BAE Share Price: Strong Growth Prospects Amid Defence Spending Surge
BAE Systems Share Price Shows Resilience in Early 2026
BAE Systems plc shares closed at 1,902.50p on 7 January 2026, gaining 21.00p (1.12%), demonstrating resilience despite recent volatility. The British defence giant, one of Europe’s largest defence contractors, has captured investor attention as geopolitical tensions continue to reshape global security priorities.
The FTSE 100 defence company has experienced significant movement in recent weeks. The more talk of a Ukraine peace deal, the lower BAE Systems’ share price seems to drift, yet market analysts suggest investors may be overlooking crucial fundamentals that could drive substantial gains throughout 2026.
Record Orders and Strong Financial Performance
BAE Systems’ financial position remains robust, underpinned by unprecedented order volumes. In a November trading statement, the company said it had secured more than £27 billion of orders in 2025 so far and reaffirmed its full-year guidance. The company expects to report preliminary 2025 results on 18 February 2026.
Revenue at BAE’s grown steadily over the past five years, rising from £18.3bn in 2019 to a forecast £32.7bn in 2026. Operating profits have tracked a similar trajectory, and normalised earnings per share are expected to climb from 65p in the trailing 12 months to 83.9p in 2026. This growth trajectory positions the company favourably for continued expansion.
NATO Defence Spending: A Long-Term Growth Driver
Perhaps the most compelling aspect of BAE’s investment case lies in structural shifts in defence spending. NATO has committed to more than doubling defence spending — regardless of any Ukraine peace deal. This is a structural shift designed to create a long‑term deterrent against future aggressors, not a temporary wartime spike. Last June, non‑US members agreed to lift defence budgets to 5% of gross domestic product by 2035, up from 2% last year.
This commitment translates into hundreds of billions in additional spending across NATO members, positioning BAE Systems to benefit from a decade-long rearmament cycle. BAE Systems is forecast to achieve double‑digit earnings growth through 2026. This is supported by a record order book, upgraded guidance, and a decade‑long rearmament cycle already locked into NATO budgets.
Analyst Targets and Market Outlook
Investment analysts remain optimistic about BAE’s prospects. UBS put a 2,500p label on the stock at the end of September. That would be a gain of around 45%. Additionally, The 12-month price target on BAE shares is £21.42, representing an 18.8% premium from current levels based on consensus analyst estimates.
Recent geopolitical developments have also provided support. Monday’s jump put the stock back above the 1,800-pence level after it opened at 1,797.5p and traded as high as 1,840.5p, as European defence stocks rallied on heightened security concerns.
What This Means for Investors
For investors considering BAE Systems, the current share price presents an intriguing opportunity. The stock’s valuation implies a slowdown just as the fundamentals point to sustained acceleration. That gap between perception and reality is where the opportunity lies.
The company’s diversified portfolio across air, maritime, cyber, and platforms segments provides resilience, while long-term government contracts offer revenue visibility. Bae Systems Plc Ord 2.5p is listed on the London Stock Exchange trading with ticker code BA..L. It has a market capitalisation of £55.50b, with approximately 2.92b shares in issue.
As defence spending commitments become embedded in national budgets across Europe and beyond, BAE Systems appears well-positioned to capitalise on this multi-year trend, making the BAE share price one to watch throughout 2026 and beyond.