Winning New Defense Contracts: The European Industrial Opportunity 

Europe is investing €800 billion in defense through 2030, creating opportunities for industrial companies that understand how to position themselves correctly. 

This figure covers just the EU’s coordinated spending. Individual European countries are spending far more on top of this foundation. 

Consider the scale when you examine individual budgets. Germany spent €88.5 billion in 2024, while Poland reached 4.2% of its GDP. Even more telling for future planning is Germany’s suggestion that it could increase its defense spending to 5% of its GDP in line with President Trump’s demands. At 5% of its GDP, Germany alone would spend roughly €200 billion annually. 

For decades, European NATO members barely met the 2% GDP target. Everything changed in 2024 when military expenditure across Europe jumped 17%—the biggest one-year increase since the Cold War ended. What makes this spending increase particularly attractive for suppliers is that Europe isn’t just spending more money. European leaders are actively reshaping who gets to supply that equipment through concrete policy mechanisms that favor domestic suppliers. 

The EU, via the European Defence Industrial Strategy (EDIS), aims to source 50% of defense equipment from European suppliers by 2030, rising to 60% by 2035. European companies will have preferential access to hundreds of billions in contracts, while non-European suppliers must establish genuine local operations to compete. 

Defense Industry Opportunities Across Industrial Market Segments

Defense investments reached €102 billion in 2024, representing money spent toward researching, developing, and procuring new defense capabilities rather than just personnel costs or infrastructure maintenance. Equipment procurement also increased 50% year-over-year, proving that European governments have moved beyond planning phases into active buying. Companies that recognize this trend can act while competitors debate whether the spending increase will continue. 

Understanding how defense contracting actually works helps explain why this expansion particularly benefits certain types of suppliers. The supplier tier structure reveals why smaller companies actually have advantages in this expanding market. Tier 1 suppliers face intimidating barriers including extensive security clearances, considerable capital requirements, and multi-year qualification processes. But here’s what most executives miss: the average aerospace OEM relies on 200+ Tier 1 suppliers and 12,000+ Tier 2 and Tier 3 suppliers. The numbers work in your favor if you’re willing to operate at Tier 2 or Tier 3 levels, where entry barriers are lower and qualification times faster while contract values remain substantial. 

Beyond the structural advantages of operating in lower tiers, the current financing environment creates additional opportunities for the right companies. Europe’s new SAFE lending program leaves Tier 2 and Tier 3 suppliers dependent on cautious commercial banks for project funding. Companies with healthy balance sheets can win business that financially constrained competitors simply can’t afford to pursue, regardless of their technical capabilities. 

Fighter Aircraft Programs Create Technology Integration Opportunities Through Platform Modernization

European fighter jet programs operate as technology ecosystems requiring continuous capability upgrades rather than discrete platform delivery, creating different supplier opportunities than other defense segments. The Future Combat Air System (FCAS) has secured €3.2 billion for its current development phase, with development spanning adaptive-cycle engines requiring 30-40% more thrust than current engines, mission systems, and remote carrier integration. The UK-Italy-Japan Global Combat Air Programme represents £2 billion in committed UK investment, while production planning for 350 fighters creates immediate supplier qualification opportunities for companies with advanced manufacturing capabilities. Current Eurofighter modernization programs show this pattern too: Spain ordered 25 aircraft while Italy committed to 24 additional units in December 2024. 

The F-35 industrial participation model proves how aerospace procurement rewards specialized suppliers with decades-long revenue streams through workshare agreements tied to national procurement volumes. Romania signed a contract for 32 aircraft in November 2024, while Greece committed €3.47 billion for 20 aircraft, creating proportional industrial returns for European suppliers. Finland secured significant industrial participation including front fuselage production and F135 engine assembly rights through 2030, while BAE Systems captures 13-15% workshare on each aircraft through electronic warfare suite manufacturing. Companies entering this market integrate into global supply chains producing thousands of units over 40+ year program lifecycles rather than competing for discrete contracts. 

Training aircraft procurement also represents an often-overlooked growth segment driven by Europe’s projected shortage of 141,000 pilots through 2043 and expanding air force requirements. Spain operates Europe’s largest PC-21 fleet with 40 aircraft, while Italy’s International Flight Training School operates M-346s training pilots from nine nations, creating opportunities for simulation systems, avionics, and specialized components. Unlike fighter programs with their multinational workshare requirements, training aircraft procurement offers more direct market access for companies providing cockpit systems, flight controls, and mission computers that can prove compatibility with existing pilot training curricula. 

Land-Based Defense Programs Generate Substantial Follow-On Orders

Land-based defense programs offer something most industrial executives rarely encounter: predictable, long-term revenue growth built into the initial contract structure. Unlike civilian markets where you win a project and hope for repeat business, successful military vehicle programs generate multiple waves of orders spanning decades. Understanding this pattern helps explain why companies fight so hard for initial positions in these programs. 

France’s Scorpion program continues through 2031, having already delivered 723 GRIFFON vehicles and 91 JAGUARs. What makes this program particularly instructive is how France just contracted 530 additional SERVAL vehicles for €1.2 billion. This isn’t an accident—it’s how military procurement works. Once a platform proves successful in service, militaries routinely order additional quantities, upgraded variants, and replacement vehicles. For suppliers established early in these programs, initial contracts multiply as requirements expand and fleets grow. 

The business opportunity for industrial companies lies not in competing for prime contractor positions, but in understanding how to become indispensable partners within these programs. ZTS-SPECIAL in Slovakia shows this approach perfectly. Rather than attempting to compete with established vehicle manufacturers, the company positioned itself as the main industrial partner for Slovakia’s €1.3 billion CV90 program by offering specialized manufacturing capabilities that the prime contractor needed.  

This partnership model matters because European governments aren’t just buying armored vehicles—they’re rebuilding domestic land-based defense manufacturing capabilities that were allowed to atrophy during decades of peace. Countries want suppliers who can prove genuine European production capabilities for vehicle chassis, armor systems, and tracked vehicle components, opening doors for companies that understand how to structure their operations to meet these specialized manufacturing requirements. 

Space and Cyber Defense Programs Drive Technology Integration

The IRIS² constellation program, valued at €11 billion, will deploy 290 satellites by 2030. Thales Alenia Space, OHB, Airbus Defence and Space, Telespazio, Deutsche Telekom, Orange, Hisdesat, and Thales SIX became key partners in this project not by promising to build complete satellites, but by partnering with dozens of specialized suppliers for everything from solar panels to communication equipment. This approach reveals an important insight: each satellite requires hundreds of specialized parts, creating multiple entry points for suppliers who understand they don’t need to compete for prime contractor positions to capture value. 

The cybersecurity transformation happening across European defense creates an even more immediate opportunity. The Cyber Solidarity Act entered force February 4, 2025, establishing regulatory requirements that force all defense contractors to upgrade their security systems. This creates a captive market where customers must buy to maintain their government contracts. Companies with existing electronic systems expertise can enter defense cybersecurity by adapting their current capabilities rather than building defense-specific solutions from scratch. This works because many cybersecurity challenges in defense mirror those in civilian critical infrastructure, allowing companies to apply existing knowledge to new, higher-margin markets. 

Naval Contracts Favor Specialized Component Suppliers

European naval procurement has changed in a direction that heavily favors specialized suppliers over vertically integrated shipbuilders. Germany’s F126 frigate program expanded from four to six ships in 2024. The program involves Damen Naval as lead contractor working with Blohm+Voss, Lürssen, German Naval Yards, and Peene Werft for construction, but the real story lies in the dozens of specialized suppliers providing everything from radar systems (Hensoldt, Thales) to propulsion components (MTU, MAN Energy Solutions, Renk) to combat systems (Thales Tacticos), electrical systems (ABB, Wärtsila SAM), and weapons (OTO, Rheinmetall, Leonardo). This procurement approach reflects European navies’ recognition that specialized suppliers often deliver superior technology compared to shipbuilders attempting to do everything internally. 

France’s Defense and Intervention Frigate program follows this trend, with Naval Group coordinating over 400 subcontractors rather than manufacturing everything internally. The business opportunity emerges from this specialization strategy: navies increasingly need companies that excel in specific technologies rather than shipbuilders who try to master every capability. Companies can win large naval contracts by providing electronics, sensors, or mechanical systems without needing any shipbuilding capabilities. The challenge lies in understanding which systems navies are willing to source externally and which capabilities they consider too sensitive to outsource. 

Support Services Create Long-Term Recurring Revenue Streams

Support services contracts have grown across European defense markets, with companies securing multi-million-euro logistics and maintenance agreements that span decades rather than delivery milestones. These arrangements offer different revenue characteristics than traditional equipment procurement. 

Rheinmetall’s €260 million logistical support contract with the Bundeswehr covers comprehensive services for military force relocation within Germany and deployment abroad through 2029. The company manages the setup and operation of holding areas, Convoy Support Centers, and assembly areas, providing accommodation facilities, catering, energy supply, waste disposal, and security services. This framework contract supports both national defense situations and NATO collective defense operations. 

Thales maintains French Navy FREMM frigates under a seven-year contract running through 2030, managing sonars, radars, and communication systems through integrated expertise centers. The company provides round-the-clock technical support, turning what was once episodic repair work into continuous service relationships. 

These service arrangements typically carry higher margins than equipment sales, face fewer competitors, and create customer relationships spanning years or decades. For companies entering European defense markets, positioning as service providers rather than equipment suppliers can capture ongoing revenue streams that continue long after initial delivery. 

Unmanned Systems Programs Prioritize Integration Capabilities

The unmanned systems market differs from traditional defense procurement because militaries need platforms that can integrate rapidly changing sensor and communication technologies. The Eurodrone program’s €7.1 billion production contract involves Airbus Defence and Space, Dassault Aviation, and Leonardo as prime contractors, but they’re sourcing engines from Avio Aero/GE Aerospace and various other specialized components from technology providers. The program completed its preliminary design review in May 2024 and is nearing its design review phase, with first flight expected during 2027 and entry into service planned for the end of the decade. This timeline opens opportunities for suppliers who can provide specialized capabilities during the development phase. 

Current contracts show how this market rewards companies that understand both technology integration and European content requirements. Romania signed a €410 million framework agreement with Elbit Systems in 2024 for seven Watchkeeper X tactical drones, while Greece deployed four Safran Patroller surveillance drones in 2025—the first tactical drones certified to NATO standards. Germany’s Quantum Systems achieved unicorn status with €160 million in funding, growing from €20 million to over €200 million in revenue between 2020 and 2024. Australia’s DroneShield launched major European expansion in 2025 to meet the 65% European content requirement for EU defense programs. Most significantly, Leonardo and Turkey’s Baykar announced a joint venture in March 2025 targeting what they estimate as a €100 billion European UAV market over the next decade. 

These companies succeeded by focusing on system integration rather than complete platform manufacturing, building European production capacity to meet content requirements, and partnering with established defense contractors rather than competing directly against them. The €100 billion market projection from Leonardo-Baykar suggests this sector will dwarf traditional defense categories, making it worth strategic investment for companies with relevant technologies. 

Ammunition Production Capacity Is Increasing Behind the Scenes

In parallel with investment in advanced platforms, European governments are also expanding their ability to produce the basics at scale. Ammunition manufacturing is a clear example. Poland’s state-owned defence company Mesko recently increased its output of small-calibre rounds from 50 million to 250 million per year by adding a new production hall—bringing daily production to roughly one million bullets. As reported by Notes from Poland, this kind of increase is happening quietly across the continent as countries take steps to rebuild the industrial depth required to support long-term defence readiness. 

Positioning Strategies for European Defense Market Entry

Companies winning the largest contracts understand that success requires positioning themselves before opportunities become public. The most profitable approach involves moving beyond obvious tactics like responding to published tenders, because by that point, specifications often favor competitors who influenced the requirements development process. 

European funding mechanisms have become the primary pathway for market entry, offering both financial support and industry connections. The European Defence Fund allocates €1.065 billion for 2025, requiring consortium partners from at least three EU member states but providing up to 100% funding for research. These funding programs primarily target Tier 1 and Tier 2 suppliers leading development consortiums, though Tier 3 suppliers can participate as consortium members. Companies that build effective consortium relationships get their development costs covered while establishing the European partnerships needed for larger procurement programs. EDIP provides an additional €1.5 billion for 2025-2027, focusing on production capacity rather than research, which creates opportunities for Tier 2 and Tier 3 suppliers ready to scale manufacturing operations within Europe. 

PESCO projects offer another entry route that many executives overlook. These encompass 75+ active programs involving multiple countries pooling resources, allowing companies to position their technology within requirements definition processes rather than competing against predetermined specifications. This approach changes companies from bidders into requirement setters, fundamentally altering competitive dynamics. 

However, accessing these funding streams requires more than partnerships—it demands authentic European presence that regulators can verify through operational footprints and local employment. The European Defence Industrial Strategy heavily favors companies with meaningful European operations over minimal presence designed solely for compliance. This requirement hits Tier 1 suppliers hardest, as they typically lead consortiums and face the most scrutiny. 

For companies unable to establish European operations, several pathways remain viable, though each involves trade-offs. Joint ventures with established European partners provide the most direct access to PESCO and EDF programs while sharing both development costs and market risk, essentially allowing non-European companies to participate through their European partner’s credentials. Alternatively, licensing arrangements enable European manufacturers to produce your technology locally, meeting content requirements while generating ongoing royalty income—a model that works particularly well for Tier 3 suppliers with specialized components or software. Many successful companies sidestep the European presence requirement entirely by focusing on component or subsystem supply to established prime contractors rather than competing for main contracts, capturing contract value without triggering the most stringent compliance requirements. Export sales to European militaries outside of EU funding programs represent the most straightforward approach, though these face higher competitive barriers and exclude companies from the most lucrative programs driving current market growth. 

The Moment for Decision

Europe’s €800 billion defense investment represents the largest industrial opportunity in decades, but the window for positioning yourself advantageously narrows with each passing month. European governments are making procurement decisions right now that will define supplier relationships through the 2030s. Countries that struggled to meet 2% GDP targets are planning for 5%. Supply chains that relied on external sources are being rebuilt within European borders. 

Companies positioning themselves during this expansion will benefit for decades from relationships formed while the market was opening. Those waiting for perfect conditions will find established suppliers already integrated into the ecosystem, with contracts signed and partnerships cemented. The question isn’t whether Europe will spend this money—that decision has already been made. The question is whether your company will capture its share while the market is still defining itself, or whether you’ll spend the next decade competing against entrenched suppliers who understood the opportunity when it mattered. 

About the Authors

Adrian Czerny is a Partner at Stanton Chase Stuttgart and the Global Subsector Leader for Aerospace and Defense. He connects aerospace and defense companies with leaders who combine technical knowledge and management skill. His international background helps him find executives for A&D organizations worldwide.   

Jan Duniec, a Partner at Stanton Chase Warsaw, serves as Stanton Chase’s Global Industrial Sector Leader. Jan specializes in consulting for the industrial, technology, consumer products and services, and SCC/BPO business sectors. He brings to the table a wealth of international experience in business and plant management, gained through his work in the UK, France, and Poland.