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BAE Systems (BA.L) posted solid full-year 2025 earnings and better-than-expected cash generation amid a rise in international military spending, sending its shares up nearly 4% by midday Wednesday.
For the 12 months ended Dec. 31, 2025, the aerospace and defense company reported a free cash flow of 2.16 billion pounds sterling due to advances received late in the year. The figure was below the previous year’s 2.51 billion pounds but 41% higher than market expectations. In its flash note, Berenberg described the cash performance as a “standout metric” that could support further share gains.
Group-defined sales for 2025 increased by 10% to 30.66 billion pounds, with organic growth reaching 9% amid growth across the company’s business sectors. Meanwhile, IFRS-derived revenue saw an 8% jump to 28.34 billion pounds as profit attributable to equity shareholders rose to 2.06 billion pounds from 1.96 billion pounds in the prior year.
The company’s order backlog hit an all-time high of 83.6 billion pounds for the year, supported by 36.8 billion pounds in new orders. To keep up with demand, the group said its capital expenditure stayed close to record levels of 1 billion pounds, with research and development investment also increasing.
Some of BAE Systems’ key contracts and projects for 2025 include the 10 billion-pound Norway frigate program, the Typhoon aircraft deal worth 4.6 billion pounds with Türkiye, and the launch of the Edgewing joint venture with Italian and Japanese partners to design and develop the next-generation Global Combat Air Programme combat aircraft.
“In a new era of defence spending, driven by escalating security challenges, we’re well positioned to provide both the advanced conventional systems and disruptive technologies needed to protect the nations we serve now and into the future. With a record order backlog and continuing investment in our business to enhance agility, efficiency and capacity, we’re confident in our ability to keep delivering growth over the coming years,” Chief Executive Charles Woodburn said.
Looking ahead to 2026, BAE Systems expects sales to rise by 7% to 9%, while also projecting cumulative free cash flow to exceed 5.5 billion pounds for the 2025 to 2027 period and surpass 6.0 billion pounds between 2026 and 2028. Berenberg noted the free cash flow outlook is “light” compared with market expectations, which the research firm attributed to the unwind from customer advances from late 2025 and “some conservatism around the receipt of downpayments.”
Against this backdrop, the board proposed proposed a increase in final dividend to 0.228 pound per share, against the previous year’s 0.206 pound per share, taking total dividend for 2025 up 10% to 0.363 pound per share.