Global defense revenues grew in 2023 amid Ukraine, Middle East conflicts: SIPRI report

WASHINGTON — The world’s largest 100 defense contractors amassed $632 billion in combined revenue in 2023, a real-term annual growth of more than 4 percent that comes as conflicts in Ukraine and the Middle East continue to propel weapons demand, according to a new Stockholm International Peace Research Institute (SIPRI) report released today.

The latest figures show that revenues have “bounced back after a dip in 2022,” as companies push to increase production capacity to meet a demand signal that shows no sign of subsiding in the near term, the report stated.

“There was a marked rise in arms revenues in 2023, and this is likely to continue in 2024,” said Lorenzo Scarazzato, a researcher with SIPRI’s military expenditure program. “The arms revenues of the Top 100 arms producers still did not fully reflect the scale of demand, and many companies have launched recruitment drives, suggesting they are optimistic about future sales.”

While US-based companies made up 41 companies in the top 100 — and half the total revenue recorded — Russian defense firms boasted the largest increase in revenues in 2023 by percentage, growing by 40 percent compared to 2022. The report attributed that gain to an intensified campaign by Russia’s Rostec defense conglomerate and United Shipbuilding Corporation to surge production capability for key weapon systems like missiles, aircraft and drones needed to replace equipment lost fighting against Ukraine.

According to the report, “this expansion was facilitated by several strategic adjustments, including increased state orders backed by a larger military budget, new administrative structures to manage production and ensure implementation of orders, and multi-shift working conditions at many arms manufacturing facilities.”

Overall, US defense companies saw revenue go up 2.5 percent in 2023. But despite a growth in orders, the two largest contractors, Lockheed Martin and RTX, recorded a slight drop in real-term revenue due to continued supply chain constraints for specialized components and subsystems like solid rocket motors, which has caused headwinds for the companies’ plans to expand production on key aerospace and missile defense programs. RTX saw defense revenues fall by about 1.3 percent to $40.7 billion in 2023, while Lockheed’s revenues dipped by 1.6 percent to $60.8 billion, according to SIPRI. Meanwhile, Northrop Grumman, which SIPRI counts as the third largest defense contractor, registered a 5.8 percent increase to revenue on the back of increased sales of ammunition in the wake of the conflict in Ukraine, as well as more than 9 percent growth in its space unit.

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While Russian defense contractors recorded a surge to their bottom lines, Chinese companies saw their year-over-year revenue growth stagnate, with a 0.7 percent increase that was its lowest rate since 2019, the report said.

The slowdown of Chinese industrial growth was met by a huge increase of defense revenues by Japanese and South Korean companies, as two of the largest US allies in the region strive to increase the capacity and technological know-how of their respective defense industries. South Korea saw an increase of 39 percent to $11 billion in 2023, with Hanwha, the country’s largest defense contractor, recording an increase of 53 percent in defense revenue after finalizing the acquisition of the shipbuilder DSME and increasing exports of armored vehicles and artillery due to contracts with Poland, Australia and the United Kingdom.

Meanwhile, Japanese defense contractor revenues expanded by 35 percent to $10 billion in 2023, with Mitsubishi Heavy Industries leading the way with a 24 percent increase and Kawasaki Heavy Industries netting 16 percent growth on defense.

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After Russia, the Middle East was the region with the largest levels of revenue growth that year, with six Israeli and Turkish companies in the top 100 increasing a combined 18 percent to reach $19.6 billion. Notably, Israel Aerospace Industries and Rafael netted increases of 15 percent and 16 percent, respectively. Meanwhile Turkish Aerospace Industries reported 45 percent revenue growth, the largest for a Turkish company.

Among the 27 European defense companies on the list, revenue was largely flat in 2023. The biggest gains were boasted by JSC Ukrainian Defense Industry, the Ukrainian conglomerate formerly known as Ukroboronprom, which saw arms revenues increase by 69 percent to $2.2 billion as it increased production of weapons needed for Ukraine’s military. The four German defense companies included in the top 100 recorded a 7.5 percent increase in revenue, while all seven UK-based defense companies also recorded revenue growth.

However, SIPRI reported that combined revenues of five French companies went down by 8.5 percent, led by a 41 percent defense revenue decrease by Dassault Aviation Group as sales of its Rafale fighter decreased. Italy, which had Leonardo and Fincantieri in the top 100, saw defense revenue fall 10 percent between the two companies due to a decrease in aircraft sales by Leonardo and the conclusion of an export deal between Qatar and Fincantieri.