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Key Signals and Implications for 2026

SIPRI estimates that world military expenditure reached USD 2.718 trillion in 2024, a 9.4% real-terms increase versus 2023 and the steepest year-on-year rise since at least 1988.

PwC’s topline for the industrial base is that global revenue across the top 100 aerospace & defense companies reached USD 922 billion in 2024, while noting demand strength across civil and defense alongside delivery/output constraints tied to labor and supply chain fragility.

Further, Space Foundation’s 2025 Q2 Space Report highlights a USD 613 billion global space economy in 2024, with the commercial sector contributing 78% of total growth and 149 launches in the first half of 2025. This signals that demand is being pulled by commercial cadence as much as state programs.

Further, IATA reports full-year passenger traffic in 2024 rose 10.4% vs 2023, landing 3.8% above 2019 levels. This demand-side indicator supports sustained production and aftermarket workloads even when OEM output lags.

Demand Reality Check: 43 420 Aircraft Needed

Airbus forecasts 43 420 new passenger and freighter aircraft demand and +3.6% traffic growth. This frames the next 20 years as both growth and forced replacement and links the outlook to the retirement of less fuel-efficient fleets – an operational constraint.

Airbus’ cargo-specific outlook adds a second pull vector. The dedicated freighter fleet is expected to grow 45% to 3420 aircraft by 2044. This requires 2605 additional freighters (including 1670 conversions and 935 new-build freighters) and 3.3% annual air-freight demand growth.

Boeing also projects a 2044 fleet of 49 640 aircraft alongside 43 600 deliveries through 2044. This reinforces that MRO capacity, parts availability, and engine shop throughput become binding constraints even when OEM ramps are uneven.

On the defense-industrial concentration side, North America accounted for USD 336 billion (49%) of Top 100 arms revenues in 2024. The United States alone recorded USD 334 billion across 39 Top 100 companies. This is useful to better understand where procurement cycles most directly translate into industrial revenue.

The global aerospace and defense market is valued at USD 846.94 billion in 2025. It is projected to reach USD 1470.43 billion by 2032, with a compound annual growth rate (CAGR) of 8.2% from 2025 to 2032.

According to StartUs Insight’s Discovery Platform, the aerospace and defense industry saw a yearly growth of -1.17%. The ecosystem includes more than 1100 startups that focus on unmanned systems, defense electronics, aerospace software, advanced materials, and dual-use technologies supporting modernization programs.

Overall, the global aerospace, defense & security industry experienced fluctuations in 2024, with patent filings declining by 25% in Q3 compared to the previous quarter. Total publications fell by 25.8%, while applications numbered 11 351 in Q3, down from 15 292 in Q2, representing a 24% year-on-year decrease.

 

 

The top five companies accounted for 21% of all patent activity. Raytheon Technologies (RTX) led with 883 filings in Q3 2024, followed by Safran with 567 patents and Boeing with 401 patents.

 

 

 

5 Examples from the Ecosystem

Aeroplicity builds a Cloud-based Operating System

US-based startup Aeroplicity provides operating software for aerospace and defense organizations. Its platform digitizes documentation, inventory, and compliance workflows within a secure cloud environment.

The startup’s platform converts certifications, maintenance records, and operational files into blockchain-anchored digital assets. These assets link to parts, tasks, and transactions using QR codes and controlled file access.

Besides, the platform integrates ERP functionality for MROs, distributors, engineering teams, and defense suppliers. It enables mobile inventory tracking, task-level traceability, automated calibration schedules, and auditable document revision histories.

The software also embeds CMMC 2.0, NIST SP 800-171, DFARS, ITAR, and EAR requirements directly into workflows. It isolates controlled information and simplifies audits with immutable records and granular permissions.

Aeroplicity improves regulatory compliance, supply chain transparency, and increases operational efficiency while reducing reliance on paper processes and external compliance systems.

EtherWing Aerospace creates Modular Satellite Platforms

Indian startup EtherWing Aerospace develops modular satellite platforms and defense systems that support commercial, scientific, and national security missions in Low Earth Orbit and multi-domain operations. Its technology applies scalable CubeSat architectures, onboard computing, secure communication subsystems, and mission-adaptive control systems to perform observation, communication, and surveillance tasks.

The startup designs EC-12, EC-25, and EC-42 platforms with standardized CubeSat compliance. These platforms feature configurable payload interfaces and integrated power, thermal, and data-handling subsystems.

In addition, Etherwing Aerospace expands into defense systems. Its work includes satellite surveillance, loitering munitions, autonomous strike platforms, and C4ISR solutions built with aerospace-grade engineering and low-observable technologies.

Arkane advances Aerospace & Defense Communication Systems

French startup Arkane offers AI technologies for signal processing in aerospace telecommunications systems.

The startup applies deep learning models to wireless and radar signals. It deploys these models on reconfigurable FPGA hardware using frugal AI principles to balance computing speed and resource usage.

Arkane supports IoT wireless networks by enabling reliable, low-latency data collection. These assist structural monitoring and instrumentation in constrained and distributed environments.

Also, the startup implements adaptive beamforming with machine learning-driven path formation for multi-element antennas, which improves signal directionality and network performance.

Further, Arkane advances multi-antenna and radar processing by embedding AI directly on FPGA platforms. This enables real-time signal analysis with traceable and deterministic behavior.

AxialTech manufactures Brushless DC Electric Motors

Polish startup AxialTech builds axial-flux BLDC motors and electronic speed controllers for unmanned aerial vehicles used in civilian, industrial, and defense applications. Its technology applies an axial-flux motor design that generates torque within a compact and lightweight form factor and integrates with UAV propulsion systems.

The startup offers Falcon for defense UAVs and Titan for heavy-lift platforms. Each motor is engineered for defined thrust, power, and environmental resistance requirements.

AxialTech also pairs its motors with dedicated electronic speed controllers (ESCs). These controllers manage real-time throttle response, adaptive thermal control, and dynamic power distribution during flight operations.

The ESCs also include embedded safety mechanisms such as overload protection, fault detection, and automatic power cut-off to maintain operational stability.

Xubin Aerospace offers EO/IR CUAS Detection Systems

Canadian startup Xubin Aerospace manufactures electro-optical/infrared counter-unmanned aerial system detection technology that identifies and analyzes drone aerodynamic signatures in complex airspace environments.

Its Eagle Vision system combines electro-optical and infrared sensors with AI algorithms informed by aerodynamics. These algorithms process motion patterns to distinguish drones from birds and other airborne objects.

The technology detects autonomous drones without RF communications. It supports extended radar-like detection ranges and maintains performance in cluttered urban environments while tracking multiple targets at once.

Also, the startup offers configurable Eagle Vision variants for civil, industrial, and defense applications. It also provides Guardian modules for continuous monitoring and fleet performance optimization.

Innovation Frontiers Shaping Aerospace & Defense

The patent activity reached 180+ filings from 152 applicants, reflecting continued research participation by corporates, research institutions, and emerging defense technology firms. Also, the yearly patent growth stood at 7.23%, indicating innovation momentum continues despite slower company formation and greater consolidation across aerospace manufacturing and defense supply chains.

Discover the emerging trends in the aerospace & defense market along with their firmographic details:

 

 

Operational AI has emerged as a growing trend in the aerospace and defense sector, with 830+ companies employing 41 600 people and adding 20 employees last year in operations-focused roles. The trend recorded annual growth of 29.39%, driven by defense agencies and aerospace firms adopting AI for mission optimization, predictive maintenance, and real-time decision-making. These solutions support logistics planning, threat detection, asset readiness, and command systems, which enable organizations to improve efficiency and resilience in complex, data-intensive environments.

Unmanned Aerial Vehicles form a core segment, with 3400 companies employing 299 300 people. It added over 115 employees last year in manufacturing, software, and operations. The UAV trend grew at 5.33% annually, supported by deployment in surveillance, reconnaissance, border security, and defense missions that reduce human risk and extend operational reach. Companies continue to invest in autonomy, sensor integration, and secure communication systems to expand UAV use across military and government-led aerospace programs.

Sustainable Aviation Fuel represents a strategic trend, with 1100 companies employing 342 600 people and adding 50 employees last year in production, distribution, and compliance functions. The trend recorded an annual growth of 4.04%. The development focuses on alternative feedstocks, scalable production processes, and certification standards, which aligns defense aviation operations’ sustainability and energy security goals.

Capital Flows, Programs, and Deal Drivers: Aerospace & Defense

PwC’s read on corporate finance activity is that 2024 A&D deal activity remained stable, though below 2019 peaks. Additionally, the deal rationales are increasingly tied to supply chain control and digital capability uplift rather than pure scale. This implies that integration execution is now part of the cost of capital for inorganic growth.

For US budget-backed demand, the FY2026 NDAA summary on Congress.gov shows the FY2026 budget request levels for major titles, including USD 152.8B procurement and USD 142.0B RDT&E, which can be used to ground near-term demand for platforms, munitions, microelectronics, and digital programs-of-record.

Within Europe’s collaborative funding lane, the EDF formal Work Programme 2026 sets the maximum Union contribution at ~EUR 1 billion, split between ~EUR 676 million for capability development and the rest for defence research.

Further, European Top 100 arms revenues (excluding Russia) rose 13% year-on-year to USD 151 billion in 2024. BAE’s acquisition of Ball Corporation’s aerospace division for USD 5.5 billion is an example of portfolio repositioning around higher-value subsystems.

Moreover, VC-backed defense tech startups raised USD 7.7 billion by October 2025. Including all private defense-related investments, the broader sector attracted more than USD 48 billion.

 

Credit: Techloy

 

In the first half of 2025, defense tech fundraising reached USD 28.4 billion across 361 deals. This surpassed the total for 2023 and tracked ahead of 2024’s USD 37.9 billion.

The combined value invested by top investors exceeds USD 25 billion, showing concentrated capital deployment across major aerospace & defense innovators.

 

 

JPMorgan Chase made a USD 75 million equity investment in Perpetua Resources, a company working to become the first US-based producer of antimony, a critical mineral with defense applications.

Data Coverage and Limitations

This Aerospace & Defense industry outlook is built on the StartUs Insights Discovery Platform, spanning 9M+ companies, 25K+ technologies & trends, and 190M+ patents, news articles, and market reports. The analysis is organized around the operating system of the sector – program-funded demand, certification and compliance gates, and industrial throughput across propulsion, avionics, materials, autonomy, secure connectivity, and sustainment.

To keep the outlook execution-relevant for 2026 planning, the report cross-walks demand visibility with the constraints that determine who captures value: labor availability, supplier fragility, and digitalization.