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The Next Question for U.S. Defense Firms in Europe

Eligibility Determines Whether a Company Can Compete. Positioning Determines Whether It Endures

Europe’s defense buildup has entered a new phase. It is moving from spending commitments and emergency acquisition toward execution, industrial expansion and medium- and long-term market design. For the past several years, much of the conversation among U.S. defense companies has focused on access: Where will Europe’s growing defense budgets be spent? Which funding mechanisms will be open to non-European suppliers? What will companies need to do to qualify?

Those remain important questions, but “access” now has at least three distinct meanings: the legal ability to sell to a European government; eligibility to benefit from European Union (“EU”)-supported procurement or industrial funding; and political acceptability as a long-term contributor to Europe’s defense industrial base. A company may satisfy the first definition without securing access under the second or third. As European governments translate historic spending commitments into procurement decisions and industrial investments, a more consequential issue is emerging: What does it take for a U.S. defense company to become a lasting part of Europe’s defense industrial base?

Urgent capability gaps have created significant opportunities for U.S. companies, particularly those with technologies that European militaries need today. Meeting immediate demand does not guarantee a place in Europe’s future industrial base. Beyond acquiring equipment, the region’s defense buildup is now focused on strengthening sovereign capability, expanding domestic industrial capacity, securing supply chains and reducing strategic dependencies.

For U.S. companies, this means competing in two markets at once. The first is driven by urgent capability needs, where speed, availability, battlefield performance and interoperability carry significant weight. The second is taking shape over a longer horizon, as governments use defense investment to determine where production, engineering capacity, intellectual property and technological control will reside.

U.S. companies must also navigate an emerging tension between overlapping policy objectives. NATO continues to emphasize transatlantic industrial cooperation, interoperability and greater production across the Alliance. At the same time, EU initiatives place greater emphasis on European industrial capacity, design authority and economic value retention within Europe.¹ The objectives are complementary from a deterrence perspective, but they can create different considerations for companies seeking long-term market access. For U.S. companies entering or expanding in Europe, success will depend on more than identifying the next opportunity or satisfying the requirements of a particular funding mechanism. It will require the relationships, trust and industrial presence expected of companies seeking an enduring role in the market.

A Lesson From Big Tech

Europe’s experience with the technology sector offers a useful warning: Commercial success does not necessarily produce political or institutional acceptance. As foreign technology companies became embedded in European economies, questions around sovereignty, regulation, data, employment and domestic control moved to the forefront. Defense raises those same sensitivities.

Governments are purchasing more than products. They are making decisions about industrial capacity, supply chain resilience, sovereign control and their ability to maintain, adapt and sustain military capability during a crisis. The European debate is shifting from ownership alone toward operational sovereignty. Governments want to know whether they can use, repair, update and sustain a system under politically adverse conditions, regardless of who owns it. Export controls, software dependencies, remote access, data location, intellectual property restrictions and reliance on non-European spares can matter as much as the nationality displayed on the company register.²

This creates an important distinction for companies entering the market. Where capability gaps are urgent, speed, performance and availability will remain important factors in procurement decisions. They are also being weighed against concerns about sovereignty, dependencies, industrial capacity, supply-chain resilience and commitment to the European market.

For U.S. companies, building that foundation is already essential to competing effectively in Europe. It will become even more valuable as defense investment accelerates and governments place greater emphasis on strengthening their domestic and regional industrial base. That makes timing critical, and companies should not wait for sovereignty requirements or local expectations to become barriers before addressing them. Decisions made today about partnerships, investments, manufacturing, leadership and technology will shape how companies are perceived, and how effectively they can compete, as the market evolves.

Ultimately, companies will be judged on a simple standard: Does their presence strengthen European capability and capacity?

Five Considerations for Sustained Engagement

Answering that question requires companies to think beyond a conventional market-entry strategy. Five considerations are particularly important.

Choose the Market Before Chasing the Money
Understanding European institutions, funding mechanisms and procurement processes remains table stakes, but funding alone should not dictate the strategy. A common temptation is to identify Europe as a priority market and launch an extended program of meetings across capitals and institutions. The itinerary quickly becomes the strategy.

The better starting point is narrower: Where does the company’s portfolio address a genuine capability gap? In which markets does it have a meaningful point of differentiation? And, where is there alignment between what customers need today and what governments want their industrial base to look like tomorrow?

Companies should map their offering against NATO Capability Targets, EU priority capability areas and the procurement plans of lead nations.³ Only then should they determine which funding instrument, industrial structure and market-entry route can support that opportunity. Products developed around U.S. requirements do not automatically map onto European priorities, nor is Europe a single defense market. National requirements, industrial policies, political considerations and procurement cultures vary considerably. The companies best positioned to succeed will make deliberate choices about where they can create value instead of chasing whichever funding opportunities emerge.

Contribute Before You Sell
Companies entering Europe should begin by demonstrating how they can contribute, not by leading with what they want to sell. Establishing a durable presence requires becoming a respected participant in the broader conversation about Europe’s defense priorities, capability needs and industrial ambitions.

Thought leadership can play an important role in that process. By contributing expertise, sharing perspectives on emerging challenges and engaging constructively with governments, institutions and industry, companies can demonstrate that they are invested in helping solve problems. The most valuable contributions will be those connected to decisions Europe is actively confronting: how to aggregate fragmented demand, finance new production capacity, integrate lower-cost technologies with high-end platforms, absorb battlefield lessons, strengthen critical supply chains and accelerate procurement without sacrificing security or interoperability.

That same principle should extend beyond communications and engagement to how companies approach the market itself. European customers want to understand what a foreign supplier’s presence will enable locally. That can include manufacturing capacity, engineering expertise, workforce development, technology transfer, resilient supply chains and capabilities that can be maintained and adapted within Europe.

The most effective market-entry strategies bring these elements together. Companies should look for opportunities to share expertise, build trusted relationships and demonstrate a genuine commitment to strengthening European capability before a specific procurement decision is on the table. The objective is to be viewed as a partner invested in strengthening Europe’s defense capabilities for the future.

Build Institutional Credibility Before You Need It
Government customers matter, but they should not be the only audience. Research institutions, industry associations, policy organizations, universities and other participants in the defense ecosystem can help companies understand how debates are evolving while establishing credibility beyond a procurement relationship.

The ecosystem shaping defense outcomes is broader than it was even a few years ago. Finance ministries, development and investment banks, private equity and venture capital firms, regulators, critical infrastructure operators and civilian industrial groups play a growing role in how European defense capacity is financed and delivered.

Done well, this engagement creates a valuable asset: independent validators. Institutional standing is not built through a busy events calendar or repeated appearances in Brussels. It requires sustained engagement with the financial, regulatory, industrial policy and public institutions that shape how a company is understood and accepted beyond individual government customers. When a procurement decision becomes politically contested, questions emerge about foreign ownership or a company faces scrutiny over its role in the market, credibility cannot be built overnight. Relationships established only after controversy begins will generally be viewed for what they are. Companies should therefore build institutional relationships while the stakes are low, not after a tender is live or a political challenge emerges.

Local Partnership Is Not the Same as Local Commitment
Most companies now recognize the need for European partnerships. More important is what those partnerships represent. A distribution agreement, joint venture, licensed production arrangement, local manufacturing facility and locally based design authority each signal very different levels of commitment. For European governments, those distinctions matter. Where is the product manufactured? Who controls key intellectual property? Where does engineering take place? Who has authority to modify the system? Can it be maintained and sustained locally during a crisis? How much of the economic value remains in the market?

These questions shape both formal eligibility and broader perceptions of whether a company contributes to European sovereignty. Simply establishing a European entity or selecting a local partner may satisfy an immediate commercial requirement. It does not necessarily establish the company as part of the local industrial base.

The companies that differentiate themselves will be those willing to make commitments that are difficult to reverse: investing capital, developing local capabilities, creating skilled employment and giving European leadership genuine authority. Over time, those commitments will distinguish companies that operate in Europe from those regarded as part of its defense industrial base.

Treat Reputation as a Market-Access Issue
Reputation is rarely a primary consideration in traditional market entry planning. In the defense sector, however, it can be a decisive factor. Procurement decisions take place within a broader political environment, and U.S. companies can arrive in Europe carrying reputations shaped by their founders, investors, customers, corporate history or association with U.S. policy positions. Those reputations may be considerably more salient in European capitals than they are in Washington.

Companies should avoid two mistakes: dismissing those reputations because capability will prevail and assuming branding alone can resolve them. Understanding their reputational profiles before entering a market can help businesses determine where potential vulnerabilities could affect customers, partners, policymakers or other stakeholders.

European leadership, sustained institutional engagement, local investment, employment and meaningful industrial partnerships can demonstrate commitment far more effectively than messaging alone. In a sector in which commercial decisions and national interests are deeply intertwined, companies that invest in these relationships are often better positioned to earn trust, navigate scrutiny and compete effectively.

Positioning for the Long Term

Europe’s defense buildup represents an extraordinary opportunity for U.S. defense companies, particularly those bringing capabilities European militaries need now. But, urgent demand should not be mistaken for permanent acceptance.

This buildup will extend well beyond the current funding cycle. Speed, performance and availability will remain important competitive advantages. They are now being evaluated alongside another consideration: which companies are viewed as genuine contributors to Europe’s defense and industrial capacity. That distinction should shape how companies approach the market today.

The companies that establish durable positions will be those that use this period of extraordinary demand to become part of Europe’s defense industrial fabric. That requires local investment, trusted partnerships, European leadership and a demonstrated commitment to strengthening European sovereignty.

For U.S. defense companies, the challenge is no longer how to sell into Europe. It is more fundamental: What would make Europe want us here ten years from now? Companies that can answer that question today will be better positioned long after the current spending surge has passed.

Building an Enduring Position in Europe

Successfully entering or expanding in Europe requires more than identifying commercial opportunities. Companies must understand how procurement priorities, industrial strategies, political dynamics and stakeholder expectations vary across markets, then adapt their approach accordingly. Beyond capability, success depends on the ability to build credibility, establish trusted relationships and demonstrate long-term commitment to European priorities.

FTI Consulting works with companies to navigate these challenges by combining expertise in strategic communications, public affairs, trade, national security and corporate finance. We help clients assess market opportunities, understand stakeholder and policy dynamics, develop market-entry and growth strategies and build the relationships, reputation and institutional credibility needed to compete effectively in Europe’s evolving defense market.

Footnotes:

1: Council of the European Union, Press Release, “European Defence Industry Programme: Council Gives Final Approval” (8 December 2025).

2: Emil Archambault, “How Non-EU Defense Companies Can Strengthen European Defense,” German Council on Foreign Relations Memo No. 33 (July 2026).

3: North Atlantic Treaty Alliance, “Future-Proofing NATO Industrial Capacity: How Decisions at the NATO Summit in the Hague Will Strengthen the Allied Defence Industry,” NATO Review (26 June 2025).