Industry research
Scope
US
Companies
136
Table of contents
What does the Defense market landscape look like in the US?
Major consolidation in the US defense market during the 1990s drastically reduced the number of US-based prime contractors, falling from 51 in 1993 to only 5 in the 2000s. The landscape has largely remained unchanged since then and is led by the ‘Big Five’ players (i.e. Lockheed Martin, RTX, General Dynamics, Boeing and Northrop Grumman). These players account for ~30% of the Department of Defense’s (DOD) annual contract spending (Congressional Research Service, September 2024).
Furthermore, the top-10 defense contractors have retained a ~65% share in terms of defense procurement and R&D spending over the past decade (Bain & Company, December 2024). Large players typically maintain highly diversified defense portfolios to optimize their participation across the full spectrum of government contracts, whereas smaller players differentiate by focusing on niche offerings (e.g. specialized components). Further consolidation in the industry is driven by incumbents aiming to vertically integrate and expand into emerging areas (e.g. autonomous warfare), while financial sponsors actively pursue opportunities to invest in advanced defense technologies.
What is the level of investor activity in the US Defense industry?
Investor-led interest has been significant, with ~54% of identified players being investor-backed (July 2025). Potential investors are attracted to (i) sustained growth in defense spending driven by rising geopolitical tensions, (ii) demand from rapid modernization of combat and surveillance systems through advanced unmanned and autonomous technologies, as well as (iii) supportive domestic manufacturing policies that emphasize onshoring. However, investors are deterred by (i) escalating program execution risks from complex requirements and cost overruns, (ii) persistent skilled labor shortages and critical supply chain constraints, as well as (iii) potential limits to export growth due to increasing defense self-sufficiency among major importers.
What are the key ESG considerations in the US Defense industry?
ESG considerations encompass environmental, social and governance challenges. Key environmental concerns include high GHG emissions, hazardous waste, fuel-intensive operations and contamination from weapons testing. Companies are responding with energy efficiency upgrades, renewable energy use, emissions targets and safer chemical practices. Yet, rising geopolitical tensions and ongoing military activity continue to drive significant emissions. Social risks arise from the potential misuse of defense products in conflict zones and the inherent safety hazards of manufacturing operations. To mitigate these, firms apply stricter due diligence, improve supply chain traceability and maintain rigorous health and safety systems. Furthermore, risks such as bribery, cost misreporting and export-control violations remain critical governance concerns. These are managed through robust third-party screening, clear reporting mechanisms and comprehensive anti-corruption compliance frameworks.
The US defense budget is expected to grow from ~$850.0bn in 2025 to ~$866.0bn by 2029 (+0.5% CAGR 2025-2029; Congressional Budget Office, November 2024)
The global military drone sector was estimated to have reached ~$36.4bn in value in 2023 and is projected to grow to ~$109.2bn by 2030 (+17% CAGR 2023-2030; OEC, November 2023)
Rising geopolitical tensions are driving a sustained increase in defense spending. Strategic challenges from adversaries such as China and Russia are fueling greater investment in conventional, cyber and space defense programs, thereby ensuring long-term demand for the industry (Cascadia Capital, February 2024)
Rapid modernization of combat and surveillance systems continue to reshape the US defense contracting landscape, as agencies prioritize advanced technologies to enhance battlefield effectiveness. Central to this evolution is the growing adoption of unmanned aerial systems (UAS), driven by defense agencies' focus on autonomous swarming, precision engagement and long-endurance surveillance (Frost & Sullivan, March 2025)
The reinforcement of domestic manufacturing policy presents novel growth opportunities for defense contractors. As federal initiatives emphasize onshoring, supply chain security and industrial resilience, identified players may benefit from increased investment, preferential sourcing and enhanced production capacity across critical defense programs (Congress.gov, September 2024)
Escalating program execution risks threaten the future profitability of players across the defense industry. Complex defense programs face growing delays driven by evolving mission requirements, integration of emerging technologies and frequent contract changes. These disruptions may escalate cost overruns, defer milestone-based payments and compress margins for both prime contractors and subcontractors (U.S. Government Accountability Office, June 2025)
Skilled labor shortages and supply chain disruptions present growing risks for US defense contractors. As programs scale and demand rises, constraints in sourcing rare earth metals (e.g. China export restriction), propulsion systems and other critical components may worsen, thereby leading to further delays, rising costs and increased pressure on margins, especially under fixed-price contracts (Homeland Security Today, June 2025; Jobs with DOD, May 2025; CSIS, May 2025; Route Fifty, March 2025; The Wall Street Journal, December 2024)
US defense export growth may be constrained by a rising push for defense self-sufficiency among major importers, including Israel, India and South Korea. Their protectionist policies, domestic production mandates and technology transfer requirements are creating higher barriers to entry and intensifying competition for US players. Additionally, a significant de-escalation in key geopolitical flashpoints, such as Ukraine, the Taiwan Strait or the Middle East, could reduce global demand for advanced defense systems, further limiting growth opportunities for US contractors abroad (Government of India, Press Information Bureau, February 2025; Breaking Defense, November 2023; Centre for Joint Warfare Studies, September 2023)
With the full report, you’ll gain access to:
Detailed assessments of the market outlook
Insights from c-suite industry executives
A clear overview of all active investors in the industry
An in-depth look into 136 private companies, incl. financials, ownership details and more.
A view on all 583 deals in the industry
ESG assessments with highlighted ESG outperformers
