War is good for business—at least when it comes to Europe’s arms industry. Geopolitical tensions are pushing investors to pour money into the continent’s defence sector, from established manufacturers to emerging military technology firms. The surge was on dramatic display when Czech group Czechoslovak Group’s Amsterdam IPO attracted fourteen times more demand than there were shares on offer.
The Prague-based group, which produces armoured vehicles, ammunition and military equipment, had already become the fastest-growing defence company in Europe in 2024, with revenues reaching €4bn—a 131 per cent year-on-year increase.
The company raised around €3.3bn in the listing. It was met with overwhelming investor demand, with subscriptions exceeding available shares more than fourteenfold, leaving roughly 40 per cent of investors without an allocation.
Since its debut, the stock has climbed about 19 per cent above its listing price.
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“This shows that public listings can provide the financing needed for the industrial phase of the defence cycle,” Aneeka Gupta, a defence specialist at asset manager WisdomTree, told Dutch newspaper Financieele Dagblad.
According to Gupta, capital is now available across the sector — from start-ups and suppliers to established defence contractors — enabling companies to expand production, build inventories, and finance mergers or acquisitions as order books swell.
IPO pipeline grows
More companies are now preparing to follow the same route.
The Franco-German tank manufacturer KNDS is reportedly working on a dual listing in Paris and Frankfurt that could value the group at around €25bn.
Smaller defence firms are also considering stock market debuts, such as Polish drone manufacturer WB Electronics, which has grown rapidly since Russia’s full-scale invasion of Ukraine. Its drones are now widely used on the battlefield, with revenues jumping to 3bn zloty in 2024, up from 343m zloty in 2021.
Shares in major European defence companies have seen similar momentum. The stock of German defence giant Rheinmetall has risen more than twelvefold since Russia invaded Ukraine. Norway’s national defence company Kongsberg Gruppen is projected to grow by more than 20 per cent annually, while British defence group BAE Systems expects annual sales growth of around 7 per cent over the next two years.
Companies in the STOXX Europe Aerospace & Defense Index now trade at roughly 43 times expected earnings for 2026 — more than double the valuation of the broader STOXX Europe 600.
Defence spending boom
Last year, European members of NATO agreed to increase defence spending to at least 3.5 per cent of GDP. That commitment could push annual military expenditure to around €800bn by 2030, compared with €234bn recorded in 2020.
The result is a surge in orders for defence contractors, many of which maintain close relationships with national governments.
By the end of the decade, domestic production is expected to absorb more than half of European defence spending.
At the recent Munich Security Conference, Under Secretary of Defense Elbridge Colby acknowledged that Europe will increasingly develop its own defence manufacturing capacity. At the same time, European leaders reiterated their commitment to higher military spending for strategic autonomy.
Risks beneath the rally
Some analysts warn that the sector may already be pricing in extremely optimistic expectations. Defence stocks often rise during spikes in geopolitical tension but can fall when markets anticipate diplomatic breakthroughs.
For example, when investors speculated about a potential ceasefire in Ukraine or diplomatic talks between Donald Trump and Vladimir Putin, defence shares temporarily declined before recovering when geopolitical tensions persisted.
The CSG listing has also attracted scrutiny. According to a cross-border investigation led by Follow the Money, the company failed to disclose before its IPO that one of its subsidiaries had been suspended by NATO as part of a corruption investigation—a transparency lapse that investors say should have been made public before the Amsterdam listing.
By contrast, recent escalations in Iran and the wider region pushed defence stocks higher across Europe. Shares in French defence corporation Thales rose more than 4 per cent, French military aircraft manufacturer Dassault Aviation climbed over 3 per cent, BAE Systems gained more than 7 per cent, and Italy’s Leonardo rose nearly 5 per cent.
“With Washington likely focused on the Middle East, European governments may feel greater pressure to strengthen their own security and strategic autonomy.” Finna Waage-Nielsen, equity analyst
And with the United States unlikely to disengage quickly from the region, Europe’s push for defence autonomy may strengthen further. “With Washington likely focused on the Middle East, European governments may feel greater pressure to strengthen their own security and strategic autonomy,” said Finna Waage-Nielsen, an equity analyst focused on defence.
