At a test site in Costa Mesa, California, in a video posted this spring by the Air Force’s top general, hangar doors slid open for a great reveal.
As dramatic electronic music pulsed, the video showcased one of the Air Force’s newest drones — and heralded an emerging sea change in the defense industry.
The video, posted May 1 by Air Force chief of staff, served to announce served to announce that the YFQ-44 collaborative combat aircraft, an autonomous drone intended to one day fly alongside the service’s most advanced piloted fighters, had officially begun ground testing. Soon after, a photograph of another CCA in ground testing — the YFQ-42 — was also released.
But it wasn’t the defense industry’s biggest aviation companies, such as Lockheed Martin, Boeing or Northrop Grumman, behind the service’s first fighter drones.
It was Anduril Industries and General Atomics, two smaller but growing firms, behind the drones dubbed YFQ-44 and YFQ-42, respectively.
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The growing importance of those companies, and other smaller and technology-focused firms, continues to reshuffle the often staid list of the world’s top 100 defense firms, as analyzed by Defense News.
Advancements in artificial intelligence and drone warfare continue to bear fruit, prompting many nations’ militaries to rethink their defense strategies and turn to unexpected companies to bolster their armories.
What’s more, massive geopolitical shifts of recent years continued to realign the Top 100 list for 2025.
Russia remained resurgent and emboldened in 2024 as its unprovoked invasion of Ukraine ground on into its fourth year. European allies, worried both about Russia’s military ambitions and a U.S. shift to a more isolationist stance, have renewed focus on rearming themselves. And Israel’s war in Gaza continues to drive defense spending, nearly two years after the Oct. 7 attacks.
“Countries have looked at both their own border security as well as defense writ large against the significant attacks” of recent years, defense contracting expert Alan Chvotkin said. “But we’d also expect to see some increase in their smaller technology-focused companies, because they’ve seen the use of drones or other robotics, other technologies. You’re not going to get those from the traditional heavy industry, aircraft, ship manufacturing … companies that are on the top list today.”
The five biggest companies remained largely unchanged from the previous year, with Lockheed Martin, RTX, Northrop Grumman and General Dynamics topping the list. Also placing third this year: the China Aerospace Science and Industry Corporation.
(Revenues for that corporation from 2023 were not available when last year’s Top 100 list was compiled. The second-highest grossing defense firm in 2023, the Aviation Industry Corporation of China, did not make its 2024 defense revenues available.)
Defense revenues grew dramatically in 2024 — topping $661 billion, 11% higher than the $594 billion those companies notched the previous year.
This paralleled an overall rise in defense spending worldwide, as governments spent more than $2.7 trillion on militaries in 2024, according to the Stockholm International Peace Research Institute, or SIPRI. That was a 9.4% increase over 2023 spending, SIPRI said, and “the steepest year-on-year rise since at least the end of the Cold War.”
In Defense News’ latest Top 100 list, based on defense revenues in 2024, smaller tech firms continue to see profits grow, and in some cases crack into the Top 100:
- Palantir Technologies also emerged on the list at 70, with its defense revenue growth rising to nearly $1.6 billion. Palantir’s work this year with the Trump administration to compile data on Americans has stirred controversy, but the developments happened after 2024, meaning its revenues could grow more next year.
- Kratos Defense and Security Solutions, maker of the Valkyrie drone, saw its defense revenues jump 38% to $989 million. Despite that growth, Kratos’ ranking slipped slightly from 89 to 91, demonstrating the toughness of the competition.
- Anduril landed on the list for the first time at 93, after its defense revenues more than doubled to an estimated $950 million.
“And they’re going to grow rapidly,” Chvotkin said of such companies like Palantir and Anduril. “Besides their strong relationships [with the Trump administration], they’ve intentionally built out their defense structure. … They’re going to continue to be a major player in the IT and cyberspace.”
Chvotkin pointed to a $100 million award by the U.S. Army to Anduril for leading a team of high-tech firms to build a next-generation command-and-control prototype as an example of the deals the firm is landing.
Matt Steckman, Anduril’s president and chief business officer, said in a recent interview that Anduril has been roughly doubling its revenue each year for the last five years.
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Part of Anduril’s growth in 2024 came from its CCA victory, he said, one of its biggest deals of the year, as well as air defense programs for U.S. Special Operations Command, the Marine Corps and the Army, software programs, loitering munitions deals with Taiwan, and autonomous submarines.
“In 2024, you saw a couple of large [autonomous submarine] programs come through, funding growth in our maritime division,” Steckman said. “There’s a renewed focus in unmanned, undersea warfare.”
Steckman anticipates Anduril’s growth to continue due to the company’s diversified portfolio and militaries’ focus on tech.
“The physics of the battlefield have changed permanently,” Steckman said. “The math problem of the battlefield — distances, numbers, mass, size, sensing ubiquity — you have to amass tons of effects at moments of time, at long distances, in order to project power.”
To accomplish that, Steckman continued, “you need an insane amount of computing capacity, driven by breakthroughs in artificial intelligence … autonomy … [and] unmanned command and control. The only way to meet that new math problem is through … software applied to an absolute metric ton of hardware.”
Chvotkin doesn’t expect Anduril to be a unique example for smaller firms.
When asked about growth of firms that specialize in uncrewed systems, Chvotkin pointed to the war in Ukraine.
Both Ukraine and Russia have heavily leveraged drones in the yearslong conflict — everything from Ukraine’s swarm of small quad-copters, which used AI to reach and demolish multiple Russian bombers as part of Operation Spider web, to the Iranian-designed Shahed kamikaze drones that Russia sends to pound Ukrainian cities.
Future conflicts could follow similar paths, Chvotkin said, leading to even greater shifts in the defense industry.
“The increased use of drones, of AI, of small, more tactical approaches rather than heavy industrial systems” will be a hallmark of future wars, he said. “Everything from pilotless aircraft to unmanned subs, all of those things … [will require] a different kind of demand set.”
“There’s still a heavy demand for the traditional munition stuff,” Chvotkin continued. “But in the move to the tech space, [there is] a different kind of demand set starting over the last few years and rapidly accelerating under the Trump administration.”
This emphasis is bipartisan as well. The Biden administration similarly focused on tech and drones, with then-Deputy Secretary of Defense Kathleen Hicks and former Air Force Sec. Frank Kendall initiating the Replicator and CCA programs, respectively.
Even if the White House changes hands after the 2028 election, the Pentagon will likely not shift course — and defense firms with a strong hand in advanced technology will have an advantage.
The Pentagon’s increasing use of Other Transaction Authority, or OTA, agreements — which give the Defense Department more flexibility to enter into arrangements with nontraditional defense contractors — has allowed it to speed up the development of new technologies and open the defense market to new organizations, Chvotkin said.
Steckman credited former Defense Secretary Ash Carter, who began his tenure in the Pentagon under President Barack Obama as undersecretary of defense for acquisition, technology and logistics, with starting the long process of pushing DOD to transform into a tech-focused enterprise.
“[DOD] is the largest single institution in the world,” Steckman said. “So, it doesn’t actually seem crazy that it’s taking [nearly] 20 years for that bow wave to crest, and then result in the [environment] that you’re seeing today.”
Other nations’ militaries, particularly those of NATO allies, also present a growth opportunity, Steckman said.
“What NATO countries are doing right now is fairly unprecedented, in terms of their own defense industrial bases scaling to meet the current challenge,” Steckman said. “It’s an opportunity for us. To scale at the speeds that they are attempting to achieve, they’re going to need to partner … within their own countries, within Europe [and] with outside partners [like] the U.S.
“They’re all aligned in the types of scale and materiel needs required to reestablish the deterrent effect of Europe, particularly towards Russia,” Steckman added.
Such growth is apparent on the Top 100 list, with Thales rising from 17th last year to 10th in 2024, Italian firm Leonardo rising from 14th to 13th, and German firm Rheinmetall AG going up from 20th to 18th. Rheinmetall’s defense revenues climbed 50% in 2024 to more than $8.2 billion.
That change comes as Germany adopts a more muscular foreign policy — dubbed Zeitenwende, or turning point, 2.0 — to take the lead in rearming Europe in the face of Russian aggression.
Rheinmetall, the largest arms manufacturer in Germany, struck an optimistic tone on geopolitical currents as it announced its 2024 year-end results.
“Rheinmetall is facing the challenges of Zeitenwende 2.0,” chief executive Armin Papperger said in a March 2025 release on 2024 results. “An era of rearmament has begun in Europe that will demand a lot from all of us. However, it also brings us at Rheinmetall growth prospects for the coming years we have never experienced before.”
In the last year and a half, Rheinmetall has expanded its satellite business, focused on expanding manufacturing and engineering capabilities through acquisitions, moved to build an artillery shell factory in Lithuania and partnered with the German military.
Israeli defense companies, meanwhile, saw significant growth in 2024 as well, as the nation’s war in Gaza and conflict with Hezbollah in Lebanon drove higher military spending.
SIPRI reported that Israel’s military spending grew $46.5 billion in 2024, which marked 65% growth over 2023, and the nation’s steepest defense spending increase since the Six-Day War in 1967.
Elbit Systems, an Israeli firm that makes guided munitions and ammunition, aircraft systems, combat vehicles, artillery and other weapon systems, jumped from the 22nd largest defense firm in 2023 to 21st in 2024, with revenues growing 14% to $6.8 billion.
Israel Aerospace Industries remained at No. 28 on the list, posting a defense revenue growth of 20% to $5.2 billion.
And Rafael Advanced Defense Systems climbed two spots to 31. Both firms are key manufacturers of Israel’s Iron Dome air defense, which has been hailed for its success in shooting down rockets and short-range missiles.
In the U.K., BAE Systems leapfrogged Boeing in the rankings to take 6th place.
BAE’s defense revenues grew 17% to more than $32 billion on the strength of its work on programs like Lockheed Martin’s F-35 and Eurofighter’s Typhoon, the U.K. Royal Navy’s Dreadnought class submarine and the Royal Australian Navy’s Hunter class frigate.
Boeing, meanwhile, continued its slide of recent years and dropped to 7th, as its revenues dipped slightly to $31.8 billion.
As recently as 2020, Boeing was the second-largest defense firm in the world, second only to Lockheed Martin. It then began dropping down the list as Raytheon, which later became RTX, Northrop Grumman, General Dynamics and Chinese aerospace corporations surpassed it.
But despite Boeing’s well-publicized troubles in recent years, Chvotkin thinks it’s ripe for a comeback.
If Boeing can get programs like the new Air Force One back on track, he said, the company may be able to come off of its back foot.
Boeing’s contract to build the Air Force’s sixth-gen F-47 fighter also provided a much-needed win, he noted, one that could help regain footing if it can avoid missteps.
“Unless there’s a big issue, they may drop another spot or two, but you’re not going to see their defense revenue drop significantly,” Chvotkin said. “They’re still going to be a significant player. Don’t count them out.”
Stephen Losey is the air warfare reporter for Defense News. He previously covered leadership and personnel issues at Air Force Times, and the Pentagon, special operations and air warfare at Military.com. He has traveled to the Middle East to cover U.S. Air Force operations.
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