European Defense Spending Surges to Record €343 Billion in 2024
European pentagon spending has surged to a record €343 billion in 2024, with a 19% increase, and is set to rise further this year. This boost, driven by geopolitical tensions, has led to a significant increase in sales for European defense companies, with the continent accounting for around 65% of their 2024 sales.
The growth in defense spending has been particularly notable in Germany and other parts of Europe close to Russia. This increased spending has led to a rise in the backlog for large Western European defense companies, now averaging 3.9 years of sales, up from three years in the period from 2013 to 2021. German companies have seen a compound annual growth rate of 16% in sales from 2020 to 2024, while Eastern European companies have grown at a rate of 33% over the same period.
Looking ahead, European defense investment is expected to focus on areas such as air defense, ground defense equipment, deep strike, air dominance, aerial drones, counter-drone technology, naval, and space. Companies involved in these areas, particularly those in Germany, are likely to see significant growth. For instance, SFC Energy AG, known for its growth in the civil security and defense sectors, is expected to benefit from the increased European defense budgets between 2025 and 2026.
With European defense equipment spending projected to reach around 1.2% to 1.4% of GDP by 2035, more than double today's levels, European defense companies are poised for significant growth. As production capacity increases, these companies are expected to fill about 34% of their backlog every year, and their revenue from European customers is projected to grow by an average of 10.5% to 11.5% a year for the next decade.
