Estonia’s defence industry could exceed €1B in annual revenue in 2026 after sales of defence and security products reached about €750M last year.
The estimate comes from Kalev Koidumäe, chief executive of the Estonian Defence and Aerospace Industry Association. Export sales and the government’s plan to involve Estonian companies more extensively in major defence procurements are expected to provide the main routes for further growth.
Companies belonging to the association generated total revenue of almost €2.5B in 2025. Sales specifically connected to defence and security products and services amounted to about €750M, with two-thirds of that revenue earned from exports.
Defence exports extend a two-year rise
The 2025 result followed a sharp expansion the previous year. Association figures show that Estonian defence companies generated about €500M in revenue in 2024, including approximately €350M from exports. That compared with revenue of €290M and exports of €162M in 2023.
The industry counted around 170 companies in 2024, with nearly 20 new entrants during the year. Estonian suppliers were selling to at least ten NATO countries, while more than ten companies were operating in Ukraine with products ranging from sensors and surveillance equipment to unmanned platforms, counter-drone systems, field hospitals and training.
The country’s defence technology base is concentrated in drones, counter-drone systems, electronic warfare, sensors, situational awareness, AI-based information analysis and cyber security. Many of these products combine civilian and military applications, allowing smaller suppliers to compete in specialised parts of larger systems rather than in capital-intensive platform manufacturing.
Major defence procurements could open supply chains
Estonia intends to bring more domestic industry into large defence purchases, according to Tööstusuudised. For local suppliers, participation can create a route into the supply chains of the international manufacturers that deliver major weapons platforms and systems.
The procurement pipeline is expanding. Estonia’s 2026 defence budget is €2.4B, or 5.43% of gross domestic product. From 2026 to 2029, 37% of the defence budget is allocated to procurement and a further 25% to ammunition, according to the Ministry of Defence.
Planned acquisitions and upgrades cover medium-range air defence, drones and counter-drone capabilities, artillery, rocket launchers, ammunition and naval systems. Such programmes are generally led by large foreign contractors, while Estonian companies can provide software, electronics, autonomous functions, sensors and other specialised components.
Defence production capacity expands in Estonia
Estonia is also adding domestic production infrastructure. The country’s first privately operated munitions factory has started production at Ämari. Basic infrastructure work is due to begin this year at the Ermistu Defence Industrial Park in Pärnu County, where four companies have been selected, while another defence industrial park is planned at North Kiviõli.
These sites add capacity for production alongside Estonia’s existing product-development and software strengths. They also provide a domestic base from which suppliers can fulfil local orders before pursuing larger export contracts.
Estonia’s domestic orders alone are not sufficient to sustain the sector’s expansion, making foreign markets essential to the 2026 outlook. The two-thirds export share recorded in 2025 shows that international sales are already the industry’s main source of revenue.
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