AI in Defence Market Share: Palantir, Lockheed, Anduril Solidify 2025 Leads

Market Share Snapshot: 2025 Competitive Balance

The AI in Defence market is coalescing around a mix of primes and software-first players, with identifiable contract data showing the top vendors capturing a majority of spend. Industry trackers point to global AI-in-defence expenditures that are on pace to surpass $20 billion by the mid‑decade, according to industry analyses. In the United States, the Department of Defense’s AI push through the Chief Digital and Artificial Intelligence Office has accelerated procurement cycles and fielding timelines, as outlined in the Pentagon’s strategy on ai.mil.

By segment, software analytics and decision-support are led by Palantir, which analysts estimate holds roughly 20–25% of identifiable U.S. AI software obligations in FY2023–FY2024, followed by Booz Allen Hamilton in the 10–12% range and cloud-enabled solutions from Microsoft near 8–10%, based on public award data and vendor disclosures. Platform-centric AI integration—spanning avionics, C2, and sensor fusion—remains anchored by primes including Lockheed Martin, RTX, Northrop Grumman, and BAE Systems, which collectively account for an estimated 35–45% of AI-enabled hardware and mission-system awards across NATO markets, as reflected in arms-industry assessments from SIPRI and procurement data summarized by Bloomberg Government.

Leaders by Segment: Software, Autonomy, and Sensors

A distinct split has emerged between software-led firms and platform integrators. In autonomy and counter‑UAS, Anduril has rapidly increased share following a multi‑year U.S. Special Operations Command award reported by Reuters, with layered autonomy and AI-enabled sensing deployed at scale. Emerging players like Shield AI are gaining ground in edge autonomy and AI‑piloting, pushing competition in contested airspace and urban ISR.

On the sensor fusion and mission-systems side, primes such as RTX (Raytheon) and Northrop Grumman are consolidating share through AI upgrades in radars, electronic warfare, and C2 networks that tie into software ecosystems. European leaders including Thales and BAE Systems are reinforcing their regional footprint by embedding AI into air defense, naval combat systems, and secure comms, positioning for incremental market share gains as EU and UK modernization programs advance.

Contract Wins and Partnerships Driving Share Shifts

Share gains in 2024–2025 are closely tied to marquee awards and integration partnerships. Palantir extended its lead in defense AI software through multi‑year analytics and decision‑support programs across the U.S. services, with analysts citing sustained growth in mission command and sensor analytics deployments; procurement data and spend analyses summarized by Bloomberg Government reflect the persistence of these awards. For more on related AI in Defence developments.

Autonomy remains the most dynamic battleground: Anduril continues to scale counter‑UAS integration after its reported $1 billion SOCOM win, while SAIC and IBM are advancing AI-enabled logistics and readiness analytics through joint programs. Cloud and AI infrastructure partnerships with Microsoft and Google have become central to primes’ roadmaps, enabling secure model training and edge inference pipelines that can be certified for mission use. These insights align with latest AI in Defence innovations.

Regional Dynamics: U.S. Leads, Europe Accelerates

The U.S. continues to dominate AI-in-defence spending, buoyed by rapid procurement vehicles and cross‑service experimentation steered by the CDAO; the strategic framework is publicly detailed on ai.mil. Europe’s share is rising as NATO members elevate AI as a priority in integrated air and missile defense, naval modernization, and ISR recapitalization—benefiting Thales, BAE Systems, and Lockheed Martin through system upgrades embedded with AI.

Industry reports note that top‑tier vendors now capture a majority of identifiable AI-related awards, although exact shares vary by classification and program scope, as underscored by arms-industry context from SIPRI and procurement analytics from Govini. As EU defense funds expand and export controls evolve, expect regional primes to close the gap in AI software, while U.S. software leaders such as Palantir and cloud providers including Microsoft and Google defend their positions with mission‑ready platforms and accreditation.

Outlook: Consolidation with Room for Specialized Entrants

Looking ahead to 2026–2028, analysts anticipate steady consolidation among primes and software specialists, with targeted M&A likely in autonomy, edge compute, and AI-enabled EW. Market projections suggest mid‑teens CAGR through the decade, industry reports show, as nations operationalize AI across C2, ISR, logistics, and training. Share leadership should remain with Lockheed Martin, RTX, Northrop Grumman, BAE Systems, Thales, Palantir, and Anduril, while focused entrants like Shield AI chip away in specialized autonomy niches.

Execution risk centers on accreditation, cyber resilience, and interoperable data pipelines—areas where partnerships with Microsoft, IBM, and Google will be pivotal. A premium will accrue to vendors demonstrating rapid fielding, measurable operational uplift, and transparent model governance across joint and coalition environments.