18 February 2026
If you are covering the latest financial results from BAE Systems, please find below a comment from Matt Dorset, defence analyst at Quilter Cheviot:
“BAE reported another solid set of results, with full year sales up 10%, in-line with expectations, while earnings increased 12%, a small beat. Free cash flow was a 42% beat driven by strong customer prepayments, underscoring the demand that continues to exist for defence companies. Indeed, growth was strong across all five segments, with particular strength in the Platforms and Services business where demand for the CV90 combat vehicle remains high.
“The strong results are clearly driven by increasing defence spending around the world, and unsurprisingly order flow remained strong at £37bn, up 9% year-on-year, while the order backlog reached a record high. We would note that there is also potential upside from continuing increased defence spending in the US and the UK with Trump pushing for significantly increased spending, and more recently rumours that Starmer may bring forward the UK’s defence spending ambitions.
“Guidance for 2026 is in-line with consensus, with BAE targeting 7-9% sales growth, and 9-11% growth in earnings, and we would not be surprised if BAE increases this guidance throughout the year. The company’s valuation remains fairly expensive compared to its history, but this remains more than justified given very strong mid-term growth prospects underpinned by increasing defence budgets across the world.”
