Who is benefitting from Ukraine war? Report says US arms firms reap ‘explosive’ profit

More than six decades ago, President Dwight D Eisenhower cautioned Americans about what he called the “military-industrial complex,” describing it as a powerful nexus of military institutions, politicians and defence contractors that could exert “unwarranted influence” on national policy.

Today, his warning has acquired renewed urgency as a new report by the Observer Research Foundation (ORF), authored by Jaibal Naduvath, argues that the war in Ukraine has reinvigorated this complex, with US arms-makers recording record profits, swelling order books and expanding ecosystems unseen in recent decades.

Expanding power of military-industrial complex

Transparency International has noted that US defence contractors maintain vast influence on political decision-making through lobbying, campaign donations and the revolving door between government and industry. These mechanisms help ensure a steady flow of contracts, an export-friendly regulatory environment and continued taxpayer support.

Doug Bandow of the Cato Institute recounted that, after the Cold War ended, a defence industry emcee jokingly thanked Saddam Hussein for his Kuwait misadventure, since the resulting war promised billions in new contracts. The suggestion, observers argue, was that conflict has long been treated as business by the industry.

Prime contractors, prime profits

According to the ORF report, five firms—Lockheed Martin, RTX, General Dynamics, Northrop Grumman and Boeing—have dominated Pentagon contracting, together securing over a third of all US defence contracts between 2020 and 2024.

During this period, they received an estimated $771 billion out of nearly $2.4 trillion in Pentagon awards, a figure far exceeding US expenditure on diplomacy, development and humanitarian aid.

In 2024 alone, overseas equipment sales by US defence contractors surged to nearly $319 billion, including $118 billion through Foreign Military Sales—a jump of more than 30 per cent from the previous year. This explosive growth in orders reflects both Ukraine’s urgent demands and a wider wave of global rearmament triggered by the war.

The ORF study highlights that the US military-industrial complex has reaped enormous gains from this surge, with soaring arms orders translating into higher production, record profits, and a sharp rise in agreements for advanced AI-driven defence systems.

Ukraine as catalyst for a boom

The Stockholm International Peace Research Institute (Sipri) reported that global defence spending rose by 9.4 per cent in 2024 to $2.72 trillion—the sharpest annual jump since the Cold War—largely due to the Ukraine conflict.

The United States, having provided almost $67 billion in military aid to Ukraine since February 2022, has also supplied nearly half of Ukraine’s arms imports during this period.

Between 2020 and 2024, Ukraine became the world’s top arms importer, accounting for almost nine per cent of global imports. As direct aid transitions to structured arms sales, companies are finding themselves with guaranteed long-term contracts.

For instance, in August 2025, Washington approved an $825-million sale of extended-range munitions to Kyiv, funded partly through Nato allies and US foreign financing mechanisms.

Europe’s expanding tab

The ORF report notes that Washington has persuaded European Nato members and Canada to commit over $10 billion for American weapons purchases, either to replenish stockpiles or for direct transfers to Ukraine under Nato’s Prioritised Ukraine Requirements List. Nearly $2 billion has already been pledged in tranches of around $500 million each.

At the July 2025 Nato summit, member states also agreed to raise annual defence spending to five percent of GDP by 2035, a steep increase from the long-standing two-per cent goal. Since the US already supplies around 64 per cent of Nato’s arms imports, American firms are positioned as long-term beneficiaries of Europe’s rearmament.

Ukraine’s defence-tech push

The conflict has also turned Ukraine itself into a testing ground and marketplace for defence innovation. Ukrainian startups in robotics, AI and drone warfare have drawn tens of millions in Western investment, facilitated by Kyiv’s BRAVE1 initiative.

Firms such as Swarmer, which develops AI-enabled drones, and Osavul, which designs tools to counter disinformation, have received millions in seed funding from US and European investors.

At the same time, established US players like AeroVironment have announced plans to manufacture loitering munitions locally. This blending of battlefield demand and venture capital investment is accelerating a new generation of military technologies.

Wall Street’s bet on war

The financial sector has not stayed on the sidelines. Since Russia’s invasion, the S&P Aerospace & Defence index has surged nearly 90 per cent, far outpacing the broader market’s gains. New defence-focussed investment funds have mushroomed, growing from just four in 2022 to 27 in 2025, with assets under management exceeding $35 billion.

Emerging firms have reaped especially high valuations. Anduril Industries, a maker of autonomous weapons systems active in Ukraine, saw its valuation double to over $30 billion in a single year.

Palantir, whose software has been integrated into Ukraine’s military operations, has seen its market cap skyrocket by more than 3,000 per cent since 2022. Shield AI and AeroVironment likewise posted dramatic gains, confirming investor appetite for war-linked growth.

Profits versus security

Much of this windfall has gone to stock buybacks and dividends rather than expanding production capacity. Bloomberg reported that in 2023, Lockheed Martin and RTX spent nearly $19 billion on buybacks, compared to just $4 billion on capital expenditures.

Former US officials have condemned the practice. Rahm Emanuel, former ambassador to Japan, suggested that excessive financial engineering makes the defence industry itself a greater security risk than adversaries like China.

Former Navy Secretary Carlos Del Toro similarly argued that firms cannot demand greater public investment while prioritising shareholder enrichment over capacity building.

An architecture of illusion

Noam Chomsky once wrote that “the general population doesn’t know what’s happening, and it doesn’t even know that it doesn’t know”. The ORF report echoes this sentiment, noting that Americans have already spent more than $8 trillion on post-9/11 wars, with many of the weapons later falling into hostile hands.

Critics claim that arms supplied to Ukraine today may fuel future instability, just as US equipment abandoned in Afghanistan ended up with the Taliban. Moreover, the report points to the creation of a US–Ukraine Reconstruction Investment Fund, which is framed as supporting rebuilding but also targets Ukraine’s vast reserves of critical minerals essential for defence and green technologies.

Fewer players, greater leverage

The consolidation of the US defence industry has also raised concerns. From 51 prime contractors at the end of the Cold War, only five remain today, increasing their bargaining power with the Pentagon. With decision-making concentrated at the top of these giant firms, critics warn of a closed oligarchy capable of shaping not just procurement but also the framing of conflicts themselves.

By 2024, the United States accounted for 40 per cent of global military expenditure, matching the total of the next nine largest spenders combined. The ORF report concludes that while the Ukraine war has supercharged defence industry profits, it has also accelerated a rearmament cycle that risks incentivising future conflicts.

Challenger firms are seizing space alongside established giants, using Ukraine as both a laboratory and a launchpad. But the long-term concern is that profit motives embedded within the defence-industrial ecosystem may increasingly shape the calculus of war and peace.

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