The global aerospace and defense (A&D) sector enters 2026 at a pivotal crossroads.
According to the 2026 Aerospace and Defense Industry Outlook, the forces that have shaped the industry over the past several years—geopolitical uncertainty, supply chain volatility, talent shortages, and digital transformation—are now intersecting with powerful new accelerators such as agentic artificial intelligence, autonomous systems, and major fleet utilization trends.
Together, these dynamics are steering the sector into a new era defined by digital sustainment, rapid capability deployment, and a higher premium on operational readiness.
The year ahead reflects both opportunity and pressure: commercial aviation is experiencing rising demand and extended aircraft lifecycles, while defense agencies are pushing aggressively toward AI-enabled capabilities and faster fielding timelines.
The industry’s most influential shifts can be understood across five themes that the report identifies as central to 2026.
AI and Agentic AI: The New Backbone of A&D Transformation
Artificial intelligence—and particularly its evolving form, agentic AI—is rapidly reshaping the A&D landscape.
Yet the report notes that adoption is uneven, with many organizations still in early stages due to regulatory complexity and operational risk inherent to the industry. Even so, agentic AI is already delivering measurable gains.
Deloitte’s analysis shows that more than a third of tasks within industrial manufacturing could be enhanced by augmenting human capabilities with agentic AI, pointing to vast untapped potential across engineering, planning, and sustainment workflows.
Defense agencies are moving decisively. The US Department of Defense has increasingly positioned AI as foundational to missions such as modeling, simulation, command-and-control operations, and operator support.
Early experiments, including Decision Advantage Sprint exercises by the US Air Force, have demonstrated that AI can assist operators in making faster, more informed decisions in complex battlespaces.
The space sector is undergoing a parallel shift.
As highlighted in the Space Force’s Data and AI FY2025 Strategic Action Plan, agency priorities include enterprise-wide AI governance, a skilled workforce, and rapid adoption of analytics—all markers of a deliberate, long-term AI posture.
The report stresses that agentic AI should not be viewed as an isolated capability.
Instead, it sits within a broader autonomy and network-centric ecosystem that includes drones, connected sensors, and open interfaces.
This systems-level approach supports the Department of Defense’s Combined Joint All Domain Command and Control vision, which hinges on data-centric, multi-domain interoperability.
By 2026, the most visible advancements in AI are expected not on the manufacturing floor, but in decision-making, procurement, logistics, maintenance, and administrative functions—areas where scalability and compliance allow for faster deployment.
Aftermarket Services: A Stabilizing Force in an Uncertain Environment
The aftermarket—covering maintenance, repair, and overhaul (MRO)—continues to be one of the industry’s most reliable revenue anchors.
The report notes strong double-digit growth, record backlogs, and exceptionally high engine maintenance demand driving the sector’s momentum.
With commercial fleets seeing higher utilization and persistent production backlogs delaying new deliveries, operators are keeping aircraft in service longer, further strengthening aftermarket activity.
According to the report’s projections, global commercial MRO demand is expected to grow at a compound annual rate of 3.2% from 2026 to 2035, with engines representing more than half of total MRO spend.
This mirrors the industry-wide focus on keeping legacy aircraft mission-capable even as next-generation systems enter service.
Geographically, the MRO landscape is undergoing quiet but significant evolution.
Traditional US hubs are consolidating capabilities, while emerging markets—particularly in the Middle East—are expanding rapidly, investing in facilities and technical capacity to reduce dependence on established global centers.
Technology remains central to the aftermarket transformation. Companies are increasingly piloting AI-enabled inspection tools, predictive maintenance capabilities, and integrated digital workflows.
These tools are accelerating turnaround times and enabling maintenance models that shift from reactive to condition-based approaches—a theme emphasized across diagrams and examples in the report’s visuals on pages 5–6, which illustrate how smarter inspections, aircraft readiness tools, and defense sustainment workflows anchor the future of aftermarket efficiency.
Supply Chain: Balancing Efficiency and Resilience in a Volatile World
The supply chain remains under persistent strain.
The report underscores ongoing shortages of materials and skilled labor, coupled with geopolitical disruptions and rising demand across both commercial and defense sectors.
This combination has created a fragile, unpredictable ecosystem in which delivery credibility is as critical as cost containment.
Defense primes are attempting to scale up production of missiles, drones, munitions, and other critical systems, while commercial manufacturers are pursuing aggressive aircraft rate increases.
Together, these pressures are stressing the entire supplier base.
The report identifies divergent strategies emerging across regions. Some US firms are consolidating domestically to reduce uncertainty, while international customers push for diversified, multi-country supply networks.
As shown in the strategic models chart on page 7, companies are exploring vertical integration, expanded local manufacturing, long-term contracts, and extensive supplier development to manage risk.
Digital visibility tools—critical for monitoring compliance, detecting counterfeit parts, and enhancing transparency—are becoming standard investments.
Still, the report is clear: resilience is not a one-time initiative but an ongoing capability, and 2026 will require structural shifts rather than incremental adjustments.
Contracting and Procurement: Speed, Competition, and a New Vendor Landscape
The A&D contracting environment is undergoing profound transformation. New technologies—ranging from hypersonic systems to reusable launch vehicles and autonomous platforms—are reshaping competitive dynamics.
At the same time, acquisition reforms in the United States are driving urgency, rewarding speed, and opening doors to new entrants.
Government agencies increasingly favor commercially available solutions and are expanding the use of Other Transaction Authority agreements to attract nontraditional suppliers.
These pathways often compress timelines relative to legacy procurement processes, giving software-centric and venture-backed firms opportunities previously out of reach.
Yet the report cautions that newer processes bring challenges, including governance, cost transparency, and intellectual property complexity.
Even with faster pathways, vendors still face ramp-up periods that can span multiple quarters.
Nevertheless, the shift is unmistakable: procurement in 2026 will reward agility, modularity, and software-driven capability delivery.
The AI-Driven Workforce: Building Skills for a Digital A&D Future
Talent remains a central constraint—and priority.
As AI becomes embedded across operations, the industry must cultivate a workforce with multidisciplinary skills that blend data science, engineering, and domain expertise.
The report highlights a surge in demand for AI-related skills such as data engineering, machine learning, and statistical analysis, with job postings requiring data analysis projected to rise from 9% in 2025 to nearly 14% by 2028, as illustrated in the skill-growth chart on page 10.
One of the report’s notable insights is the growing divide within organizations: while senior leaders tend to be optimistic about AI’s potential, middle management often demonstrates more caution, driven by uncertainty and lack of training.
Bridging this gap through targeted skill development and leadership programs will be essential for sustaining momentum.
Partnerships with academic institutions are expected to deepen, with a shift from hiring specialized AI experts to embedding AI fluency across the entire workforce.
A Year Defined by Digital Momentum and Operational Demands
The 2026 outlook makes clear that growth will continue across the A&D sector, but that growth will increasingly depend on the ability to sustain and optimize existing assets while fielding new capabilities at unprecedented speed.
With aging fleets, supply chain fragility, and rising global tensions, reliability and readiness are becoming the industry’s dominant metrics.
Digital transformation—once aspirational—is now essential.
Companies that invest in AI, talent, supply chain resilience, and integrated sustainment will be best positioned to thrive in the evolving market.
As the report concludes, the organizations most likely to lead in 2026 will be those that turn digital tools into operational advantage, unlocking both resilience and competitive strength in a rapidly shifting world.
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