European Aerospace, Defense Firms Adopt AI to Compete — ISG - July 23rd, 2025

Aerospace and technology enterprises in Europe are rapidly integrating AI and other advanced technologies into next-generation systems, driven partly by European Union (EU) initiatives to foster defense innovation, according to a new research report published today by Information Services Group (ISG), a global AI-centered technology research and advisory firm.

The 2025 ISG Provider Lens™ Aerospace and Defense Services and Solutions reports for Europe find that companies are utilizing advancements in electronic warfare, missile systems, cybersecurity and other areas to meet European defense demands. In response to the ongoing war in Ukraine, the EU is taking steps to consolidate and strengthen the region’s defense sector. The commercial aerospace industry is also growing, driven by recovering air travel demand and sustainability initiatives.

Harish B, manager and principal analyst, ISG

“Europe’s aerospace and defense industry is undergoing rapid digital transformation,” said Andreas Fahr, partner and manufacturing industry lead for ISG in EMEA. “This transformation is driven by competitive pressures and customer demands in both commercial aviation and defense.”

Enterprises’ accelerating digitalization efforts include integrating AI, cloud platforms and digital twins across their operations, the report says. These investments enhance efficiency, transparency and data-driven decision-making, empowering organizations to increase their agility and speed.

AI innovations by European firms are already improving military systems, ISG says. AI-enabled predictive analytics and decision-making tools increase the efficiency of battlefield management systems. Using AI, enterprises are developing autonomous systems, such as drones, for use in military reconnaissance missions and combat operations. Autonomous systems also have applications for enhanced operations in commercial aviation.

European companies are increasing investments in space systems as that sector expands, the report says. Growing investments in satellite technology, commercial space services and space exploration missions are bringing new momentum to this area.

Many enterprises are partnering with agile mid-sized and specialist providers to plan, design and implement advanced digital solutions, ISG says. These providers are facilitating the swift adoption of emerging technologies such as AI, blockchain and digital twins for many clients, helping them meet evolving operational and strategic needs. They lead the adoption of automation, cloud platforms and secure communications infrastructure and build customized solutions for regulatory compliance and integration with legacy systems.

“Aerospace and defense innovation in Europe will have measurable impacts on military and commercial applications,” said Harish B, manager and principal analyst, ISG Provider Lens. “Providers empower European manufacturers to accelerate advancements.”

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