France is considering an additional 36 billion euros in defense spending by 2030, a increase that marks an acceleration from the current annual increase of 3 billion euros in military spending. This new strategy reflects security pressures related to wars in Ukraine and the Middle East, as well as growing doubts about American support for European defense. Analysts believe that Thales is poised to benefit from this new funding.
If adopted, this budget extension would raise defense spending to 2.5% of GDP by the end of the decade, compared to about 2% currently. The annual budget would reach 76.3 billion euros in 2030, nearly double its 2017 level, totaling defense spending to around 436 billion euros over the period 2024-2030.
“Planning our defense model means making choices,” said Fabien Mandon, Chief of Staff of the Armed Forces, during the Defense Commission. The general indicated that this new funding would allow the army to expand its equipment, logistics, and critical capabilities, particularly at a time when American support for European defense is increasingly in question.
Specifically, “this is not a modernization cycle. The budget is rather being redirected towards the intensification and strengthening of operational capacity,” highlighted Saïma Hussain, defense analyst at AlphaValue.
In detail, around 26 billion euros in total over the period 2024-2030 are expected to be allocated to the purchase of ammunition, about 8.5 billion euros extra.
The air/anti-drone defense budget is set to increase by 1.5 to 2 billion euros, drone spending is expected to rise by 2 billion euros (to over 8 billion euros in total). Finally, Space and ISR (infrared satellites and ground radars) should benefit from a total budget of 10 billion euros.
AlphaValue estimates that Thales is likely to benefit from this new strategy due to its strong presence in air defense, radars, sensors, and protection systems. An opinion shared by Chloé Lemarie at Jefferies, who also points out that nearly 20% of Thales’ revenue is exposed to the state defense budget.
Safran is also expected to benefit from its strong presence in modular air-to-ground weapons (AASM), such as guided bombs, whose volumes have more than tripled. AlphaValue highlights the additional growth potential of this technology through guidance and propulsion.
The MBDA ecosystem (via Airbus/BAE/Leonardo) is expected to benefit from the overall increase in missile volumes (Aster, MICA, SCALP). Airbus could also benefit from new orders for A400M (the figure of six units is sometimes mentioned) and has growth potential in the space sector.
However, no additional Rafale orders are expected to be recorded by Dassault Aviation. Saïma Hussain reports, however, that this XXL budget should accelerate the development schedule for the Rafale F5 standard.
