BAE Systems Shares Surge on Strong Defense Orders

British defense giant BAE Systems is entering the new trading week with significant momentum, bolstered by a reaffirmed full-year outlook and the announcement of substantial new contract wins. The company’s recent market update, released last Wednesday, has reinforced investor confidence in its sustained operational strength.

Robust Financial Forecasts Maintained

In its latest guidance, BAE Systems confirmed that trading performance for the second half of 2025 remains aligned with projections. The corporation has maintained its full-year 2025 expectations, anticipating:

• An 8-10% increase in sales
• Underlying EBIT growth between 9% and 11%
• Earnings per share rising by 8-10%
• Free cash flow exceeding £1.1 billion

This positive financial trajectory is supported by a powerful capital allocation strategy. The company plans to return approximately £1.5 billion to shareholders in 2025 through dividends and a share buyback program, while also funding organic growth initiatives and evaluating potential acquisition opportunities.

Record Contract Inflows Signal Market Strength

A key driver of the optimistic outlook is the remarkable volume of new orders secured since the start of the year, totaling more than £27 billion. This influx underscores robust global demand for the company’s diverse range of defense products. Major contracts booked in the second half include:

Should investors sell immediately? Or is it worth buying BAE Systems?

• A £4.0 billion agreement to supply 20 Typhoon combat aircraft to Turkey
• A $3.3 billion order for advanced electronic systems
• $1.7 billion for the production of US combat vehicles
• MBDA missile system contracts valued at approximately £1.1 billion
• A further £0.9 billion for the Dreadnought submarine program

Further bolstering the order pipeline, a significant contract for at least five Type-26 anti-submarine warfare frigates for Norway is anticipated. This deal is expected to be formally booked after 2025, pending the finalization of contractual terms.

Geopolitical Climate Fuels Sustained Demand

The current landscape of global geopolitical tensions continues to drive sustained demand for advanced defense capabilities. While BAE Systems has acknowledged that a prolonged US government shutdown could potentially lead to delays in contract funding, the company has reported no material impact on its US operations to date.

The combination of a substantial order backlog and a reiterated financial forecast provides a solid foundation for the company’s future performance. Investors can expect the next comprehensive financial update when BAE Systems releases its preliminary full-year results for the period ending December 31, 2025, on February 18, 2026.