BAE Systems shares slipped on Wednesday despite the defence group releasing strong first-half results driven by governments bolstering their defence spending to meet rising threats.
The group delivered a strong financial performance in H1 2025, with sales growing 11% and underlying EBIT rising 13%.
Underlying earnings per share increased 12% to 34.7p after accounting for net finance costs and taxation.
Order intake remained robust at £13.2bn across all business segments, contributing to a substantial order backlog of £75.4bn at period end. Order intake in the electronics and air segments was particularly strong.
These segments were also key drivers of higher revenues during the period.
BAE Systems shares were down 1.5% at the time of writing on Wednesday, likely due to the wider market’s step down on Wednesday rather than disappointment with BAE’s results.
“BAE Systems delivered a blockbuster set of first-half results, with growth across all business units, giving management the confidence to upgrade its full-year guidance,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“The UK’s largest defence company manufactures heavy-duty military equipment like fighter jets, aircraft and submarines. The group’s diversified portfolio sees it win contracts from around the world, with nearly 45% of its £14.6 billion of first-half sales coming from the US. BAE looks well-positioned to tap into new funding available for some of the administration’s big-money projects, including the Golden Dome missile defence system.
“Overall demand for BAE’s products and services has remained strong over the first half, helping new orders flow in and keeping the order backlog at a mammoth £75.4 billion, just shy of record levels.”
Chiekrie continued to explain that strong order intake sets BAE Systems up well for the years to come given the long lead time for delivery and revenue recognition policies.
“These orders are typically long-cycle, with programs spread over many years, giving BAE great revenue visibility. It’s these defensive characteristics in an uncertain macroenvironment that have helped boost BAE’s valuation, which now sits well above its long-run average. But with a new super cycle of defence spending underway, there could be a long runway of growth ahead if BAE can execute well.”