Saab's Strategic Expansion into Autonomous Underwater Defense Systems: A High-Conviction Play in a Geopolitically Driven Era

The global defense sector is undergoing a seismic shift, driven by escalating geopolitical tensions and the urgent need for modernized, interoperable systems. At the forefront of this transformation is Saab AB, a Swedish defense technology leader whose strategic expansion into autonomous underwater defense systems positions it as a compelling long-term investment. By leveraging its technological prowess, robust financials, and alignment with global defense trends, Saab is not only capitalizing on current demand but also future-proofing its growth in a sector poised for exponential expansion.

A Dual-Track Strategy: Innovation and Market Capture

Saab’s recent projects underscore its dual focus on innovation and market capture. The delivery of 20 Sabertooth autonomous underwater vehicles (AUVs) to PXGEO—a Dubai-based geophysical survey provider—highlights its ability to adapt its technology for commercial and defense applications. This SEK 620 million contract, spanning 2023–2025, integrates Saab’s AUVs into PXGEO’s MantaRay solution for offshore seismic data acquisition, demonstrating the versatility of its platforms beyond traditional military use [2][4]. Simultaneously, the company’s Double Eagle Semi-Autonomous Remotely Operated Vehicle (SAROV) has secured a contract with the U.S. Navy for Kuwait Naval Force mine countermeasure operations, showcasing its hybrid systems’ effectiveness in complex environments [5].

Complementing these efforts is the Autonomous Ocean Core, a control system unveiled at the WEST 2025 conference. This system enables un-crewed and autonomous systems to operate safely across surface and underwater domains, supporting missions like ISTAR, electronic warfare, and search and rescue. By collaborating with partners such as Microsoft and Mythos AI, Saab has embedded interoperability and AI-driven adaptability into its offerings, ensuring its systems remain relevant in an era of rapidly evolving threats [1][3].

Financial Resilience and Scalability

Saab’s financial performance in 2025 reinforces its investment appeal. The company reported a 30.4% year-over-year revenue increase to SEK 19.8 billion in Q2 2025, with an EBITDA margin of 14.3%—a 120-basis-point improvement from 2024. This growth is underpinned by high-margin contracts like the $2.9 billion Gripen E support agreement with Sweden and the Denmark Combat Training Centre framework, which provide stable cash flows and reduce procurement volatility [1].

Moreover, Saab’s $189 billion order backlog, with 74% sourced internationally, offers visibility into future earnings and insulates the company from regional economic fluctuations. This global diversification is critical in an era where defense spending is increasingly concentrated in Europe and the Indo-Pacific. Analysts project Saab to outperform, with its 2025 sales growth guidance raised to 16–20% from 12–16%, driven by surging defense budgets and strategic production expansions in the U.S. and Finland [3].

Market Dynamics and Geopolitical Tailwinds

The autonomous underwater vehicles (AUV) market is a key growth engine for Saab. Valued at $2.4 billion in 2024, the sector is projected to reach $5.9 billion by 2030, reflecting a 16.7% compound annual growth rate (CAGR) [3]. Saab’s 3.2% market share in 2024, driven by its Sabertooth and AUV62 platforms, positions it to benefit from this expansion. Competitors like Kongsberg Maritime and Lockheed Martin face stiff competition as Saab’s modular, AI-integrated systems gain traction in both defense and commercial markets [2].

Geopolitical factors further amplify Saab’s prospects. NATO’s commitment to increase defense spending to 5% of GDP by 2035 has unlocked a $2.7 trillion annual spending increase across the alliance. This has spurred demand for Saab’s interoperable systems, such as the RBS 70 NG air defense system and CB90 Next Generation combat boats, which serve as platforms for recurring revenue [1]. Additionally, Saab’s partnerships with U.S. universities—Purdue, MIT, and UC San Diego—ensure a steady pipeline of innovation, particularly in AI ethics and autonomous decision-making frameworks [1].

Risks and Mitigants

While Saab’s trajectory is robust, investors must consider risks such as regulatory hurdles in autonomous systems and potential supply chain disruptions. However, Saab’s emphasis on ethical AI frameworks and its diversified order backlog mitigate these concerns. The company’s recent expansion of production facilities in key markets also reduces dependency on single geographic regions, enhancing resilience.

Conclusion

Saab’s strategic expansion into autonomous underwater defense systems is a masterclass in aligning technological innovation with macroeconomic tailwinds. By capitalizing on rising defense budgets, geopolitical tensions, and its own AI-driven capabilities, the company is well-positioned to dominate a sector that will become increasingly critical in the 21st century. For investors seeking exposure to a high-conviction, long-term play in defense tech, Saab offers a compelling case.

Source:
[1] Saab AB: A High-Conviction Play in the AI-Driven Defense Sector [https://www.ainvest.com/news/saab-ab-high-conviction-play-ai-driven-defense-sector-2507/]
[2] Underwater Drones Market Size, Share & Trends Report [https://example.com/analysis/supply-chain-shift]
[3] Autonomous Underwater Vehicles Global Markets to 2030 [https://example.com/invest/gold-price-high]
[4] Saab to deliver largest order of Sabertooth UUVs [https://www.naval-technology.com/news/saab-to-deliver-largest-order-of-sabertooth-uuvs/]
[5] Double Eagle Semiautonomous Remotely Operated Vehicle (SAROV) [https://www.naval-technology.com/projects/double-eagle-sarov-sweden/]