London, May 13, 2026, 15:04 BST
BAE Systems and Thales are teaming up to fit a new intelligence, surveillance and reconnaissance mast onto BAE’s Herne XLAUV — that’s the company’s extra-large autonomous underwater vehicle. They’re eyeing a 2027 demo, targeting expanded sub-surface capabilities for navies. ISR covers the sensor tech that gathers and relays information from the field.
Timing is key here. Western navies want eyes on contested waters but aren’t keen to risk crewed subs or ships sitting exposed for long stretches. Thales points out that autonomous vessels—from drone boats on the surface to larger unmanned subs—are reshaping how these so-called “hybrid navies” carry out missions. “The systems need the sharpest possible eyes from beneath the waves,” said Tommy Cowan, who heads Thales’ sea business sector. Thales Group
BAE Systems plc picked up the project only days after reaffirming its 2026 outlook. The company reported solid performance over the first four months, sticking with forecasts calling for 7% to 9% sales growth, underlying EBIT up 9% to 11%, and free cash flow topping 1.3 billion pounds. Chief Executive Charles Woodburn pointed to “a strong start to 2026.”
Herne XLAUV, a modular autonomous underwater vehicle, is built to handle a mix of payloads—think sensors, comms gear, mission systems. BAE claims the platform can be switched up to tackle jobs like anti-submarine warfare, protecting essential infrastructure, or intelligence, surveillance and reconnaissance.
Thales is building the mast in Glasgow, aiming for rapid 360-degree image capture—so an underwater platform doesn’t have to linger above water any longer than absolutely necessary. In areas where being spotted can compromise the entire mission, that speed is critical.
The companies didn’t share the contract value, describing the project as a demonstration—not a production deal. So, it’s not clear what this means for near-term revenue. Still, BAE picks up another angle on naval autonomy, where software, payloads, and sensors are now just as critical as engines or hulls.
The expansion isn’t limited to ships. RENK America said Tuesday it’s teaming up with BAE Systems and Forterra to add autonomous features to the U.S. Army’s Armored Multi-Purpose Vehicle. The key: a drive-by-wire transmission upgrade, which could be slotted into other tracked platforms too. BAE, for its part, is clearly pushing for more uncrewed—or at least semi-autonomous—systems in both its land and naval portfolios.
Defence budgets remain front and centre for analysts. Matt Dorset, a defence analyst at Quilter Cheviot, pointed to BAE’s latest orders as a sign of robust demand spanning space systems, missile and air defence, drones, counter-drone gear, and electronic warfare. “The current geopolitical situation continues to drive demand for defence companies,” Dorset wrote in a May 7 note. Quilter
The credit picture didn’t shift. Fitch Ratings kept BAE Systems plc at A- and stable as of Wednesday, according to MT Newswires, pointing to profitability, free cash flow, a hefty order book, and BAE’s standing in global defence as reasons behind the move.
BAE’s own investor page listed shares at 1,883.50 pence as of 13:43 in London, using delayed data from the London Stock Exchange. According to Alliance News, BAE finished Tuesday down 0.4% at 1,916 pence. Thales, meanwhile, ended the session in Paris up 0.4%.
Contractors focused on submarines, missiles, drones, and electronic warfare still have the advantage in this environment. According to SIPRI, global military spending hit $2.887 trillion in 2025—a 2.9% increase after inflation. Europe jumped 14%. Asia and Oceania moved up 8.1%. SIPRI researcher Xiao Liang expects that upward trend to carry through 2026 and into later years.
Still, execution is the catch. That 2027 demo could easily face delays, and if costs climb or supply chains falter, those long-cycle defense contracts start looking a lot less lucrative for contractors. “Trip hazards” like supply bottlenecks and late production could hit profits, Aarin Chiekrie, equity analyst at Hargreaves Lansdown, pointed out. BAE’s ability to stay profitable, he wrote, comes down to how well it can predict its future costs. Hargreaves Lansdown
For the moment, the Thales mast is more about sending a message than generating revenue. BAE is positioning itself as more than just a manufacturer of jets, ships, and armored vehicles; it wants to be viewed as a systems integrator, ready for the sensor-packed, crewless battlefields that defense ministries are beginning to embrace.
