2026-07-08T18:30:00.000Z
Lockheed Martin lost the most important fighter competition of a generation on March 21, 2025, when the U.S. Air Force handed the Next Generation Air Dominance contract to Boeing for what became the F-47. For a company that had built every fifth-generation stealth fighter the United States has flown since the F-22, the loss closed a franchise overnight. It also signaled something larger about the global military platforms market: incumbency no longer guarantees a seat at the table.
Kaiso Research's primary dataset puts global military platforms market at USD 51.87 billion in 2024, expanding to USD 105.95 billion by 2035 at a 6.8% CAGR. The figure matters less than what sits underneath it: a fast reallocation of procurement dollars from legacy manned hardware toward unmanned systems, AI-enabled sensors, and the software stacks that tie platforms together. Defense primes, venture-backed challengers, and government procurement officers are now competing for the same dollar under very different cost structures. This analysis breaks down where that dollar is actually going.
The USD 51.87 Billion Base Year Rests on Three Preconditions, Not One Procurement Cycle
Three structural preconditions explain Kaiso Research's USD 51.87 billion base year figure for 2024: rising multi-domain threat postures across the Indo-Pacific and Europe, a shift toward optionally manned and fully autonomous platforms, and an alliance architecture that increasingly funds joint procurement instead of isolated national programs.
The platform mix itself is segmented four ways in the underlying data: by type across land, air, naval, and space; by operation between manned and unmanned; by application spanning combat, ISR, logistics, and training; and by end user across the Army, Navy, Air Force, and Space Force. Land combat systems still hold the largest share of 2024 revenue, the product of decades of investment in armored vehicles, artillery, and logistics platforms. The unmanned platforms segment, by contrast, is the fastest-growing operation category, driven by drones, robotic ground vehicles, and autonomous ISR systems entering service faster than any prior platform generation.
North America holds the largest regional share, anchored by the United States' defense budget and flagship programs that span every domain in the segmentation, from the F-47 fighter to the XM30 ground vehicle to the Space Force's growing platform requirements. Asia-Pacific is the fastest-growing region across the 2025-2035 forecast period, propelled by modernization programs in China, India, Japan, and South Korea that are accelerating independently of any single alliance's spending pledge.
Boeing Took the Fighter. Rheinmetall Is Fighting for the Tank. India Is Building Both at Home.
Boeing's win of the F-47 contract on March 21, 2025, ended Lockheed Martin's monopoly on Western stealth fighter production, a position the company had held since the F-22 entered service. The Engineering and Manufacturing Development contract is worth more than USD 20 billion for the development phase alone, and the Air Force expects roughly 200 F-47s in service through the 2030s. Lockheed Martin will keep building and upgrading the F-35, with more than 1,100 already flying worldwide, but the loss narrows the company's crewed fighter franchise at the exact moment the Pentagon is shifting weight toward networked systems of systems.
On the ground, the Army's Optionally Manned Fighting Vehicle program took a parallel turn. After completing its digital design phase in 2023, the Army renamed the effort the XM30 Mechanized Infantry Combat Vehicle and awarded General Dynamics Land Systems and American Rheinmetall Vehicles roughly USD 1.6 billion to build and test prototypes. American Rheinmetall's design, fielded with Anduril Industries, Textron Systems, and L3Harris Technologies as teammates, is competing directly against General Dynamics for a contract that could replace nearly 2,400 Bradley fighting vehicles across the Army's armored brigades.
China is running a parallel-program strategy of its own at the high end of air combat. Chengdu Aircraft Corporation and Shenyang Aircraft Corporation have each flown sixth-generation fighter prototypes, tentatively designated the J-36 and J-50, since December 2024, and a U.S. government report from December 2025 confirmed both as legitimate sixth-generation programs rather than concept demonstrators. The tailless, three-engine J-36 is read as a long-range strike and air superiority platform, while the smaller, twin-engine J-50 is widely assessed as China's future carrier-based fighter, both intended to reach service the same decade as Boeing's F-47.
India is pursuing a different strategy: building both categories of platform at home instead of competing for a single flagship program. The country's defense production crossed USD 18 billion in calendar 2025, and its Ministry of Defence has set a target of 70% self-reliance in weaponry by 2027 under the Atmanirbhar Bharat initiative, backed by positive indigenization lists covering more than 5,500 items and two dedicated defense industrial corridors in Uttar Pradesh and Tamil Nadu.
NATO's 5% Pledge Is the Single Largest Demand Shock This Market Has Seen Since the Cold War
NATO's 32 members committed at The Hague Summit in June 2025 to invest 5% of GDP annually in core defense and security spending by 2035, more than double the prior 2% guideline that only three allies actually met as of 2014. European allies and Canada raised defense spending 20% in 2025 versus 2024, ahead of the pledge taking full effect, which is the kind of demand signal that explains why Kaiso Research's forecast period assumes sustained growth in European procurement specifically.
At a 6.8% CAGR on a USD 51.87 billion base, this market adds more absolute dollar value most years than entire national defense budgets adjust in a decade, and the NATO pledge alone could pull that blended growth rate higher in the back half of the forecast period if European allies hit their 2029 review checkpoint.
Demand for AI-enabled combat systems is the second driver, reflected directly in the platform mix shift toward unmanned and software-defined systems that Kaiso Research's segmentation captures. The third driver is alliance-level joint procurement itself: NATO and AUKUS are increasingly funding shared platforms and shared research instead of national programs alone, which lowers the unit cost of entry for mid-sized defense budgets and widens the addressable buyer base for prime contractors and challenger firms alike. A fourth driver sits outside the NATO and EU spending story entirely: India's Atmanirbhar Bharat self-reliance push is reshaping Asia-Pacific demand toward indigenous production rather than reducing it, a pattern Japan and South Korea are following on a smaller scale.
Space is the fifth growth vector, and the smallest in current dollar terms but among the fastest in percentage terms within Kaiso Research's segmentation. Military space spending is rising as low earth orbit constellations take over missions once reserved for a handful of monolithic satellites, a shift that mirrors the broader move toward distributed, software-defined platforms across every other domain this market tracks.
AUKUS Just Swapped a New Submarine for a Used One, and Drones Are Doing the Same to Manned Aircraft
On May 30, 2026, Australia, the United Kingdom, and the United States revised the AUKUS submarine pathway, replacing the single newly built Virginia-class submarine originally promised to Australia with a third in-service U.S. Navy boat. The decision trades a longer design life for nearer-term certainty, a trade every AUKUS partner is now making across naval platforms as American shipyard capacity remains the binding constraint on the entire program.
Collaborative Combat Aircraft are the air-domain version of the same trend. General Atomics and Anduril Industries are both competing to build the autonomous drones that will fly alongside the F-47, with a prototype flight expected as soon as 2026, and the Air Force's eventual fleet target runs to more than 1,000 airframes, roughly two for every crewed F-47 and F-35A.
The necessary counterweight to that trend is counter-drone systems, growing for an uncomfortable reason: every government fielding cheap, mass-produced drones is also racing to defend against the same category of threat from an adversary. This is the kind of arms-race pattern that now has to be funded on both sides of the ledger, offense and defense, at the same time, inside the same procurement cycle.
Ukraine's battlefield experience since 2022 is the underlying reason procurement priorities shifted this fast. First-person-view drones costing a few hundred dollars have destroyed armored vehicles costing millions, a cost asymmetry every defense ministry now has to budget against rather than around. The SAFE instrument's own procurement priorities group small, NATO class-1 drones together with counter-drone systems for exactly this reason, treating offense and defense in the same category of spend.
Manned-Unmanned Teaming Is the Architecture Choice That Decides Which Platforms Survive Contact
Manned-unmanned teaming answers the question every platform program now has to solve: how does a single expensive, crewed asset survive long enough to matter in a contested environment. The F-47 program pairs a crewed fighter with Collaborative Combat Aircraft, autonomous drones built by General Atomics and Anduril Industries that fly as armed escorts and absorb risk a pilot would otherwise carry. The Army's XM30 follows the same logic on the ground, designed from the outset to control robotic and semi-autonomous systems rather than fight alone.
Modular open systems architecture is the second technical differentiator separating programs likely to survive a procurement cycle from those that won't. The XM30's open architecture lets the Army swap software and sensor payloads without a hardware redesign, the same principle the Air Force is applying to the F-47's mission systems. Programs locked into proprietary, vendor-controlled architectures, the model that defined the F-35's early sustainment problems, are the ones the Pentagon is now actively designing around.
Sensor fusion is the third differentiator, and it is largely invisible to anyone outside the program offices building it. A platform's networked value depends on how fast it can fuse radar, infrared, and electronic warfare data into a single targeting picture and share it across a formation, a capability that increasingly lives in software updated over the life of the platform rather than hardware fixed at delivery.
Lockheed Lost the Fighter. It Has Not Lost the War for Margin.
Boeing now holds the crewed sixth-generation fighter franchise in the United States, and Lockheed Martin's exit from the Navy's F/A-XX competition narrows the company's position further, leaving Boeing and Northrop Grumman as the two remaining contenders for that program. Lockheed's path back to relevance in this market runs through sustainment revenue on more than 1,100 fielded F-35s, missile systems, and software, not new crewed airframes.
On the ground, General Dynamics Land Systems and American Rheinmetall Vehicles are running a genuinely open competition for the XM30, the first major U.S. armored vehicle program in over a decade with no incumbent guarantee. Anduril Industries occupies a different competitive position entirely: a company with no legacy platform business, competing for both prime-level Army enterprise contracts and component-level sensor and software work across nearly every other prime's program.
European primes are consolidating around the same software-first logic. Rheinmetall, Leonardo, and BAE Systems are all expanding software and electronics divisions faster than their traditional platform-assembly lines, a direct response to the SAFE instrument's preference for systems that can be upgraded across a longer service life instead of replaced wholesale.
Lockheed Martin will not regain a crewed sixth-generation fighter franchise this decade. The company's credible path forward is software, munitions, and sustainment margin, not a new airframe win.
Anduril's USD 61 Billion Valuation Is a Bet That Software, Not Steel, Wins the Next Contract
Anduril Industries closed a USD 5 billion Series H round in May 2026 at a USD 61 billion valuation, doubling its worth from the USD 30.5 billion mark it had set just eleven months earlier. The raise followed a U.S. Army enterprise contract from March 2026 worth up to USD 20 billion over ten years, built around Anduril's Lattice AI platform, which fuses sensor data into a single operating picture for autonomous systems.
Anduril is not the only firm pulling in capital at this scale. Shield AI raised USD 1.5 billion in March 2026 at a USD 12.7 billion valuation, and Germany's Helsing was reportedly closing a round near an USD 18 billion valuation in the same window. Venture capital is pricing software-defined defense firms the way it once priced enterprise software, a bet that recurring platform revenue, not one-time hardware sales, is where the margin actually sits.
Europe's EUR 800 Billion SAFE Instrument Comes With a Buy European Condition Attached
The European Commission's SAFE instrument, adopted in May 2025 as the first pillar of the broader ReArm Europe Plan's EUR 800 billion in unlocked defense spending, began disbursing its first loans to member states in March 2026. Nineteen countries requested roughly EUR 190 billion against a EUR 150 billion envelope, with Poland alone seeking EUR 43.7 billion, evidence that European governments treat the funding gap as real rather than rhetorical.
SAFE loans carry an eligibility condition that matters more than the headline figure: contractors must be established and headquartered inside the EU, EEA, or Ukraine, which functionally limits U.S. and UK primes' access to a meaningful share of this procurement pool unless they restructure around European subsidiaries. That condition, combined with NATO's Hague Investment Plan requiring annual national spending roadmaps, is reshaping which companies can compete for European defense dollars regardless of platform quality.
What Defense Primes, Challenger Firms, and Procurement Chiefs Should Actually Do Before 2030
For defense prime executives and government procurement officers, the actionable shift is sequencing, not ambition. Primes that still treat software as an add-on to a hardware platform will lose the next two competitive cycles to firms that built software first, the same pattern that cost Lockheed Martin the F-47 contract in 2025. Procurement officers inside NATO and EU defense ministries face a parallel sequencing problem: national plans submitted under the Hague Investment Plan and the SAFE loan instrument need executable industrial capacity behind them, not just budget authorization, or the money sits unspent while shipyards and munitions lines remain the binding constraint.
For investors and challenger firm executives, the relevant signal is which contracts convert paper valuation into recurring revenue. Anduril's move from a single Army enterprise contract worth up to USD 20 billion to a USD 61 billion valuation in May 2026 shows capital is already pricing in that conversion. Investors evaluating the next wave of defense technology firms should weight production capacity and delivered units more heavily than headline contract ceilings, since a maximum potential contract value is not the same as obligated, deliverable revenue, a distinction this market has not always priced correctly.
Mid-tier suppliers and subcontractors face a third version of the same problem. Aligning with a software-capable prime or challenger firm now, while contracts are still being shaped, beats waiting for a final award to reveal which architecture won, because by the time a program reaches production the supplier relationships are usually already locked in.
Three Risks the 6.8% CAGR Does Not Price In
The first risk is fiscal, not industrial. NATO's pledge to reach 5% of GDP in defense and security spending by 2035 assumes member states can fund it without breaking already strained sovereign balance sheets, and SIPRI's assessment of the commitment flags credit and debt pressures across several of the largest European economies that predate the pledge itself. Five percent of GDP sounds clean in a summit declaration. It isn't clean in a finance ministry carrying a debt-to-GDP ratio above 100%.
The second risk is industrial capacity, not demand. The Virginia-class submarine production rate has held near 1.1 to 1.2 boats a year since 2022 against a stated target of two, and the same shipyard constraint that forced the May 2026 AUKUS revision applies across surface combatants, armored vehicle lines, and munitions production and supporting defense electronics. Demand has outrun the industrial base's ability to deliver it on schedule, in nearly every domain this market covers.
The third risk sits with the challenger firms themselves. Anduril is projecting an operating loss near USD 1.2 billion in 2026 even as its valuation tripled in under a year, a gap between paper value and earned margin that a sustained contract slowdown has not yet tested.
By 2035, USD 105.95 Billion and a Platform Mix Nobody Budgeted For in 2024
Kaiso Research's forecast carries the market from USD 51.87 billion in 2024 to USD 105.95 billion by 2035 at a 6.8% CAGR, but that blended figure hides a forecast period in which unmanned, space, and software-defined segments compound faster than the legacy land and air platforms that still hold the largest current share. The 2035 endpoint assumes NATO's spending pledge holds, AUKUS Pillar 1 clears its shipyard bottleneck, and China's parallel sixth-generation fighter programs reach service close to their stated timeline. Any one of those three assumptions breaking shifts the curve, not the headline number. The platform mix in 2035 will look less like 2024's hardware-heavy base year than the blended forecast number implies.
The Platform That Wins Is the One That Ships, Not the One That's Stealthiest
Boeing's F-47 will not fly until 2028. China's J-36 and J-50 have already flown, repeatedly, since December 2024. That gap between selection and delivery is the real competitive battlefield in this market, more than any stealth coating or sensor suite. It is also the gap every buyer named in this analysis, prime, challenger firm, and procurement ministry alike, is positioning against right now, well ahead of the 2035 forecast horizon.
The companies and governments that close the distance between a signed contract and a delivered, software-integrated platform will capture the disproportionate share of the USD 105.95 billion Kaiso Research projects for 2035. Lockheed Martin's loss on NGAD wasn't a failure of engineering. Rheinmetall, General Dynamics, Anduril, and the Chinese state design bureaus racing two fighter programs at once understand that speed of fielding has become the actual product being sold.
The defense primes still organized around decade-long, single-platform development cycles are competing against firms and governments that no longer accept that timeline. That mismatch, not the CAGR, is what decides who is still relevant in 2035.
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About Kaiso Research and Consulting
Kaiso Research and Consulting is a global market intelligence firm publishing 5,000+ research reports across 11+ industry verticals.
kaisoresearch.com | [email protected] | +1 872 219 0417
Dhwani Sharma, Lead Industry Analyst, Kaiso Research and Consulting | Covering cybersecurity and quantum-safe technology across global markets
Published: 2026-02-14 | Report Code: ADDE939
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