Europe’s Military Spending Has Shifted Toward Drones

European governments are rapidly increasing investment in drones and autonomous military systems as lessons from the war in Ukraine reshape defence planning and procurement, creating new opportunities for companies developing artificial intelligence, battlefield software and electronic warfare technologies.

A series of announcements over the past two weeks underscores the shift. NATO launched a new drone initiative, Britain committed billions of pounds to drones and counter-drone capabilities, Germany moved to procure 50,000 drones for Ukraine, and German defence technology startup Helsing secured an $18 billion valuation.

The moves reflect a broader change in military strategy, with drones evolving from niche battlefield tools into a central element of modern warfare.

“Future defence is moving towards a layered battlefield, where, for example, a tank will not simply fire shells; it will also launch drones, receive live targeting data from satellites and [unmanned aerial vehicles], share information across the battlefield, and operate as part of a networked force,” Morningstar analyst Loredana Muharremi says.

Military planners have drawn heavily on battlefield experience from Ukraine, where drones have become indispensable for reconnaissance, targeting and attacks. Iran’s deployment of relatively inexpensive Shahed drones in the Middle East has also reinforced the growing role of low-cost, AI-enabled systems capable of operating with increasing autonomy.

Last week, NATO Secretary General Mark Rutte said the alliance would become “drone-ready” as members pledged to invest more than $40 billion in counter-drone capabilities over the next five years.

Drones have “fundamentally altered” the character of modern warfare and have become a “decisive factor” on the battlefield, Rutte said, citing the Russia-Ukraine war as an example.

Britain is also expanding investment in autonomous systems. Under its Defence Investment Plan published in late June, the government committed 5 billion pounds ($6.7 billion) to a “UK drone transformation” programme aimed at strengthening its armed forces.

Germany is increasing support for Ukraine through drone supplies. On Monday, defence software company Auterion and Ukrainian drone manufacturer Skyfall announced a 90 million euro ($105 million) order for 50,000 drones equipped with Auterion’s operating system from a European NATO member. The purchasing country was Germany.

“This is the first war happening at a time where drones were prevalent enough that they started to play a role,” Auterion Chief Executive Lorenz Meier said.

Meier added that software is increasingly becoming the defining feature of modern warfare.

Auterion’s operating system enables drones to continue attacking targets despite electronic jamming.

“It allows them to dive into a target, even if the target has jammers, where previously they would have lost video signal and missed,” Meier noted.

The software also enables strikes against targets below the radio horizon, such as when drones descend into valleys. The company plans to introduce software allowing operators to control coordinated swarms of drones rather than flying each aircraft individually.

Although the latest contract is intended for Ukraine, Meier said the technology has already attracted interest from the armed forces of Germany, Norway, Britain and France.

Analysts say the expansion of drone warfare is creating opportunities beyond manufacturers themselves.

The growing use of autonomous systems is increasing demand for secure communications, battle management software, AI, satellite intelligence, sensors and electronic warfare systems.

“As a result, companies with physical platform scale and exposure across autonomy, air defence, sensors, electronic warfare, software, and space are likely to capture a share of future defence spending,” Muharremi said.

European core defence spending has doubled since 2019 and, under NATO’s target for members to spend 3.5% of GDP on core defence by 2035, could reach about 800 billion euros by 2030, equivalent to roughly 2.9% of GDP, according to McKinsey.

Private capital is also flowing into the sector. Venture capital investment in defence technology more than doubled in 2025 from a year earlier, according to McKinsey, while European defence technology funding rose from about 200 million euros in 2021 to 2.6 billion euros in 2025.

Among the biggest beneficiaries is Munich-based Helsing, which announced a funding round on Monday valuing the company at $18 billion, making it one of Europe’s most highly valued defence technology startups.

Helsing develops drones, underwater surveillance systems, AI and autonomous software, reflecting Europe’s growing focus on software-driven warfare alongside conventional military hardware.

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