ii view: is BAE Systems now an investment staple?

BAE Systems’ Eurofighter Typhoon exhibit at the Farnborough International Air Show in July 2026. Photo: Richard Baker/In Pictures via Getty Images.

First-half results to 30 June

• Sales up 9% to £15.8 billion
• Adjusted profit (EBIT) up 11% to £1.7 billion
• Order intake of £16.4 billion, up from £13.2 billion in H1 2025
• Interim dividend up 11% to 15p per share
• Net debt (excluding lease liabilities) down 43% to £3.17 billion

Guidance:

• Now expects growth in full-year 2026 sales of between 8% and 10%, up from a previous 7% to 9%
• Now expects growth in full-year adjusted profit (EBIT) of between 10% and 12%, up from a previous 9% to 11%

Chief executive Charles Woodburn said: “The global threat picture remains highly volatile and governments are responding with sustained increases in their defence budgets. 

“The combination of our proven execution, diverse geographic footprint and continued investment in our technology and facilities, alongside our healthy order backlog and growing opportunities across our markets, positions us to keep delivering long-term growth.”

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ii round-up:

BAE Systems (LSE:BA.) is a major manufacturer of defence equipment.

Group involvement includes programmes for Dreadnought and Astute Class submarines, Type 26 and Hunter Class frigates, Typhoon and F-35 jets, electronic warfare systems, combat vehicles, drones, missile systems and many others.

For a round-up of its latest results announced on 30 July, please click here.

ii view:

The FTSE 100 company employs over 110,000 people across more than 40 countries. Aircraft-related products made most profits during 2025 at 34%. That was followed by electronic systems at 28%, platforms & services, including vehicles and ammunition, at 18%, maritime equipment 14%, and cyber & intelligence products 6%.

Geographically, the US proved its biggest customer during 2025 at almost 46% of sales. The UK was next at close to 28%, with other big customers including Saudi Arabia at 10% and Australia at 4%. Global rivals include Rheinmetall AG (XETRA:RHM), Lockheed Martin Corp (NYSE:LMT) and Northrop Grumman Corp (NYSE:NOC).

Ethical concerns over the making of weapons may deter some investors from buying shares. An estimated price/earnings ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. Changes of government can impact defence spending plans, while the more than two-thirds of sales made overseas leave the group subject to changes in currency moves.

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To the upside, BAE upped sales and profit hopes for the current full year with order intake growing year-over-year. A high-tension geopolitical backdrop includes threats from Russia to potentially target the UK given its ongoing supply of weapons to Ukraine. Diversity across both products and geographical regions exists, while the dividend payment has risen consecutively for more than 20 years, leaving the shares on an estimated future yield of close to 2%.

On balance, and while risks remain, a more dangerous geopolitical backdrop means this major UK defence contractor is still worthy of a place in many already diversified investment portfolios.  

Positives:

• Diversity across products and geographical sales
• Progressive dividend policy

Negatives:

• Arms manufacturing may generate ethical concerns
• Subject to government finances

The average rating of stock market analysts:

Buy