BAE Systems lifts cash forecast to $4 billion

BAE Systems now expects to generate about £3 billion ($4 billion) of free cash flow this year, up from the more than £2 billion it forecast in July, after taking in £33 billion ($43.8 billion) of orders with seven weeks of 2026 still to go.

Britain’s largest defense contractor gave the figures Thursday morning in a trading statement, its last scheduled update before full-year results. At the same point last year it had booked more than £27 billion ($35.8 billion). Dollar figures here use Thursday’s rate of about $1.33 per pound.

Chief Executive Charles Woodburn pointed to “positive order intake momentum.”

Some of that cash is money governments paid up front. BAE said the new forecast carries “some benefit from customer advances received to date,” though it leaves out any large advances that land before year-end.

The statement didn’t say how much of the £3 billion came from advances. Or what the order backlog is worth now. It stood at a record £84 billion ($111.5 billion) on June 30.

Advances did the heavy lifting in the first half, too. BAE turned in £1.79 billion ($2.4 billion) of free cash in the six months to June, after an outflow of £368 million ($488 million) a year earlier, and its July report put that down to a “high level of customer advances.”

That makes two cash upgrades this year. In February, BAE was aiming for more than £1.3 billion ($1.7 billion). It produced £2.2 billion ($2.9 billion) in 2025.

The rest of the outlook held. Sales are still forecast to rise 8% to 10% from £30.7 billion ($40.7 billion) last year, and underlying EBIT, the company’s main profit measure, 10% to 12% from £3.3 billion ($4.4 billion). Earnings per share should climb 11% to 13%, the company says.

Shipbuilding is lagging. Strong trading in the Electronic Systems, Air and Platforms & Services businesses “more than offset subdued growth and margins in our Maritime sector,” per the statement, as the Type 26 frigate program works through its “first-in-class stage.”

BAE’s targets assume $1.32 to the pound, last year’s average. The pound has averaged about $1.34 so far in 2026. Each 5-cent move shifts annual sales by roughly £500 million ($663 million), the company says.

The biggest second-half order was about £4.3 billion ($5.7 billion) in further funding for Britain’s Dreadnought nuclear-missile submarines, money meant to move the boats “towards entry into service.”

Combat aircraft brought in about £1.6 billion ($2.1 billion) through the Global Combat Air Programme, the fighter Britain is developing with Italy and Japan. That includes BAE’s share of a £4.6 billion ($6.1 billion) contract for Edgewing, the three countries’ joint venture, to move toward detailed design. MBDA, the missile maker BAE partly owns, added £1.5 billion ($2 billion).

BAE’s Australian arm also won about A$1.3 billion ([$XXX million]) to build an over-the-horizon radar in Canada’s Arctic. BAE called it “Australia’s largest ever defence export.”

In the U.S., the company says it works on “10 of the 12 programmes prioritised for significantly increased production capacity” in munitions. It didn’t name them.

About $1 billion in new U.S. munitions funding came in during the second half, covering APKWS guidance kits for 70 mm (2.75-inch) rockets and seekers for the THAAD missile-defense interceptor. BAE agreed in July to quadruple THAAD seeker output under a seven-year deal. The U.S. Army added $800 million to keep Armored Multi-Purpose Vehicles in full-rate production, and $500 million went to the Holston and Radford ammunition plants BAE runs in Tennessee and Virginia.

Investors get about £1.6 billion ($2.1 billion) back this year, including roughly £500 million ($663 million) of share buybacks. The interim dividend, 15 pence (about 20 cents) a share, is paid December 2.