VOL. XCIV, NO. 247
★ WIDE MOAT STOCKS & COMPETITIVE ADVANTAGES ★
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Sunday, December 28, 2025
BAE Systems plc
BA. · London Stock Exchange
Weighted average of segment moat scores, combining moat strength, durability, confidence, market structure, pricing power, and market share.
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Overview
BAE Systems plc is a UK-based defence, aerospace and security contractor with five reporting segments: Electronic Systems, Platforms & Services, Air, Maritime, and Cyber & Intelligence. The core moat is relationship- and regulation-driven: long-term trusted government contracting positions, compliance barriers, and embedded roles on multi-decade programmes that support a large order backlog. Air and Electronic Systems have design-in positions on major platforms and mission systems, while Maritime benefits from scarce submarine/shipyard capacity tied to sovereign programmes. Competitive pressures include budget reprioritisation, procurement competition (especially in services), and execution risk on complex contracts.
Primary segment
Electronic Systems
Market structure
Oligopoly
Market share
—
HHI: —
Coverage
5 segments · 10 tags
Updated 2025-12-28
Segments
Electronic Systems
Defence electronics (electronic warfare, avionics, C4ISR, space payloads and mission systems)
Revenue
26.6%
Structure
Oligopoly
Pricing
moderate
Share
—
Peers
Platforms & Services
Land platforms, munitions and sustainment (combat vehicles, artillery systems, ammunition plants) plus naval ship repair/modernisation services
Revenue
16.3%
Structure
Oligopoly
Pricing
moderate
Share
—
Peers
Air
Combat air platforms, systems integration and through-life support (Typhoon, F-35 workshare, future combat air programmes, and Middle East support)
Revenue
26%
Structure
Oligopoly
Pricing
moderate
Share
—
Peers
Maritime
Naval shipbuilding and submarines (surface combatants, nuclear submarines) and through-life support
Revenue
22.5%
Structure
Oligopoly
Pricing
moderate
Share
—
Peers
Cyber & Intelligence
Defence and intelligence cyber security, digital intelligence products, and mission IT/integration services
Revenue
8.6%
Structure
Competitive
Pricing
weak
Share
—
Peers
Moat Claims
Electronic Systems
Defence electronics (electronic warfare, avionics, C4ISR, space payloads and mission systems)
Revenue share computed from external revenue by segment in the FY2024 preliminary results announcement (Electronic Systems external revenue GBP 6,988m / Group revenue GBP 26,312m).
Government Contracting Relationships
Legal
Government Contracting Relationships
Strength: 4/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Long-standing government customer trust and contracting track record supports wins/renewals in sensitive defence electronics and space missions.
Erosion risks
- Budget reprioritisation by government customers
- Contracting pressure (fixed-price risk, margin caps)
- Technology disruption and faster refresh cycles
Leading indicators
- US DoD/IC order intake and backlog trend
- Win rate on recompetes and new awards
- Program performance (schedule/cost metrics)
Counterarguments
- Government awards are often competed and can shift with procurement priorities
- Peers with similar clearances/capabilities can bid aggressively
Design In Qualification
Demand
Design In Qualification
Strength: 4/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Embedded systems on major platforms create long tails and switching friction (requalification, integration, certification).
Erosion risks
- Platform mix shifts (program cancellations/slowdowns)
- Open-architecture initiatives that commoditise subsystems
Leading indicators
- Installed base growth on key platforms
- Follow-on upgrade/modernisation awards
- Aftermarket and sustainment revenue mix
Counterarguments
- Open mission systems can enable easier vendor substitution over time
- Prime contractors may dual-source to reduce dependence
Compliance Advantage
Legal
Compliance Advantage
Strength: 3/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Proven compliance with export controls, sanctions and classified handling is a prerequisite for many programmes and can be a barrier to entry.
Erosion risks
- Regulatory changes (export controls, sanctions) limiting addressable markets
- Compliance failures leading to penalties/debarment
Leading indicators
- Audit findings, remediation costs, and enforcement actions
- Changes in export licensing timelines/approvals
Counterarguments
- Large peers also have mature compliance systems; advantage may be table stakes
- Regulation can raise costs and slow execution
Platforms & Services
Land platforms, munitions and sustainment (combat vehicles, artillery systems, ammunition plants) plus naval ship repair/modernisation services
Revenue share computed from external revenue by segment in the FY2024 preliminary results announcement (Platforms & Services external revenue GBP 4,288m / Group revenue GBP 26,312m).
Service Field Network
Supply
Service Field Network
Strength: 4/5 · Durability: medium · Confidence: 3/5 · 1 evidence
Specialised sustainment footprint (shipyards, depots, GOCO plants) supports recurring work and makes switching providers operationally difficult.
Erosion risks
- Government insourcing or competitive re-tendering of sustainment work
- Capacity additions by competitors near key ports/bases
Leading indicators
- Ship repair backlog and utilisation in key home ports
- Recompete win rate on sustainment contracts
- Capex into new yard/depot capacity
Counterarguments
- Sustainment can be competed and repriced, limiting long-term excess returns
- Government customers may diversify suppliers to reduce dependency
Long Term Contracts
Demand
Long Term Contracts
Strength: 4/5 · Durability: medium · Confidence: 4/5 · 1 evidence
Multi-year production and sustainment awards provide visibility and reduce near-term demand volatility.
Erosion risks
- Program cancellations or quantity reductions
- Fixed-price exposure and cost inflation
Leading indicators
- Option exercises and contract extensions
- Cost/schedule performance on key vehicle programmes
- US supplemental funding trends for munitions
Counterarguments
- Follow-on funding still depends on annual appropriations
- Competition can intensify at re-tender points
Government Contracting Relationships
Legal
Government Contracting Relationships
Strength: 4/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Trusted relationships with defence customers support large awards and task orders across vehicles, artillery and munitions facilities.
Erosion risks
- Political change affecting procurement priorities
- Performance issues leading to lower award fees or lost recompetes
Leading indicators
- Order intake trend in Platforms & Services
- On-time delivery and quality metrics
- Audit findings and award fee outcomes
Counterarguments
- Large primes and specialist OEMs compete aggressively for US Army and US Navy programmes
- Some platforms (e.g., armoured vehicles) are subject to price-driven bidding
Air
Combat air platforms, systems integration and through-life support (Typhoon, F-35 workshare, future combat air programmes, and Middle East support)
Revenue share computed from external revenue by segment in the FY2024 preliminary results announcement (Air external revenue GBP 6,840m / Group revenue GBP 26,312m).
Design In Qualification
Demand
Design In Qualification
Strength: 4/5 · Durability: durable · Confidence: 4/5 · 2 evidence
Deep workshare on flagship platforms (e.g., F-35 structures and sustainment) creates long program tails and costly supplier transitions.
Erosion risks
- Platform production rate cuts or program reprioritisation
- Workshare renegotiation or competitive sourcing
- Geopolitical/export restrictions affecting deliveries
Leading indicators
- F-35 lot awards and global production rate
- Typhoon production/support contract wins
- Sustainment volumes and retrofit/upgrade awards
Counterarguments
- Prime OEMs can re-source structures over time if economics shift
- Future platforms could reduce demand for legacy jets and structures
Long Term Contracts
Demand
Long Term Contracts
Strength: 4/5 · Durability: medium · Confidence: 4/5 · 1 evidence
Long-standing support contracts in the Middle East and Europe provide recurring services revenue and stickiness.
Erosion risks
- Renegotiation/termination risk tied to diplomatic relations
- Localisation requirements shifting work in-country
Leading indicators
- Renewal/extension of KSA support contracts
- In-Kingdom Industrial Participation progress
- Services margin and cash conversion trend
Counterarguments
- Support contracts can be politically sensitive and re-tendered
- Customers can demand greater localisation, reducing margin and control
Capex Knowhow Scale
Supply
Capex Knowhow Scale
Strength: 4/5 · Durability: durable · Confidence: 3/5 · 1 evidence
Combat-air design/development and certification require scarce engineering talent, facilities and programme management capabilities.
Erosion risks
- Cost overruns and schedule delays on development programmes
- Shifts toward unmanned systems changing requirements
Leading indicators
- GCAP contract milestones and funding commitments
- R&D spend and hiring in combat air engineering
- Customer satisfaction on delivery milestones
Counterarguments
- A small number of global primes share similar capabilities; excess returns depend on contract terms
- Government customers may split work to preserve competition and national interests
Maritime
Naval shipbuilding and submarines (surface combatants, nuclear submarines) and through-life support
Revenue share computed from external revenue by segment in the FY2024 preliminary results announcement (Maritime external revenue GBP 5,915m / Group revenue GBP 26,312m).
Capacity Moat
Supply
Capacity Moat
Strength: 4/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Specialised shipyard/submarine industrial capacity and workforce are hard to replicate and create high barriers to entry in sovereign naval programmes.
Erosion risks
- Programme delays, cost overruns, or quality issues
- Workforce and supplier bottlenecks
- Policy shifts toward alternative platform strategies
Leading indicators
- Submarine and surface ship programme milestone delivery vs plan
- Order backlog in Maritime segment
- Skilled labour hiring/retention and supplier readiness
Counterarguments
- Cost-plus structures can cap upside if efficiencies are shared with the customer
- Governments may intervene heavily, reducing commercial leverage
Long Term Contracts
Demand
Long Term Contracts
Strength: 5/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Naval platform programmes often run for decades, providing long-duration revenue visibility once in execution.
Erosion risks
- Annual appropriations/funding pauses
- Renegotiations driven by political pressure
Leading indicators
- Funded vs unfunded backlog trend
- Government budget allocations for naval programmes
- Contract modifications and re-baselining events
Counterarguments
- Long programmes can be low-margin if bid aggressively or if execution issues arise
- Inflation and supply chain shocks can erode profitability on fixed-price elements
Government Contracting Relationships
Legal
Government Contracting Relationships
Strength: 4/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Deep relationship with sovereign customers supports repeat awards for combat systems, submarines and fleet infrastructure.
Erosion risks
- Political change or industrial strategy shifts
- Performance issues reducing trust/award fees
Leading indicators
- UK MoD and Australia NDS/AUKUS contracting cadence
- Recompete outcomes on support contracts
- Customer satisfaction and safety performance
Counterarguments
- Sovereign customers can split work to preserve competition and leverage
- International competition for surface ships remains intense
Cyber & Intelligence
Defence and intelligence cyber security, digital intelligence products, and mission IT/integration services
Revenue share computed from external revenue by segment in the FY2024 preliminary results announcement (Cyber & Intelligence external revenue GBP 2,271m / Group revenue GBP 26,312m).
Compliance Advantage
Legal
Compliance Advantage
Strength: 3/5 · Durability: durable · Confidence: 4/5 · 1 evidence
Ability to operate in national-security environments (clearances, secure delivery) is a prerequisite that limits entrants.
Erosion risks
- Talent shortages increasing delivery risk
- Policy changes affecting access to classified work
Leading indicators
- Staff clearance pipeline and retention
- Security incident metrics and audit outcomes
- Bid pipeline and recompete success rate
Counterarguments
- Large services peers have similar clearances and can compete on price
- Government customers can shift work to in-house teams or other integrators
Government Contracting Relationships
Legal
Government Contracting Relationships
Strength: 4/5 · Durability: medium · Confidence: 4/5 · 1 evidence
Established relationships with US DoD and other agencies support task orders and pipeline continuity.
Erosion risks
- Procurement delays and budget uncertainty
- Recompete losses on major contract vehicles
Leading indicators
- US federal procurement cycle timing (award delays)
- Order intake/backlog trend in the segment
- Customer satisfaction scores and CPARS ratings (where available)
Counterarguments
- The company notes the US defence services market is highly competitive
- Agency priorities can shift quickly, reducing continuity of task orders
Switching Costs General
Demand
Switching Costs General
Strength: 3/5 · Durability: medium · Confidence: 3/5 · 1 evidence
Mission-critical integration work can create operational switching costs (knowledge of systems, accreditation, and continuity requirements).
Erosion risks
- Standardised cloud/platform tools reducing differentiation
- Commoditisation of IT services and increased competition
Leading indicators
- Renewal rates on major programmes
- Mix shift toward higher-value proprietary products vs labour-based services
- Gross margin trend in the segment
Counterarguments
- Service contracts can be re-bid frequently, keeping switching costs limited
- Customers can modularise work to avoid vendor lock-in
Evidence
government customers have trusted us for decades to develop the next generation of defence and security capabilities.
Management frames long-term government trust as a core advantage, relevant to classified/sensitive electronics work.
for a cumulative total of over 1,600 EW systems as at year end.
Large installed base on a flagship platform implies sustained support/upgrade demand and high switching costs.
operate under tight regulation and complying fully with applicable trade controls and sanctions.
Highlights regulatory intensity; incumbents with mature compliance systems face less friction winning/performing.
delivers services and sustainment activities, including US naval ship repair
Segment description highlights on-the-ground sustainment infrastructure that underpins service density.
provide repair and maintenance services for the Danish Army's CV90s over a 15-year period
Illustrative example of long-duration defence service contracting within the segment.
Showing 5 of 16 sources.
Risks & Indicators
Erosion risks
- Budget reprioritisation by government customers
- Contracting pressure (fixed-price risk, margin caps)
- Technology disruption and faster refresh cycles
- Platform mix shifts (program cancellations/slowdowns)
- Open-architecture initiatives that commoditise subsystems
- Regulatory changes (export controls, sanctions) limiting addressable markets
Leading indicators
- US DoD/IC order intake and backlog trend
- Win rate on recompetes and new awards
- Program performance (schedule/cost metrics)
- Installed base growth on key platforms
- Follow-on upgrade/modernisation awards
- Aftermarket and sustainment revenue mix
Curation & Accuracy
This directory blends AI‑assisted discovery with human curation. Entries are reviewed, edited, and organized with the goal of expanding coverage and sharpening quality over time. Your feedback helps steer improvements (because no single human can capture everything all at once).
Details change. Pricing, features, and availability may be incomplete or out of date. Treat listings as a starting point and verify on the provider’s site before making decisions. If you spot an error or a gap, send a quick note and I’ll adjust.