News

What’s Driving the Debate: Aerospace and Defense in Europe / Insights on Italy

12 June 2026

The Flag of Europe on military uniform. Collage.

A defense market in structural expansion

Italy's defense sector has re-rated into one of Europe's most active M&A and procurement markets. In 2025, Italy reached NATO's 2% of GDP threshold — spending of €45.3 billion, up 38.5% year-on-year — though part of that jump reflects a reclassification of existing outlays.

The capital story is unambiguous: roughly €2.27 billion in disclosed defense M&A and financings within twelve months, anchored by Leonardo's €1.7 billion acquisition of Iveco Group's Defense business (IDV) and Fincantieri's €415 million purchase of Leonardo's Underwater Armaments & Systems division (January 2025) — both moves to build multi-domain platforms at European scale.

National champions in execution mode

Leonardo posted FY2025 revenues of €19.5 billion (+11%), new orders of €23.8 billion, Free Operating Cash Flow of €1.0 billion and net debt down 44% to €1.0 billion. With IDV completed, it now spans the full land-defense value chain alongside aerospace, helicopters and cyber, on a backlog above €46 billion — about 2.4 years of coverage.

Fincantieri's results are equally striking: 9M-2025 revenues of €6,725 million (+20.5%), EBITDA up 40% to €461 million, and order intake of €16.0 billion (+88%, book-to-bill 2.4x) lifting total backlog to a record €61.1 billion — 7.5x 2024 revenues, with 100 ships scheduled through 2036. Its newly consolidated Underwater segment (WASS) already delivers a 17.3% EBITDA margin.

Beretta Holding, the private-sector counterpart to these state-influenced giants, continues to expand as the world's largest firearms group — roughly €1.6 billion in 2024 revenues across small arms, ammunition (via RUAG Ammotec), optics and apparel, with 50+ subsidiaries.

A long-dated procurement pipeline

Behind the headline budget sits the real demand signal: a deep, long-dated procurement pipeline. Defense investment reached roughly €12 billion in 2025 (+23%), nearly triple the 2019 level, and Italy has earmarked close to €170 billion for defense investment between 2017 and 2039 across the Ministry of Defense and MIMIT — with dedicated envelopes for aeronautics and aerospace (€1.16 billion in 2025), the FREMM frigate programme (€1.04 billion) and naval defense (€0.70 billion).

Italy is also a structural net exporter: authorized arms exports reached €9.2 billion in 2025 (+19%), with Leonardo alone accounting for 54% and aircraft and missiles the leading categories, while imports surged 165% to €2.0 billion as procurement accelerated.

Sovereign gatekeeping meets foreign capital

Italy balances openness to foreign capital with protection of sovereign assets through its Golden Power regime — most visibly in Baykar's acquisition of Piaggio Aerospace, cleared and closed on 30 June 2025 with commitments to keep Italian sites and build the P.180 Avanti EVO and Baykar's drones locally, alongside a Baykar-Leonardo unmanned-systems JV.

Where growth capital is flowing

Beyond the headline deals, a dynamic dual-use ecosystem is drawing capital: D-Orbit raised over €109 million, Dronus €15 million in Series A, and Leonardo absorbed Gyala (cyber) and GEM Elettronica. CDP Venture Capital and SIMEST co-invest alongside private capital, leveraging Italy's family SMEs, whose 12.2% EBIT margin in 2023 nearly doubled the 6.2% sector average.

Forward demand is reinforced by EU and NATO commitments: Italy has been provisionally allocated about €15 billion under the EU's Security Action for Europe (SAFE) instrument (up to €150 billion EU-wide), while the June 2025 NATO Hague summit set a 5%-of-GDP target by 2035 — 3.5% core defense plus 1.5% security-related.

Authored by Alessandro Borrello, Piero de Mattia, Ferigo Foscari, and Francesca Rolla.