Why the next defence boom will be digital

Defence is no longer defined only by tanks, aircraft and missiles. Secure networks, digital infrastructure and the systems that protect them now matter just as much.

Cybersecurity has become the digital counterpart to air superiority. Defence planners have already recognised the change; investors are only beginning to catch up.

No hardware without software

Software now sits behind nearly every modern military capability, from precision-guided weapons and autonomous systems to communications and intelligence networks. That dependence also creates a weakness: disrupt the digital infrastructure, and much of the hardware may lose its effectiveness.

The war in Ukraine makes the point plainly. Ukrainian officials recorded about 288,000 cyberattacks tied to Russian actors during the ten months before the 2022 invasion. After the invasion began, cyber operations ran alongside physical attacks, hitting power grids, communications networks, and government systems. Ukraine's ability to keep communicating and coordinating operations has relied heavily on cyber resilience - a clear sign that digital and physical defence can no longer be separated.

The threat is growing. Cyberattacks cross borders, adapt quickly, and keep coming. CrowdStrike reported that hacks targeting the U.S. from suspected Chinese government actors more than doubled between 2023 and 2024.2

The UK's National Cyber Security Centre recorded at least one nationally significant or critical cyber incident every month in 2024. During 2025, it handled more than 200 incidents, including 89 classified as nationally significant.3

A fighter jet or naval fleet can only perform as well as the networks behind it. Once those networks go down, even the most advanced equipment loses its value. NATO doctrine is changing around that reality, along with its definition of military readiness.

NATO defence spending

Source: NATO, SIPRI, and HANetf research. The 2035 scenario assumes that every NATO member allocates 5% of GDP to defence, amounting to approximately £4.2 trillion that year, according to SIPRI. For illustration only; the chart shows expected data.

Cyber defence is now a budget necessity

The surge in cyber-attacks has made it a financial obligation, not just a strategic talking point.

NATO's revised defence-spending framework sets aside 3.5% of GDP for core military capabilities and another 1.5% for areas such as cybersecurity and critical infrastructure. For 2026, the U.S. Department of Defense has requested more than £14 billion for cyberspace activities alone, with additional increases expected.

Alongside the funding, the organization is building a Zero Trust architecture to protect classified and operational networks. Palo Alto Networks has helped support the shift through connected firewall, cloud, and automation systems, bringing cyber defence deeper into military infrastructure.

As these commitments become actual procurement programmes, their effects reach well beyond defence ministries. Operators of critical infrastructure, government agencies, and allied industries now face stricter cyber-resilience requirements.

Capital is moving in the same direction. Global cybersecurity spending is expected to rise by more than 12% each year, surpassing £370 billion by 2028. Companies and governments no longer treat it as just another IT cost; they now count it among their essential defence capabilities.

Cyber cannot be an afterthought

Modern militaries no longer buy isolated pieces of hardware; they buy connected defence systems. Cyber security now supports every physical capability, helping it function while protecting it from attack. Leaving cyber security out of a 2026 defence allocation would be like planning a campaign without air cover. Ground forces could still fight, but they would face greater exposure, tighter limits, and a weaker strategic position. Cyber capability does not replace troops, vehicles, or weapons. It makes them more useful and helps keep them operational. As defence budgets grow, spending is shifting with them. The next stage of the defence cycle will depend not only on missiles and vehicles, but also on software, data, and digital infrastructure.

For investors treating defence as a long-term theme, one question stands out: can a modern defence portfolio really be complete without cyber security?

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