BAE Systems has posted record-breaking financial performance in 2025, with sales climbing 10% to £30.7bn and underlying earnings per share rising 12% to 75.2p, driven by strong demand across all its business sectors.
It will come as no surprise that BAE Systems had a strong 2025, given heightened geopolitical risks and a push by governments globally to ramp up defence spending.
Underlying earnings before interest and tax rose 12% to £3,322m, with return on sales improving to 10.8%. The defence giant generated free cash flow of £2,158m, whilst its order backlog swelled to a record following £36.8bn of new order intake during the year.
“A 12% rise in operating profit tells you governments aren’t hesitating in reaching for their chequebooks,” said Mark Crouch, market analyst for eToro.
“BAE’s order book now stands at a record £83.6bn, stretching years into the horizon, and it’s why BAE shares have definitively outpaced the FTSE 100. With free cash flow set to top £6bn through 2026, that trajectory looks set to continue.”
Shareholders will receive a dividend of 36.3p per share, up 10% on the prior year.
BAE Systems shares were 3.1% higher at the time of writing, but failed to convincingly break through previous highs in the 2,150p – 2,160p region, suggesting the market may have been hoping for a little more from the group.
Nonetheless, today’s results reflect a broad increase in demand for the group’s products that more than justifies the meteoric rise in shares over the past four years.
Norway selected BAE’s Type 26 frigate for its future warship programme in a Government-to-Government agreement worth £10bn, potentially the UK’s largest ever warship export deal by value. A separate agreement saw Turkey commit to purchasing 20 Typhoon aircraft in a deal anticipated to be worth £4.6bn to BAE, sustaining Typhoon production and supporting 20,000 UK jobs.
In space, the company secured a $1.2bn contract to provide the US Space Force with space-based missile-tracking capabilities, whilst its Armored Multi-Purpose Vehicle programme reached 500 deliveries for the US Army.
The company also launched Edgewing, a joint venture with Italian and Japanese partners to design and develop the next-generation combat aircraft under the Global Combat Air Programme (GCAP).
The growing orderbook underpins BAE Systems’ orderbook, and analysts see the stock as a solid option for seeking exposure to the sector.
“Despite a good run so far in 2026, with the shares up around 15%, its valuation isn’t too demanding, especially compared to some peers. For investors looking to get exposure to the defence sector, BAE Systems remains a compelling choice,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.