Aerospace and Defense Market Size, Share, Growth, Report 2025 to 2034

Aerospace and Defense Market Size and Growth 2025 to 2034

The global aerospace and defense market size was valued at USD 820.61 billion in 2024 and is expected to hit around USD 1,250.28 billion by 2034, growing at a compound annual growth rate (CAGR) of 6.5% over the forecast period from 2025 to 2034.

The aerospace and defense market are expected to grow significantly owing to rising geopolitical tensions, increasing defense budgets, and rapid advancements in aerospace technologies. Demand for next-generation military systems, unmanned aerial vehicles (UAVs), and space exploration initiatives are driving investment. Additionally, the modernization of commercial aircraft fleets and strong air travel recovery post-pandemic are fuelling growth. Government partnerships and private sector innovation further support long-term expansion across global markets.

 Artificial intelligence, autonomous platforms, cybersecurity tools, and new space capabilities are reshaping the aerospace and defense sector at a remarkable speed. Rising national security spending and surging private capital in space projects are injecting fresh energy into military planes, drones, missile systems, and satellites alike. Three striking trends stand out: hypersonic weapons, AI-assisted mission design, and an urgent drive for cleaner, greener flight. Partnerships among defense contractors, software firms, and leading cloud providers are speeding the march toward fully digital operations. At the same time, governments are crafting rules on ethical AI and the militarization of outer space. The result is a defense domain that is smarter, more automated, and deeply interconnected. Such a system underpins national security and fuels progress in next-generation technology.

Aerospace and Defense Market Report Highlights

• By Region, North America has accounted highest revenue share of around 35.6% in 2024.
• By Type, the aerospace segment has recorded 55.65% market share in 2024, due to rising demand for commercial aircraft, space exploration programs, and UAV development, fueled by technological advancements and increased government and private sector investments
• By Operation, the manual segment has recorded 63.75% market share in 2024, due to its reliability in complex mission scenarios, particularly in defense applications, where human oversight is preferred for precision, adaptability, and rapid decision-making in critical environments.
• By Component, the weapon system segment has recorded 44.5% market share in 2024, the largest share as nations invest heavily in advanced combat platforms, guided missile systems, and integrated defense capabilities to modernize armed forces and address evolving security threats.

Aerospace and Defense Market Growth Factors

• Rapid adoption of AI, automation, and advanced analytics: In early 2023 the U.S. Federal Aviation Administration noted that AI-assisted air traffic management cut flight delays by about twenty-three percent and expanded usable airspace by nearly nineteen percent, clear evidence of greater efficiency. NASA and FAA figures also show that AI-driven drones logged over 3.7 million incident-free hours while carrying cargo. In December 2024 an aerospace control-systems study reported that deep-reinforcement-learning models performed real-time fault detection, further highlighting the advance of onboard intelligence. Taken together, these legally recorded outcomes confirm that AI and analytics now sit at the heart of daily operations, sharpening predictability, resilience, and decision-making across the sector.
• Growth in UAVs and autonomous combat systems: By late 2023 the United States had issued almost 369,000 remote pilot certificates-an increase of 21 percent over the previous year-showing brisk uptake of long-range, autonomous UAV operations. To develop loyal wingman AI drones the U.S. Air Forces Collaborative Combat Aircraft program secured nearly $9 billion in funding for fiscal years 2025 through 2029. A January 2025 defense roadmap formalized manned-unmanned teaming as official doctrine, signaling that autonomous systems are moving beyond prototypes to become legally ratified force multipliers. Such developments mark a clear shift from experimental trials to operational autonomy in military missions.
• Rising cyber threats push demand for stronger electronic- warfare tools: Federal overseers-including FEMA-now insist that avionics with AI telemetry keep encrypted, auditable logs of their explainable reasoning because hackers are increasingly probing flight-data and navigation networks. In 2024 the European Union Aviation Safety Agency and the U.S. Department of Homeland Security unveiled new cybersecurity rules that force onboard AI systems to meet strict integrity benchmarks. As drones and crewed planes gain deeper autonomy, regulators are tightening scrutiny, which in turn elevates sales for electronic-warfare gear and resilient comms.
• Advances in hypersonics and directed-energy weapons are influencing new systems: Innovations in hypersonic munitions and directed-energy weapons have impacted the design of emerging military systems. The DOD approved hypersonic programs associated with Mach-5 glide vehicles funding of more than $5 billion in March 2025 for FY-2024.  A 2023 study by DARPA found that machine-learning flight controls lifted the hit probability of laser and microwave weapons by more than thirty percent. That same month a federal review confirmed the first real-world deployment of AI-directed drone swarms for wide-area surveillance and access-denial tasks. Taken together, these achievements demonstrate that smart munitions are moving beyond the laboratory and into near-term operational use.

Aerospace and Defense Market Trends

• Artificial intelligence (AI)-based decision-support systems and battlefield intelligence: In 2024 NASA air-traffic studies report identified that AI-based predictive systems have demonstrated 88% accuracy when forecasting said incidents, including military mission readiness—these technologies are now being transitioned into the military. The Defense Advanced Research Projects Agency (DARPA) 2025 Roadmap recommends the use of trustable and explainable AI to achieve traceable and legal compliance in command-and-control systems. UAV networks with blockchain-backed traffic management provides audit trails for auditable real-time data flows. The combination of AI applications, secured data infrastructure, and compliance regulation will continue to enhance battlefield intelligence capabilities.
• Fusion of digital twins and simulation technologies: Late 2024, a government-funded project raised the bar on digital twins, delivering "digital twins" for defense aircraft which included real- time multi-million parameter simulations of flight to predict wear and optimize maintenance on aircraft. The FAA's adoption of Digital twins has resulted in a 50% reduction in unscheduled maintenance, which allows more availability of military aircraft. These legally beneficial tools that use simulated engagements changed the readiness equation, as they can be used similarly by incorporating predictive analytics and certification compliance daily.
• Emergence of hypersonic missile technologies: A 2025 U.S. Strategic Command report confirmed the first successful intercept test of a hypersonic glide vehicle guided by AI-enhanced targeting systems. Over $5 billion invested in FY 2024 hypersonic R&D demonstrates a fast-track from research to deployment under DoD authority. This milestone reflects a clear shift: hypersonics has entered the active defense inventory, transforming strategic missile capabilities within legally supported battlefield architectures.

Report Scope

Aerospace and Defense Market Dynamics

Market Drivers

• Technological convergence: AI + IoT + 5G in defense systems: The NTIA pilot projects and testing in 2024 showed 5G-enabled autonomous drones operating in unison with each other over an IoT network with latency control of fewer than 50 milliseconds. Encrypted sensor data from the 5G-enabled autonomous drones was streamed at a high rate in real time to command nodes that ensured compliance with government cybersecurity policies. AI was utilized in the processing of sensor data at the edge of the network providing tactical situational awareness and establishing a low-latency decision-making framework within legally governed defense architectures. As a result, this technological convergence is establishing the next generation of responsive and secure systems on the battlefield.
• Increase in cross-border cyber activities and digital warfare: Homeland Security briefings throughout 2023-2024 state 40%+ of military networks were exposed to advanced persistent threats in the form of targeted adversarial manipulation aimed at changing an AI model's output across all endpoints and used in all systems. The U.S. Department of Defense responded to develop mandatory adversarial robustness testing as a part of DFARS, with non-compliance penalties staked against defense contractors. This enforceable, non-negotiable cyber resilience stance taken by the Department of Defense is combining AI used for destruction with robust security into defense procurements, and making cybersecurity a strategic procurement criteria.
• Growing exports of defense equipment from developed nations: The U.S. State Department indicated a 17% increase in defense exports of AI-enhanced drones and avionics year-on-year for 2023. The Dual-Use Regulation update from the EU that took effect in May 2024 placed intelligent weaponry under controlled export licensing, increasing legal oversight over AI-enhanced military applications. These regulatory frameworks enable and regulate the arms trade globally and increase manufacturers' obligations in terms of compliance with regulations, while also enabling international commercialization of AI-enabled defense technologies.

Market Restraints

• Stringent regulatory and export control frameworks (ITAR, EAR): In 2023 the United States Commerce Department aggressively regulated AI-enabled avionics, by moving it to a more restricted export-category XV (adding 6-12 months to licencing timeliness), the regulation classification noted in the 2024 GAO report. Canada and Australia also legislated ITAR-based conditions into their regulations when developing regulatory changes for AI-enabled UAV. These legally regulated controls are delaying development timeframes and increasing compliance costs, which limits the global use of advanced aerospace systems.
• Talent shortage in aerospace engineering and AI integration: Studies from the NSF and U.S. Air Force in late 2024, found that 42% of aerospace-AI career opportunities are unfilled due to a shortage of professionals with both aerospace systems and machine learning skills. While workforce development grants have grown under the America COMPETES Act, it will be over three years until current pipelines can even meet the anticipated demand. The growing shortfall of talent, has the potential to elongate project timelines, and create regulatory risk when certifications or safety standards are lost.
• Dependence on rare earth materials and vulnerable supply chains: The CHIPS and Science Act awarded $52 billion in August 2022 to further domestic capacity to manufacture semiconductors, however pre-2024 audits reveal a critical defence-grade fab facility is still being deployed. Approximately 85% of the GaN chips required for defence sensors are imported from China - a potential Congressional risk.

Market Opportunities

• Use of AR/VR in military training and combat simulations: Use of AR/VR in military training, exercises, and combat simulation. By 2024, the Department of Defense integrated an AR system to the rotary-wing crew training community, which estimated a 30% reduction in rehearsal time, as assessed by the Defense Innovation Unit. The Air Force allocated $0.1 billion in FY 2024 for mixed-reality cockpit trainers that are also enhanced by emergency simulation driven by AI engines. These legally approved methods provided standardized training scenarios, while continually abide within approved safety thresholds, enhancing readiness at scale without the hazards and costs of live operations.
• Incorporation of quantum computing in secure communications: By May 2025, the National Institute of Standards and Technology had made significant strides in piloting quantum key distribution (QKD) links between U.S. airbases that demonstrated the impossibility of breaching the encryption methods. All tactical AI systems have to be quantum-resistant per the National Quantum Initiative Act by 2026 sanitary a legally mandated path for quantum secured aerospace communications. This will position aerospace defense companies to market next-generation encryption solutions.
• Sophisticated space-based surveillance and early warning systems: In 2024 the FCC made filings to approve an AI-controlled satellite constellation to provide near-real-time missile detection capabilities, that would also be managed jointly by DARPA and NOAA in accordance with the Space Treaty. The U.S. Space Force has allocated $0.5 billion in FY 2025 to expand orbital ISR capacity including using AI early-warning sensors. As an overall legal compliant set of capabilities to deploy the development of AI-based surveillance and engagement capabilities for defense purposes in space is clear from their alignment with national defense strategic objectives.

Market Challenges

• Balancing innovation speed with safety and compliance: The FAA autonomous aircraft roadmap requires 12 months of data audits for AI flight systems, as experienced with Reliable Robotics' autonomous Cessna retrofit, which had an additional six months of validation under FAA oversight. These delays of legal certification require developers to plan their releases, map regulatory milestones, and bills for regulatory burden into their innovation cycle, thus creating friction between timely innovation and the mandated safety assurance required for certified aircraft.
• Interoperability between legacy and modern systems: A recent GAO report noted that integrating AI modules into legacy defense systems, which in some cases, could often be 30 years old, requires the development of middleware, and each was legally certified as being compliant with DoD cyber security standard pertaining specifically to the AI component. This one requirement has the potential to delay fielding by up to 24 months. Therefore, these legal interoperability standards means that legacy systems must be recovered to meet safety and compliance lines to exist, and otherwise render under-compliance, effectively risking mission readiness.
• Potential backlash over AI-driven lethal autonomous weapons: During UN disarmament dialogues in 2024, over 50 nations agreed to explore legally binding constraints on lethal autonomous weapon systems, emphasizing the requirement for human oversight in targeting decisions under international humanitarian law. Compliance efforts including human-in-the-loop verification introduce certification complexity and may limit deployment timelines, creating a policy-driven barrier to fully autonomous combat systems.

Aerospace and Defense Market Segmental Analysis

Type Analysis

Aerospace: The aerospace segment has generated highest revenue share in the market. According to the Department of Transportation, U.S. civil aviation contributed $1.8 trillion to GDP and accounted for 9.4 million jobs in 2022. The FAA's NextGen modernization program will ultimately deliver over $12.3 billion in operational benefits by 2024, primarily through reduced fuel use and emissions. Moreover, NASA and the FAA co-sponsored the reporting of over 3.7 million hours of flights of UAVs in 2023 through the pilot integration programs. In early 2025, the DOT announced new expanded digital twins to better manage airspace with more optimal air traffic optimization. All these examples, especially those led by government initiatives, illustrate how aerospace systems are integrating autonomous tools into digital ecosystems under regulatory oversight to improve the overall safety and efficiency of their operations.

Aerospace and Defense Market Revenue Share, By Type, 2024 (%)

Defense: The U.S. Department of Defense released its first Defense Industrial Strategy in January 2024 to modernize the defense sector and to ensure greater resiliency and responsiveness in the supply chain. With the commit of funding for FY 2024-25 and the investments of over $5 billion for the development of hypersonic missiles, as well as, over $0.5 billion for orbital ISR (intelligence, surveillance, and reconnaissance) capabilities, the U.S. Department of Defense (DoD) established the Replicator program in August 2023 with the vision to have thousands of attritable autonomous systems, drones, UUVs, in operational fielding by mid-2025. This effort marked a departure from single or remote autonomous action to mass autonomous operations. These developments are important because they highlight legally supported strategic actions to strengthen national defense through advancing use of autonomous and artificial-intelligence-enabled capabilities.

Operation Analysis

Autonomous: In 2023 the DoD updated Directive 3000.09 to expand on review and approval requirements for autonomy in lethal systems to ensure human judgment remains at the forefront of the decision making. Contracts totaling $1 billion were awarded by Navy in 2024 for contracts utilizing unmanned surface vehicle autonomy systems, and subsystems (while compliance frameworks are heavily regulated). Process-oriented acquisitions that utilize autonomy were in production, like the Ghost Fleet Overlord project (USV fleet) that deployed multiple vessels completely untouched by a human by January of 2024. These government programs highlight both comprehension of autonomy across multiple defense environments, but also levels of oversight that are required, to allow advancements in capability development while preserving oversight, of autonomy and of use of force, in the air, land, or uncharted surface is still relevant in defense.

Aerospace and Defense Market Revenue Share, By Operation, 2024 (%)

Manual: The manual segment has held leading position in the market. While autonomy tends to be trending towards high levels of autonomy, human-manned or operated platforms will continue to play a significant role. In its report the FAA noted that the 2022 civil aviation supported 9.4 million jobs, which highlights the undeniable relevance of human flight in the industry within the U.S. The funding allocated to the defense sector on the 2024 Defense Industrial Strategy continues to consider supporting crewed aircraft programs previously (and now) like F-35, B-21, or even nuclear-powered submarines and have to meet the highest requirements and standards under defense policy (DoD). The DoD modernization effort to software (in 2024) was only to include hybrid-human in the loop systems allowing for human oversight over commands and control which returned to, must be part manual. This has remained a back-end conforming requirement and is enforced under safety, certification, or legal regime across the defence (or aviation) and aerospace sectors.

Component Analysis

Weapon System: The weapon system segment has dominated the market. In 2024, the AIM-260 JATM entered initial production as the priority for air-to-air weapon constructions by the U.S. military at the DoD's classified procedures for developing capabilities that include Mach 5 speed and long-range engagements. In 2025, Kratos received a 1.45 billion dollar contract to create hypersonic testbeds for subscale and full-scale hypersonic weapon platforms under DoD and MDA testing. The Replicator contracts in May 2024 included the purposeful use of autonomous offensive watercraft and loitering munitions like the Switchblade 600 as assessed against doctrine-based rules of engagement and compliant fielding requirements where the fielding of the systems involved the utilization of legally reviewed attorney vetting tools with comprehensive oversight frameworks.

Fire Control System: In 2024 and funded by DARPA, AI fire control capability platforms achieved 30% more precision using machine learned targeting and tracking algorithms as reported in defense briefing statements. As part of the US Navy SBIR Topic N242-078 in 2024, solicitations were issued to procure legally recognized autonomy agents to protect against adversarial threats that defend against legally recognized cyber risks to assure fire-control actions. The results of the Autonomous Multi-Domain Launcher air and ground launch trials (Project Convergence 2025) indirectly launched fired capabilities and fired with embedded autonomy within a DoD compliant constructive testing layout. Collectively, combined with the results in 2024, government agencies are enhancing the testing urgency surrounding fire-control systems enrolled in legally recognized procurement methods.

Command and Control System: In 2024, the DoD’s CIO led the merging of DevSecOps pipelines (C2SF and Vulcan) to modernize enterprise command-and-control software under legally mandated cybersecurity standards. NTIA-backed 5G/IoT pilot projects in 2024 introduced real-time encrypted sensor integration into tactical C2 nodes, meeting cybersecurity and latency compliance. DARPA’s 2025 roadmap emphasized explainable AI for command systems to ensure legal accountability and transparent decision logs. These developments highlight that next-gen C2 systems are being built atop secure, AI-integrated architectures governed by real-time auditing and policy-compliant frameworks.

Aerospace and Defense Market Regional Analysis

The aerospace and defense market is segmented into several key regions: North America, Europe, Asia-Pacific, and LAMEA (Latin America, Middle East, and Africa). Here’s an in-depth look at each region:

What makes North America the leader in the aerospace and defense market?

• The North America aerospace and defense market size was valued at USD 292.14 billion in 2024 and is expected to reach around USD 445.10 billion by 2034.

The US Congress approved a budget for $145 billion on RDT&E in the FY 2024 National Defense Authorization Act, of which $1.8 billion was allocated for AI and $1.4 billion towards JADC2 - translating into considerable federal investment decisions within a defence modernization program across aerospace and defense. The government of Canada additionally updated its procurement budget for defence procurement to announce a commitment to CAD 13 billion in 2024 for modernised fighter jets and naval vessels within legally regulated procurement budgets. In 2025, SEDENA, Mexico's Secretaria de la Defensa Nacional, also acquired remote-sensing UAV platforms using a federally prescribed procurement regime to enhance border surveillance capabilities along land and maritime borders. Thus, these North American ASW nations are investing in aerospace and defense modernization activities within regulated procurement policies while undertaking a strategic alignment.

What are the current trends in the Europe aerospace and defense market?

• The Europe aerospace and defense market size was estimated at USD 205.15 billion in 2024 and is expected to hit around USD 312.57 billion by 2034.

The UK reported a 49% increase in its defense export orders from 2022, at £14.5 billion in 2023. The defense order figure, especially in the aerospace sector, reported a record of 56% output controlled by legally regulated governance of government-mandated controls on exports. The UK government, in March 2025, announced the idea of a defense innovation program to establish a Defence Innovation Organisation to fast-track military technology into frontline support within its mission to support 430,000 defence jobs. Germany has committed significantly to agile systems and unmanned capability in an increase of 4% for its 2024 defense budget that was approved by the Bundestag. France, as part of the Direction Générale de l'Armement, announced its accelerated procurement of CAESAR artillery systems and tactical combat UAVs for 2024, to specifically deploy in Sahel aligned with the EU regulatory framework. Collectively, these countries demonstrate.

What factors are driving rapid growth in the aerospace and defense market in Asia-Pacific?

• The Asia-Pacific aerospace and defense market size was estimated at USD 238.80 billion in 2024 and is projected to surpass around USD 363.83 billion by 2034.

China’s Ministry of National Defense increased UAV and hypersonic program funding in early 2024, supported by new space-launch infrastructure under legally mandated five-year plans. India’s 2025 defense budget reached RS 6.81 lakh crore (~US$78.6 billion), with capital R&D up 13% and 75% of procurement reserved for indigenous platforms, notable projects include the Akashteer air-defense system and approval of 52 surveillance satellites. Japan’s Defense Ministry awarded 240 next-generation jet engines in late 2024 under its five-year plan for upgraded fighter fleets. Australia’s 2023 naval shipbuilding plan gained legal approval of AUD 270 billion to localize combat vessel and submarine production. South Korea enhanced its defense exports in 2023 by exporting missile defense systems under government–industry agreements. The region is advancing self-reliant, technology-driven military capabilities with legal backing.

What are the current trends in the LAMEA aerospace and defense market?

• The LAMEA aerospace and defense market size was valued at USD 84.52 billion in 2024 and is anticipated to grow around USD 128.78 billion by 2034.

In Latin America and the Middle East & Africa, countries are building indigenous defense capabilities through formal mechanisms. In 2024, Brazil increased its aerospace R&D budget by 12% from the previous year. The focus was on the continued upgrades of the Embraer KC-390 and in modernizing submarines. Recently, Brazil entered into R&D agreements with its Latin American neighbors, Argentina and Chile, regarding UAVs. In 2024, the UAE Air Force purchased AED 2 billion of AI-enabled radar and UAV systems to support its border security under import regulations. Saudi Arabia announced a  SAR 10 billion commitment to manufactured domestic missiles and air-defense systems in 2023, aligned with Vision 2030. In 2024, South Africa's Armscor procured USD 0.025 billion for upgrades to command-and-control systems and make upgrades to Rooivalk helicopters. All these nations have developed AI, UAV, and naval systems with state-backed programs. The emphasis remains on defense autonomy, regional cooperation, and compliance with national procurement regulation.

Aerospace and Defense Market Top Companies

• Northrop Grumman Corp
• General Dynamics
• Raytheon Technologies Corporation
• Airbus Group SE
• The Boeing Company
• Lockheed Martin Corporation
• Raytheon Co
• Bae Systems plc
• General Electric Company
• Safran SA

Recent Developments

Recent partnerships in the aerospace and defense industry focus on accelerating AI integration, automation, and multi-domain capabilities. Boeing and Shield AI teamed up in 2024 to co-develop autonomous drones using Hivemind AI software. Airbus partnered with Helsing to advance AI mission systems for European combat aircraft. Northrop Grumman collaborated with the U.S. Air Force on AI-driven missile warning systems. Lockheed Martin joined NVIDIA to apply digital twin technology for hypersonic testing and simulation. Raytheon expanded work with DARPA to enhance AI-based electronic warfare. These cross-industry alliances are transforming defense strategies through scalable, secure, and real-time AI applications.

• In May 2025, Northrop Grumman has invested $0.05 billion in Firefly Aerospace to accelerate the development and production of their jointly developed medium launch vehicle, now named Eclipse. Built on technology from Northrop’s Antares and Firefly’s Alpha rockets, Eclipse is designed to deliver up to 16 metric tons to low Earth orbit and 3.2 metric tons to geosynchronous transfer orbit, targeting space station resupply, commercial, scientific, and national security missions. The vehicle features upgraded avionics, a larger payload fairing, and leverages economies of scale through shared components with Antares 330 and Alpha. The first launch of Eclipse is planned from Wallops Island, Virginia, as early as 2026. This investment strengthens the partnership between the two companies, positioning Eclipse as a strong contender for US Space Force contracts and the growing market for launching proliferated satellite constellations.
• In October 2024, Boeing launched a major capital-raising effort as early as October 28, 2024, aiming to secure over $15 billion to address a severe liquidity crisis caused by ongoing production issues, regulatory scrutiny, and a lengthy strike. The fundraising includes a combination of new shares and mandatory convertible bonds, following regulatory approval to sell up to $25 billion in equity and debt. Boeing’s advisers lined up potential investors for the offering, which is critical to maintaining the company’s investment-grade credit rating and supporting its recovery. The company is projected to burn about $4 billion in cash in the fourth quarter, with a total free-cash outflow near $14 billion for the year. This capital raise, one of the largest in US corporate history, is intended to bolster Boeing’s finances as it restarts airplane production and navigates substantial operational and reputational challenges

Market Segmentation

By Type

• Aerospace
• Defense

By Operation

• Autonomous
• Manual

By Component

• Weapon System
• Fire Control System
• Command and Control System
• Others

By Region

• North America
• APAC
• Europe
• LAMEA