London, May 13, 2026, 15:04 BST
BAE Systems and Thales plan to integrate a new intelligence, surveillance and reconnaissance mast into BAE’s Herne XLAUV, a crewless extra-large underwater vehicle, in a 2027 demonstration aimed at expanding what navies can do below the surface. ISR refers to sensor systems that collect and pass on battlefield information.
The timing matters. Western navies are trying to watch contested waters without putting larger crewed platforms, including submarines and surface ships, in the open for too long. Thales said the spread of autonomous vessels, from uncrewed surface craft to large underwater vehicles, is changing how “hybrid navies” operate; Tommy Cowan, Thales’ sea business sector director, said the systems need the “sharpest possible eyes from beneath the waves.” Thales Group
For BAE Systems plc, the project lands just days after the company held its 2026 guidance, saying it had traded well in the first four months of the year. BAE forecast sales growth of 7% to 9%, underlying EBIT growth of 9% to 11% and free cash flow above 1.3 billion pounds; Chief Executive Charles Woodburn said the group had delivered “a strong start to 2026.”
The Herne XLAUV is a modular autonomous underwater vehicle designed to carry different payloads, including sensors, communications equipment and mission systems. BAE says the platform can be reconfigured for roles such as anti-submarine warfare, critical infrastructure protection and ISR.
The mast itself is being developed by Thales in Glasgow. It is intended to capture 360-degree images quickly, limiting how long an underwater platform has to expose itself above the surface. That matters in waters where detection can end a mission.
No contract value was disclosed, and the companies framed the work as a planned demonstration rather than a production award. That leaves the near-term financial impact unclear, but it gives BAE another route into naval autonomy, a field in which software, sensors and payload integration increasingly matter as much as hulls and engines.
The push is not only maritime. RENK America said on Tuesday it was working with BAE Systems and Forterra on autonomous capability for the U.S. Army’s Armored Multi-Purpose Vehicle, using a drive-by-wire transmission upgrade that could also fit other tracked vehicles. That points to a broader effort by BAE to build crewless or partly autonomous options across land and sea programmes.
Analysts have kept the focus on defence budgets. Matt Dorset, defence analyst at Quilter Cheviot, said BAE’s recent orders showed demand across areas including space systems, missile and air defence, drones, counter-drone technology and electronic warfare. “The current geopolitical situation continues to drive demand for defence companies,” he wrote in a May 7 note. Quilter
The credit side also stayed steady. Fitch Ratings affirmed BAE Systems plc at A- with a stable outlook on Wednesday, with MT Newswires reporting that the rating reflected expected profitability, free cash flow, a strong order backlog and BAE’s position in global defence.
BAE’s investor site showed the shares at 1,883.50 pence at 13:43 London time, based on delayed London Stock Exchange data. Alliance News said BAE closed down 0.4% at 1,916 pence on Tuesday, while Thales closed up 0.4% in Paris.
The broader backdrop still favours contractors with submarine, missile, drone and electronic-warfare exposure. SIPRI said global military spending reached $2.887 trillion in 2025, up 2.9% in real terms, with Europe rising 14% and Asia and Oceania up 8.1%. Xiao Liang, a SIPRI researcher, said spending would probably continue rising through 2026 and beyond.
But the risk is execution. A 2027 demonstration can slip, and long-cycle defence contracts can become less profitable if costs, supply chains or production schedules move against the contractor. Aarin Chiekrie, equity analyst at Hargreaves Lansdown, wrote that BAE’s profitability depends on estimating future costs and that supply-chain issues and production delays remain “trip hazards.” Hargreaves Lansdown
For now, the Thales mast is more signal than sales line. It shows where BAE wants to be seen: not just as a maker of jets, ships and armoured vehicles, but as a systems integrator for the crewless, sensor-heavy battlefield that defence ministries are starting to buy into.
