The New Lords of War

The list of top global arms exporters has been stable for decades. Three countries have just broken into it, and they probably won’t be the last.

The ranking of the world’s biggest arms exporters has changed little in a generation. The United States sits far in front, with around 43 percent of global major-arms exports, followed by France, Russia and a handful of western European states. New names rarely climb into the upper ranks.

Yet, over the past five years, three have managed it: Israel, South Korea and Turkey have each built multi-billion-dollar export businesses from a relatively low base. They did so by reading the same opening: the established suppliers can no longer meet global demand. America’s defence firms are stretched, their order books filled with replacements for weapons used in the Red Sea and Israel or donated to Ukraine. Europe is rearming quickly but its manufacturers need years to rebuild the capacity they lost after the Cold War. And Russia has turned inward; its arms exports fell by 64 percent between 2015-19 and 2020-24 as it supplied its own war and sanctions cut off key components, prompting long-standing customers such as India, Vietnam and Egypt to look elsewhere. Three different sellers moved into that space.

Turkey competes on availability and price. It offers equipment built to NATO standards, sold without political conditions, to governments that cannot or will not buy from Washington. The Bayraktar drones proved the approach, with more than 500 sold to over 30 countries after seeing combat in Libya, Ukraine and the Caucasus, and the product range has since widened to armoured vehicles, missiles, radars and warships. Exports have risen from roughly $2B to $8.5B in 5 years. The notable change is geographic: a supplier once focused on Africa and the Middle East is now signing deals inside Europe, including a $1.6B agreement with Spain to co-produce trainer jets and an invitation to join Germany’s Sky Shield air-defence programme.

South Korea competes on scale and speed. Seven large firms work closely with the government, source most of their components at home, and can therefore produce equipment quickly and at competitive prices, which is exactly what a depleted Western manufacturing base struggles to do. Its main market is Europe rather than Asia. Setting the United States aside, South Korea is now tied with France as the largest arms supplier to European NATO members, and it has more global orders than the US for tanks and artillery. The anchor is a 2022 package with Poland, now worth about $22B. Romania has since ordered around $1B of howitzers (a sort of cannon). Exports reached $15.4B in 2025, and South Korea is now developing its own fighter jet to move into higher-value sales.

Israel competes on combat experience, and from the highest base of the three. Its exports reached a record $19.2B in 2025, up 30% and the fifth consecutive annual record, led by missile and air-defence systems and by surveillance and optical equipment. The selling point is that the systems have been tested in war. Israeli equipment has operated under combat conditions since October 2023, and air defence in particular, including the Iron Dome and its longer-range interceptors, has performed under sustained attack in a way no competitor has. Europe was the largest destination, taking 36% of deals. Israel is selling the categories that current conflicts call for: drones, missiles and defences against large-scale aerial attacks.

What this means for the future of defence exports

The wider lesson is that a country can now build a competitive, export-grade defence industry fairly quickly, and that it is a strong business to be in. These are high-value products that carry years of maintenance, training and political relationships with them. Israel sells more than $19B of weapons while under diplomatic pressure, because the systems work. South Korea moved from a minor supplier to one of Europe’s leading sources in under five years.

That points to an ever more competitive market rather than a settled new order. Almost every region is trying to depend less on foreign, and particularly American, suppliers, and wants to build its local champion. The likely outcome is a more crowded field.

None of this displaces the United States, which will stay dominant for the foreseeable future. The more interesting question is what happens to the incumbents just beneath it, and France is the clearest test. It is still the world’s 2nd largest exporter, and its established primes are thriving: MBDA booked a record €14B of orders in 2024 and now holds a €37B backlog, while Dassault Aviation’s revenue rose 29% on the strength of Rafale exports, lifting its order book above €43B. But France’s public finances are stretched, which raises a real question about whether it can fund the next generation of suppliers as generously as it funded the last. The risk is that contracts keep flowing to the giants while smaller firms struggle to reach scale, and that the stamp “DGA-approved”, France’s defence-procurement agency, counts for less in a market that increasingly rewards speed and combat results over pedigree. A new cohort of defense innovators is emerging: Exail naval-drone contracts have pushed its order book past a billion euros, Harmattan reached a billion euros valuation, and both Alta Ares and Egide are able to poach top talent. Whether this generation grows into primes or is absorbed by them will say a great deal about who stays at the top of the table, and who slowly slips down it.

My own bet for the next breakout is Germany. It has the largest defence budget in Europe, a huge industrial base that converts readily to defence production, and a captive market next door. Eastern Europe and Poland are rearming against Russia at speed and would generally prefer to buy within the European Union than rely on Washington or Seoul. They already procure tanks from Germany, meaning trust and relationship is already there. Germany is well placed to export on a large scale across Europe, and once its carmakers fully turn their capacity toward defence it could grow faster than any of the three exporters described here. Japan, now undertaking its largest military build-up since the second world war and loosening its export rules, is on a similar path a step behind.

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Funding and deals

IPOs

• Applied A&D (NYSE: AADX), which supplies subsystems like missile bodies and satellite solar arrays, raised ~$650M in its IPO for a $3.6B valuation.

• Quantum Systems and Destinus, two European drone makers, are lining up banks for potential IPOs as early as 2027, with Quantum eyeing a €10B+ valuation.

Acquisitions:

• D-Fend Solutions, an Israeli counter-drone company whose systems detect and take over rogue drones, was acquired by Motorola Solutions for $1.5B; deployed in 30+ countries, with ~$185M expected 2026 revenue.

• Bluewhite, an Israeli AI startup that retrofits vehicles into self-driving platforms, was acquired by Elbit Systems for an undisclosed sum.

Fundraises:

• Iceye, space surveillance, raised €1B at a €10B valuation, led by General Atlantic.

• Impulse Space, building highly manoeuvrable in-space spacecraft, raised a $500M Series D co-led by 137 Ventures and Banner at a $4.26B valuation.

• Mach Industries, developing unmanned systems and distributed manufacturing, raised a $300M Series C at a $1.8B valuation, led by Infinite Capital and Ribbit Capital. Ribbit is a legendary fintech investor but I guess neoprimes are the new neobanks.

• Isar Aerospace has closed a €270M Series D with Island Green Capital.

• Allen Control Systems, maker of Bullfrog, an autonomous gun that shoots down drones, raised a $200M Series B at a $2.2B valuation, led by Smash Capital.

• Airis Labs, turning raw field video into machine-readable intelligence, emerged from stealth with $60M, including a $31M Series B led by PSG Equity.

• Picogrid, building an open data layer that fuses battlefield sensors and systems, raised a $45M Series A led by Bessemer.

• Layup Parts, a software-defined factory for carbon-fibre parts, raised a $42M Series A led by Marlinspike.

• Volund Manufacturing, building low-cost gas turbine engines, raised a $12M seed led by Root Ventures.

• Shifters, developing AI-native autonomous ground robots, raised a $10.2M seed led by Ace Capital Partners.