The Space Industry Keeps Growing, Boosted By Defense Initiatives

The space industry continues to grow. A January report from Novaspace found that it is positioned to expand from $626.4 billion in 2025 to $1.01 trillion by 2034, a significant 5.5% CAGR.

In 2025, space infrastructure and services were scaling, but the industry was struggling to find commercial buyers. Today, demand from defense is on the rise, driven by geopolitical events and a shift to developing sovereign tech capabilities.

“Demand is unquestionably stronger, particularly in defense and security, but I still think we’re only scratching the surface of the commercial opportunity,” Daniel Smith, Trade and Investment Envoy for Space from the Scottish Government, Member of the UN High-Level Expert Group on Data and Frontier Technologies for the Planet, and Founder and Creative Director of AstroAgency, told the International Business Times.

One of the biggest shifts has been the increased focus on national security and ‘sovereign’ capabilities.

“Geopolitical events have reinforced just how valuable space-based infrastructure is, from Earth observation and secure communications to positioning, navigation and timing, so we’re seeing much greater interest in those areas,” Smith said.

Despite the growth, Smith noted that across commercial industries like agriculture, energy, infrastructure and insurance, as well as within government procurement teams, there is still a disconnect between the organizations producing incredibly valuable Earth observation data and many of the people who could benefit from using it.

Defense Space Budgets Are Going Up

Global defense tech startup funding hit $14.6B in the first five months of 2026, up from $1.6B in 2020. Germany alone has committed €35B to space-related defense through 2030, and NATO members are pushing toward 5% of GDP.

Space and defense have always been intertwined, but more than ever, the demand for timely satellite-derived insights has never been so high for government agencies across the globe, said Smith.

“Whether it’s the illegal invasion of Ukraine or the ever-changing situation in the Strait of Hormuz, the fastest way to receive up-to-date, in-depth insights is from Earth observation technologies,” Smith said.

“This drives investment into launch, the enabler for satellites in orbit, right through the value chain to get the information back down to decision makers to defend and protect terrestrial infrastructure and people,” he added.

With a boost from defense, which Smith argues is here to stay, the space industry in Europe and around the world will continue to grow.

“The last few years have demonstrated that when it comes to national security, there really is no better vantage point for developing an understanding of what’s happening on Earth than from space,” Smith said.

“The illegal invasion of Ukraine brought that into sharp focus, particularly for those outside the space sector,” Smith said. “Satellite imagery has played a critical role in verifying events on the ground, assessing damage, monitoring humanitarian impacts and helping decision-makers respond more effectively,” he explained.

Smith went on to say that most nations are recognizing the importance of developing sovereign space capabilities while also strengthening international partnerships.

Three areas of focus: Space Domain Awareness, In-Space Servicing, and Earth Operations (EO)

For investors and business leaders, new opportunities are opening up in the space industry supply chain, with three areas attracting a lot of attention.

One of them is Space Domain Awareness (or Space Situational Awareness), which is the process of tracking and indeed predicting what is happening in orbit. Space Domain Awareness involves tracking satellites, satellite collision avoidance, and visualization data for safe navigation, or deorbit maneuvers.

“The area of Space Traffic Management has never been so important with more and more satellites being launched to supply the needs of commercial, government and defense users,” said Smith.

Another area of scaling is In-Space Servicing. In-Space Servicing can provide pharmaceutical companies or researchers from any discipline with access to microgravity, with companies such as Space Cargo Unlimited and Voyager’s Starlab commercial space station focused on dramatically changing the availability of these activities.

In-space manufacturing is moving closer to a reality, and active debris removal operations, where servicers collect defunct objects in orbit, are being prepared,” Smith added. These also need fuel, with companies like Orbit Fab offering a service to keep such activities from running out of energy, Smith explained.

“This is a whole new economy that is moving quickly towards commercial reality, following years of demonstration missions and development,” Smith added.

Finally, the third space area on the rise is Earth Observation (EO). While Smith highlighted the growing demand for spaceports across many countries at the moment, interested in launching their own satellites and space missions without relying on other countries’ sites, EO is what is driving the demand for launch.

“It’s EO that can support just about any sector imaginable through different sensors and insight and, therefore, it’s EO that has unlimited growth potential,” said Smith.

Where Space Technologies Are Moving Towards: Dual Use and Downstream

The influx of investments coming from defense is boosting space operators’ capabilities and advancing their dual-use technologies, capable of performing tasks that can support both civilian and military applications.

“Improving Earth observation sensors or developing better sensors to track what is happening in space may support military needs, but also have a knock-on effect in bolstering the support of other industrial sectors,” said Smith.

Smith also spoke about the concept of dual use and the lessons for tech companies, their supply chain and their investors. “The more areas your technology can support, the better opportunities you’ll have for generating revenue,” he said.

As an example, Smith pointed to infrared sensors that Hydrosat uses to support water management, which are now being used to support defense insights. “Same for the InSAR radar technology that CATALYST uses,” he said.

Another example of downstream dual use is the work being planned in orbit by companies developing active debris removal devices that will be able to remove broken satellites from busy orbits to advance space sustainability.

“But (these) may also be able to reposition functional satellites that are acting in a nefarious fashion,” Smith said.

Closer to Earth, dual-use and downstream driven by space industry growth could impact other areas like the environment.

“Sustainable fuels being developed by aerospace companies to drive down their carbon footprint and meet ESG targets can also be applied to wider aviation markets or rocketry, growing their target audiences and helping everyone have access to greener solutions,” said Smith.

Accessing Space Services is No Longer Complex, Slow, and Expensive

Plugging into the space sector and accessing its services and the Earth observation data space companies produce is no longer expensive, slow or complex to integrate into everyday business operations.

“In reality, EO companies already have vast amounts of data that can help organisations understand what’s happened in the past, monitor what’s happening today and make better decisions about the future,” said Smith.

As Smith said, more organisations and businesses are beginning to recognise that satellite data isn’t something meant for the space sector; it’s becoming another business intelligence tool.

“We’re seeing more sectors ‘waking up’ to the value every year, and that’s only going to accelerate,” he added.