Polish Arms Maker Set for Record Sales on Defense Spending Spree

Polish Arms Maker Set for Record Sales on Defense Spending Spree

(Bloomberg) -- Poland’s biggest defense group is targeting another record year as the European Union’s largest land force ramps up spending to counter threats from Russia and tap into new EU funding.

PGZ SA revenue soared by around 50% in 2025 from 13.9 billion zloty ($3.86 billion) the previous year and growth in 2026 is expected to be just as good, according to Deputy Chief Executive Officer Arkadiusz Bak. 

The state-owned firm is strongly benefiting from a historic military buildup. Poland’s defense spending reached almost 5% of gross domestic product last year - the highest ratio in North Atlantic Treaty Organization. Warsaw has flooded PGZ with orders for ammunition, tanks, howitzers and air defense systems as it seeks to consolidate what was once a group of scattered, small manufacturers into a regional industrial powerhouse. 

“Defense, which once was a niche industry, is currently a growth one,” Bak said in an interview in Warsaw. “The arms race situation is repeating: defense will be the main source of technology for other sectors.”

PGZ is positioned to be the lead recipient of the EU’s SAFE defense loan program. Poland is slated to receive roughly a third of the €150 billion ($176 billion) plan and intends to direct a bulk of those funds to local producers.

However, the funding has recently become a flashpoint in domestic politics. Premier Donald Tusk faced opposition from President Karol Nawrocki, who blocked the law facilitating the use of the funds, saying it would make the nation too dependent on costly and long-term credit taken abroad. Despite the veto, Tusk managed to find a workaround to tap the funds.

“We expect SAFE to be the main driver of the sales growth this year,” said PGZ’s Bak. “The scale of last year’s increase in revenue is sustainable this year.”

Technology Transfer

Poland has sped up procurement since Russia’s 2022 invasion of neighboring Ukraine and spending is unlikely to taper. The government has committed to record outlays for F-35 fighters, submarines from Sweden and a 15 billion zloty counter-drone system designed to secure the eastern border following Russian drone incursions last September.

PGZ will hold a 60% share in the “anti-drone wall” project, developed jointly with Norway’s Kongsberg Defence & Aerospace AS. To evolve beyond a mere assembly line, the company has secured agreements, including technology transfer, with global majors such as Rheinmetall AG, Rolls-Royce Solutions GmbH, Hyundai Rotem Company Ltd. and Anduril Industries Inc. 

Despite its rapid growth clip, PGZ has thus far shied away from going public. This stands in stark contrast to its Czech rival CSG NV, valued at €21 billion after making a successful debut in Amsterdam earlier this year.

Any decision on a potential share sale rests with the government, Bak said, adding that the current cash flow is “good” and supported by existing contract payments. 

The government’s vision for the SAFE program is to order as much as possible locally and help the entire industry build on the additional €44 billion spending in the next five years. That plan has drawn criticism from some opposition parties and Nawrocki’s aides who claimed the program risks cutting Poland’s orders in the US, the nation’s biggest ally — which the government denies.

Bak also dismissed concerns that shifting American attitudes toward Europe and NATO might dampen PGZ’s prospects.

“It’s not about the US, it’s more about the supply chain,” he said. “Each country wants to have the certainty of supplies.”

--With assistance from Konrad Krasuski.

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