Military Electro Optical and Infrared Systems Market – Global Industry Size, Share, Trends, Opportunity, and Forecast, Segmented By Type (Image Intensification, Laser and Infrared), By Platform Type (Air-based, Land-based, and Sea-based) By Region & Competition, 2021-2031F

Forecast Period	2027-2031
Market Size (2025)	USD 9.75 Billion
CAGR (2026-2031)	6.18%
Fastest Growing Segment	Air-based
Largest Market	North America
Market Size (2031)	USD 13.97 Billion

Market Overview

The Global Military Electro Optical and Infrared Systems Market will grow from USD 9.75 Billion in 2025 to USD 13.97 Billion by 2031 at a 6.18% CAGR. Military Electro-Optical and Infrared (EO/IR) systems encompass sensor technologies operating in the visible and infrared spectrums to facilitate intelligence, surveillance, reconnaissance, and precise target acquisition across land, sea, and air domains. The market is primarily driven by the escalating demand for superior situational awareness in asymmetric warfare environments and the urgent necessity to modernize aging defense inventories with enhanced night-vision and thermal imaging capabilities. These fundamental drivers operate independently of transient technological trends, as they stem from core operational requirements to maintain tactical superiority and protect personnel in contested territories.

However, the market faces a significant challenge regarding the high cost and technical complexity associated with integrating these sensitive optical components into legacy platforms. This financial burden can delay procurement cycles, particularly in nations where defense budgets are strained by competing fiscal priorities or economic instability. Despite these hurdles, sector investment remains robust; according to the Aerospace Industries Association (AIA), in 2024, the United States aerospace and defense industry generated over $995 billion in total business activity, reflecting the immense scale of capital available to support the continued development and deployment of advanced sensor technologies.

Key Market Drivers

Rising Global Defense Expenditure and Military Modernization Programs act as the primary catalyst for the Global Military Electro Optical and Infrared Systems Market. As nations grapple with escalating geopolitical instability and cross-border security threats, defense budgets are seeing unprecedented growth to finance the acquisition of next-generation sensor technologies. This financial surge directly supports the procurement of high-performance optical systems essential for maintaining tactical superiority in contested environments. According to the Stockholm International Peace Research Institute (SIPRI), April 2025, in the 'Trends in World Military Expenditure, 2024' Fact Sheet, global military spending increased by 9.4 percent in real terms to reach a record $2.72 trillion in 2024. This expanded fiscal capacity enables armed forces to replace legacy equipment with advanced night-vision, thermal imaging, and targeting solutions, ensuring operational readiness against near-peer adversaries.

Simultaneously, the Increasing Demand for Advanced Intelligence, Surveillance, and Reconnaissance (ISR) Capabilities is reshaping market dynamics by prioritizing systems that deliver high-fidelity, real-time data. Modern combat operations require precise target acquisition and long-range detection, driving heavy investment in airborne and ground-based optronics. For instance, according to Overt Defense, June 2025, in the 'Lockheed Martin Awarded $1.7 Billion Contract for Army Targeting and Vision Systems' report, Lockheed Martin secured a $1.735 billion contract modification to produce and sustain M-TADS/PNVS sensors for the U.S. Army's Apache helicopter fleet. This trend is further evidenced in the land domain where European forces are upgrading armored platforms; according to GovCon Executive, February 2025, in the 'Hensoldt Secures Over $1.4B in Orders in Latest Quarter Report' article, Hensoldt received an order exceeding $70.2 million to supply optronic systems for 123 Leopard 2 A8 main battle tanks. These investments highlight the critical reliance on EO/IR technologies to enhance situational awareness across all operational domains.

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Key Market Challenges

The high cost and technical complexity associated with integrating sensitive optical components into legacy platforms constitutes a significant barrier to the Global Military Electro-Optical and Infrared Systems Market. Retrofitting modern sensor suites onto aging airframes and land vehicles requires extensive engineering modifications to ensure compatibility with older avionics and power systems. This integration process is often more expensive than the hardware itself, creating a prohibitive financial burden that forces defense ministries to delay or scale back modernization programs. Consequently, procurement cycles are extended, preventing the rapid adoption of advanced thermal and night-vision capabilities despite the operational necessity.

This challenge is further exacerbated in nations grappling with competing fiscal priorities, where the funding required for these complex integration projects is frequently diverted to immediate operational costs. The continued struggle to secure adequate funding is evident in recent alliance data regarding member contributions. According to the North Atlantic Treaty Organization (NATO), in 2024, nine member nations failed to meet the alliance’s minimum defense spending guideline of 2% of Gross Domestic Product (GDP). This data highlights the enduring budgetary constraints that limit the addressable market for upgraded electro-optical systems, as a significant portion of the alliance remains unable to allocate sufficient capital for comprehensive defense modernization.

Key Market Trends

The Advancement of Third-Generation Forward-Looking Infrared (FLIR) Sensors is revolutionizing the market by replacing legacy analog systems with high-definition digital architectures that offer superior range and target resolution. These next-generation sensors allow for the identification of threats at greater standoff distances, a critical requirement for survivability in modern armored warfare and reconnaissance operations. By integrating high-fidelity thermal imagers into vehicle-mounted platforms, defense forces can maintain operational effectiveness in degraded visual environments while reducing the cognitive load on operators through clearer digital imagery. This technological transition is exemplified by recent European modernization efforts; according to Hensoldt, February 2025, in the 'HENSOLDT achieves order intake of over EUR 1.4 billion between October 2024 and January' report, the company secured a contract worth just under 56 million euros to upgrade the sensor capabilities of 92 Fennek armored reconnaissance vehicles with BAA III observation equipment.

The Adoption of Multispectral and Hyperspectral Imaging Technologies is simultaneously driving market growth as military operators seek to fuse data from distinct electromagnetic bands for enhanced situational awareness. Unlike traditional systems that rely on a single spectral band, modern solutions combine high-definition daylight, low-light, and infrared feeds to detect camouflaged targets and navigate complex maritime or terrestrial environments more effectively. This shift towards multi-band versatility ensures that personnel can switch seamlessly between sensor modes to adapt to changing lighting and weather conditions. This trend is evident in naval aviation upgrades; according to Vertical Magazine, January 2025, in the 'Teledyne FLIR Defense awarded $74M IDIQ contract to modernize U.S. Coast Guard surveillance systems' article, Teledyne FLIR Defense received a contract with a ceiling of $74.2 million to deliver over 125 Electro-Optic Sensor System-Modernized (ESS-M) units for the U.S. Coast Guard's rotary-wing fleet.

Segmental Insights

The Air-based segment is anticipated to register the fastest growth in the Global Military Electro Optical and Infrared Systems Market due to the rising adoption of unmanned aerial systems and the modernization of aircraft fleets. Defense organizations globally are prioritizing aerial platforms for intelligence and surveillance missions to maintain superior situational awareness. Consequently, the requirement for integrating optical sensors into these airborne units has surged, as they provide essential capabilities for target identification and tracking. This strategic focus on aerial capabilities directly supports the rapid expansion of the segment.

Regional Insights

North America holds the leading position in the Global Military Electro Optical and Infrared Systems Market, driven primarily by substantial defense allocations and fleet modernization programs. The United States Department of Defense prioritizes the procurement of optical technologies to improve situational awareness across land, air, and naval domains. Additionally, the presence of established defense manufacturers in the region facilitates consistent research and development activities. This robust industrial ecosystem, supported by government initiatives to upgrade legacy equipment, ensures the region remains the primary contributor to global market expansion.

Recent Developments

• In October 2025, Lockheed Martin secured a $233 million contract from the U.S. Navy to produce and deliver Infrared Search and Track (IRST21) Block II systems. These advanced sensors are designed to passively detect and track airborne threats at extended ranges without emitting radar signals, thereby enhancing survivability in contested environments. The program director for the IRST21 system described the upgrade as a significant advancement in passive warfighting capabilities. The contract covers the full-rate production of infrared receivers, processors, and inertial measurement units, which will be installed on the F/A-18E/F Super Hornet fleet to improve situational awareness and targeting precision.
• In November 2024, Teledyne FLIR Defense announced it would deliver its UltraFORCE 380X-HDc multi-spectral imaging systems to NL EASP AIR for integration into maritime patrol aircraft. This agreement marked the first sale of the surveillance gimbal specifically designed for international customers outside the United States. The system provides high-definition imaging across visual, thermal, and shortwave infrared channels, supporting search and rescue, border patrol, and intelligence missions. The company highlighted that the technology offers superior resolution and magnification to aid crews in identifying targets day or night, which is essential for monitoring increasing immigration activity and other high-stakes operations at sea.
• In June 2024, Leonardo DRS received a full-rate production contract to provide its Quantum Cascade Laser technology for the Common Infrared Countermeasure systems used to protect U.S. military aircraft. This laser technology is a critical component of the fifth-generation infrared countermeasure system designed to track and neutralize incoming heat-seeking missiles. The Senior Vice President and General Manager of the daylight solutions business unit noted that the technology ensures flight crew survivability against evolving surface-to-air threats. The lightweight, multi-color laser systems allow for unlimited rounds of defense and are intended to support rotary-wing platforms across the U.S. armed forces.
• In January 2024, an RTX business announced a $154 million contract award to supply Commander’s Independent Viewer systems for the U.S. Army’s Bradley Fighting Vehicles. These units utilize second-generation forward-looking infrared cameras and sensors to provide 360-degree battlefield oversight and targeting capabilities. The President of Advanced Products and Solutions at the company stated that the technology offers early threat detection and all-weather performance, enhancing the vehicle commander’s ability to locate and defeat targets in various conditions. The production of these electro-optical/infrared sight systems is scheduled to take place in McKinney, Texas, with initial deliveries expected in June 2026.

Key Market Players

• BAE Systems plc
• Elbit Systems Ltd.
• Teledyne Technologies Incorporated
• Israel Aerospace Industries Limited
• L3Harris Technologies Inc.
• Leonardo S.p.A
• Lockheed Martin Corporation
• RTX Corporation
• Rheinmetall AG
• Saab AB

By Type	By Platform Type	By Region
Image Intensification Laser and Infrared	Air-based Land-based Sea-based	North America Europe Asia Pacific South America Middle East & Africa

Report Scope:

In this report, the Global Military Electro Optical and Infrared Systems Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• Military Electro Optical and Infrared Systems Market, By Type:

• Image Intensification
• Laser and Infrared

• Military Electro Optical and Infrared Systems Market, By Platform Type:

• Air-based
• Land-based
• Sea-based

• Military Electro Optical and Infrared Systems Market, By Region:

• North America
• United States
• Canada
• Mexico
• Europe
• France
• United Kingdom
• Italy
• Germany
• Spain
• Asia Pacific
• China
• India
• Japan
• Australia
• South Korea
• South America
• Brazil
• Argentina
• Colombia
• Middle East & Africa
• South Africa
• Saudi Arabia
• UAE