not prototypes that might work in a decade.
This trend has real consequences for how Europe defends itself. Countries are buying more standardized equipment, which should improve interoperability between allied forces. But the focus on immediate needs might leave gaps in next-generation capabilities.
“We’re solving today’s problems very well,” notes former NATO official Robert Chen. “But someone needs to think about the threats we’ll face in 2035 and beyond.”
The shift also changes Europe’s industrial landscape. Smaller, agile companies that can deliver quickly are thriving, while traditional giants that rely on complex international partnerships face challenges.
For ordinary Europeans, these changes mean stronger national defenses but also higher defense spending that competes with social programs for government funding. The defense winners are creating jobs in their home countries, but those benefits come with trade-offs elsewhere in national budgets.
The geopolitical implications extend beyond Europe’s borders. As European companies become more competitive in global defense markets, they’re challenging American dominance in key sectors. This could reshape alliance relationships and defense trade patterns worldwide.
Looking Ahead to 2026 and Beyond
The momentum behind Europe’s defense winners shows no signs of slowing. Poland recently announced plans to double its defense budget, while Germany committed to sustained high military spending through the decade.
Saab is expanding production facilities to meet submarine demand, while Rheinmetall is building new ammunition factories across Europe. These investments suggest both companies expect the current boom to continue.
But challenges remain. Supply chain constraints limit how quickly production can increase, while skilled worker shortages plague the entire industry. Some analysts worry that current spending levels aren’t sustainable once the immediate Ukraine crisis fades.
“The question is whether European governments will maintain this spending when other priorities compete for attention,” says defense economist Lisa Torres. “History suggests defense budgets are often the first to get cut when public attention shifts.”
FAQs
Why did Saab become one of Europe’s biggest defense winners?
Saab offered proven, reliable systems like submarines and fighter jets that countries could acquire quickly, unlike complex multinational programs with long development timelines.
What went wrong with the FCAS fighter jet program?
Political disagreements between France, Germany, and Spain over technology sharing and workshare, combined with soaring costs and technical delays, left the program in serious trouble.
How much did European defense spending increase in 2025?
European defense spending reached Cold War levels, with some countries increasing budgets by over 50% compared to pre-Ukraine invasion levels.
Will these defense companies stay successful long-term?
Success depends on whether European governments maintain high defense spending and whether companies can scale production while managing supply chain challenges.
How does this affect ordinary European citizens?
Higher defense spending creates jobs in defense industries but means less government money available for social programs, healthcare, and education.
What happens to European cooperation on defense projects?
Complex multinational programs like FCAS are struggling, while bilateral or simpler partnerships seem more successful in the current environment focused on quick results.