Arrow 3 demand propels Israel Aerospace Industries to best year in its history
Israeli defense contractor posts record profits and a $30 billion backlog.
In the midst of the Second Iran War, and with the Arrow 3 interceptor missiles it produces forming a central pillar of Israel’s defense against ballistic missiles, Israel Aerospace Industries (IAI) concluded 2025 with the strongest financial results in its history.
The company reported sales of $7.4 billion in 2025, a 20% increase compared with 2024. Net profit reached $712 million, an all-time high, representing a 45% increase from the previous year.
IAI also recorded a sharp rise in its order backlog, which grew by more than $5 billion compared with the end of 2024, surpassing the $30 billion mark for the first time.
The company’s performance has been strongly influenced by increased sales to the Israel Defense Forces (IDF) and the Ministry of Defense, which have risen significantly since the outbreak of the October 7 war, and even more so following the start of the first Iran war about nine months ago.
Another major contributor has been the sale of Arrow 3 missile defense systems to Germany, part of two major deals signed over the past three years worth nearly $7 billion in total. These transactions are being complemented by additional arms deals around the world, as rising geopolitical tensions and a global arms race fuel demand for advanced weapons systems.
About 30% of IAI’s total sales last year were made in Israel. The company’s reports indicate that the Ministry of Defense owes IAI about 4 billion shekels for unpaid orders. The company said the payments are expected to be settled once the state budget is approved, similar to previous instances.
Unlike past conflicts, since the outbreak of the war with Iran the IDF has not disclosed the number of missiles launched toward Israel or the interception rates of its air defense systems. IAI has expressed satisfaction with the performance of the Arrow 3 system during the current campaign but is aligning with the military’s policy and declining to release specific figures.
Over the past two years, production lines for Arrow missiles at IAI have been significantly expanded to meet supply commitments for both Israel and Germany. Even before the current war with Iran, IAI and the Ministry of Defense had accelerated development of the Arrow 4 interceptor, which is intended to serve as a complementary layer to the Arrow 3 system.
In 2025, deals involving defensive and offensive missiles accounted for 31% of IAI’s total contracts, amounting to approximately $2.26 billion. By comparison, such deals accounted for 26% of the company’s contract mix in 2023 and 28% in 2024.
IAI CEO Boaz Levy said: “A highly complex security reality marked the year 2025 for the State of Israel, a reality that continues to compel us. Even today, as the country remains engaged in security operations across various fronts, IAI is proud to stand at the forefront, supporting the defense establishment and strengthening Israel’s position as a technological powerhouse on the international stage.”
IAI is fully government-owned, and over the past year the Government Companies Authority has accelerated efforts to float a minority stake in the company in an attempt to strengthen its financial position. However, since November 2024 the company has been without a chairman, following a dispute between Defense Minister Israel Katz and Minister for Government Companies Dudi Amsalem over the appointment.
