# BAE Systems profits leap amid ‘new era’ of defence spending

By Russ Mould — 2026-02-18

Russ Mould, investment director at AJ Bell, said: “BAE Systems has reaped the benefits of greater defence spending around the world, with full-year results showing a chunky increase in sales, underlying earnings and dividends.

“BAE is highly experienced and a trusted name in the defence space, valuable attributes that put it in a prime position to win contracts.

“While it is a major cog in the UK’s defence wheel, it isn’t solely reliant on its home territory to grow earnings.

“BAE is an international business, and this diversification works to its advantage.

“BAE benefits from having fingers in many pies.

“In addition to air, land and sea defence, it is increasingly involved in technologies for electronic warfare and space-based security.

“These are tomorrow’s defence hotspots, and innovation is paramount.

“It is ploughing big money into research and development to stay abreast of technological advancements and the need for more sophisticated products and services.

“While that has pulled down free cash flow year-on-year, reinvesting in a business is essential to stay one step ahead of the competition.

“Free cash flow is the cash generated from operations minus the costs of running the business and capital expenditure.”

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