There’s money to be made in defense, and many Portuguese companies are seizing the opportunity. The sector generated around €2.1 billion ($2.4 billion) in revenue last year, according to José Neves of AED Cluster Portugal, an industry association representing more than 160 organizations in aeronautics, space and defense. “And the trend is upward,” he says.
Portugal is also buying equipment abroad to meet NATO-agreed targets of higher defense spending, acquiring frigates from Italy, tanks from Germany and debating new fighter jets — with the choice unresolved between US and European suppliers. In 2025, Defense Minister Nuno Melo publicly questioned a near-final deal to buy US F-35 jets from Lockheed Martin, citing doubts about US commitment to NATO under President Trump and urging consideration of European options. Portugal’s 28 F-16s are aging — some more than 30 years old — so a decision is urgent.
One European option is Sweden’s Saab, which is promoting the Gripen-E. Saab frames the Gripen-E as “a new fighter aircraft system” and argues it would be a European solution that strengthens Portuguese and European strategic capabilities through long-term industrial partnerships and technological sovereignty. Unlike the US offers, Saab proposes to involve Portuguese industry: aerospace firm OGMA could manufacture aircraft parts, as it already supplies components for companies like Embraer.
Saab also points to cooperation beyond airframes. Portugal already buys military transport aircraft from Embraer, and Saab says it is exploring further production and MRO (maintenance, repair and overhaul) partnerships with Portuguese firms. Critical Software, a Portuguese company, is developing a flight simulator for the Gripen-E and is working toward an AI co-pilot to support pilots and enhance the jet’s capabilities.
Critical Software began in 1998 with three employees and has grown to about 5,000 staff. It started by producing software for navy frigates and now works with international partners including BMW, Airbus (military and civilian divisions), and German defense firms such as Diehl and Rheinmetall. “We develop software for military satellites, drones and missile systems,” says CEO João Carreira, explaining why the Saab project fits the company’s expertise.
Portugal’s defense cluster has expanded rapidly in recent years. AED Cluster Portugal’s Neves notes around 20,000 jobs in the sector now, with Portuguese firms involved across the European defense supply chain — as suppliers, and increasingly, as manufacturers of finished products. Companies such as drone maker Tekever and Critical Software are trusted international partners. Portuguese drones and communications systems are already being used in Ukraine, Neves says.
Saab and Portuguese firms envision deeper ties: besides parts production, simulator development and MRO services, there’s potential for broader industrial cooperation. The Gripen pitch emphasizes European industrial participation and technological sovereignty, an attractive narrative for those wanting reduced reliance on non-European suppliers.
But questions remain about how free Portugal is to choose. Bruno Oliveira Martins of the Peace Research Institute Oslo (PRIO) argues that Portugal’s historical reliance on the US and strategic ties — including use of the Azores airbase during past conflicts — constrain its ability to upset Washington by choosing non-American platforms. In his view, Lisbon’s political room to maneuver is limited, and buying US equipment can reflect geopolitical realities as much as technical preference.
Oliveira Martins also suggests a pragmatic path for building a European defense industry: procurement of equipment that may not be cutting-edge but is “good enough” for many defense tasks. Such choices could foster domestic industrial capacity and reduce dependence on external suppliers while meeting defense needs affordably.
Portugal’s defense industry growth reflects a mix of market opportunity, rising government spending, international partnerships and geopolitical pressures. Portuguese companies are moving from niche suppliers to broader roles in manufacturing, software and systems integration — positioning the country as a more significant player in Europe’s evolving defense landscape.
This article was originally written in German.