The aerospace and defense (A&D) sector enters 2026 at a pivotal moment, with persistent challenges intersecting new opportunities. In recent years, companies have navigated digital transformation imperatives, supply chain volatility, talent shortages, and geopolitical shocks – and 2026 will test how effectively organizations can execute on stronger demand, modernization investments, and multi-year program momentum across both commercial and defense markets.
This global outlook outlines the forces shaping A&D in 2026, with a focus on artificial intelligence (AI), supply chains, electric vertical take-off and landing (eVTOL) aircraft, and defense budgets.
AI and Autonomy
In commercial aviation, AI is already moving from experimentation into operational use.
The International Civil Aviation Organization (ICAO) report, “The Impact of Artificial Intelligence on the Aviation Sector”, highlights AI’s growing role in aircraft operations and the flight deck, particularly as modern air traffic management
(ATM) and Communications, Navigation, and Surveillance systems for Air Traffic Management (CNS/ATM) incorporate richer data from surveillance, data links, and onboard sensors. These capabilities enable more responsive routing and airspace decisions that directly affect aircraft in flight. ICAO notes that flight-deck AI can analyze real-time data to anticipate risks, recommend actions, and reduce pilot workload, with training and simulation paving the way for deeper cockpit integration.
Beyond commercial aviation, AI is also becoming a strategic priority in defense. A recent Belfer Center report highlights how major powers are framing AI as a strategic, national priority, with leaders staking out clear positions on global AI leadership. China’s Xi Jinping has called for “complete self-reliance” in core AI technologies, the Trump administration stated it would do “whatever it takes to lead the world in artificial intelligence,” and Russia’s Vladimir Putin has argued that whoever leads in AI “will become the ruler of the world.” These statements are backed by sustained investment and real-world experimentation in military and dual-use AI systems, signaling that AI leadership is increasingly viewed as a determinant of geopolitical and military advantage.
In the United States, that posture is already translating into operational programs. Project Maven, the Pentagon’s long-running AI initiative, applies machine learning to intelligence analysis to help process large volumes of sensor and imagery data and has scaled into a capability supporting intelligence, surveillance, and decision support across the U.S. Department of Defense (DoD). AI is also being positioned as a core enabler for architectures such as Golden Dome, where Pentagon research chief Emil Michael emphasized, “We have to be AI-first in the department,” noting that AI can “simplify the choice set” for operators and make them more effective.
Looking toward 2026, the most widespread impact across both commercial and defense environments is likely to come from AI that augments human roles: decision support, predictive maintenance, logistics, and resource allocation. In this human-plus-AI model, success will depend less on automation alone and more on how engineers, program managers, and operators integrate AI into everyday workflows. At Performance, AI is accelerating work across the organization and within key customer projects, driving measurable efficiencies in software development.
OEM Manufacturing and Supply Chain Resilience
Fitch expects higher production rates in 2026 as supply-chain and operational conditions improve, supported by strong demand and an active aftermarket. Order books remain near historic highs, with combined Boeing and Airbus backlogs exceeding 15,300 large commercial aircraft, giving OEMs years of production visibility. The ramp, however, is still constrained by bottlenecks in critical components and skilled labor, limiting how quickly backlog converts into deliveries.
Resilience is therefore as important as efficiency. Deloitte highlights supplier diversification and digital supply-chain tools to improve visibility and planning, while Fitch cautions that even as conditions improve, parts of the supply base remain fragile, particularly smaller sub-tier suppliers—making multi-year demand visibility and sustained commitments critical for stabilization.
OEMs are responding by tightening coordination with key suppliers, bringing more critical work under direct control to reduce schedule risk and improve quality, and expanding aftermarket capacity as service demand grows. Overall, 2026 remains constructive but execution-heavy: the winners will be those who can scale throughput without sacrificing quality or resilience.
eVTOL Progression
The U.S. government is now positioning advanced air mobility (AAM)—including eVTOL aircraft—as a strategic transportation and industrial priority for the 2026–2036 window. In The Advanced Air Mobility National Strategy: A Bold Policy Vision for 2026–2036, the federal government outlines a nationwide effort to accelerate AAM development and deployment, linking the roadmap to safety, security, national defense, and economic competitiveness. The strategy also anticipates demonstrations and initial operations by 2027, with broader operational maturity building over the following decade.
In parallel, the Trump administration’s Electric Vertical Takeoff and Landing Integration Pilot Program (eIPP) is intended to speed certification, infrastructure planning, and operational testing, with an eye toward demonstrating progress around the 2028 Los Angeles Olympics. Modeled after an earlier drone integration effort, the program plans to select multiple participants by March 2026 and begin limited operations shortly thereafter—making 2026 a pivotal “integration year” where eVTOLs move from development programs into real-world deployment challenges, including airspace coordination, safety assurance, and operational readiness.
Defense Budgets Outlook
The DoD’s FY2026 budget request totals $961.6 billion, a 13.4% increase over FY2025. What sets this cycle apart is how funds are allocated: U.S. defense spending is shifting toward digital modernization as a core pillar of deterrence. The Pentagon proposes $179 billion for Research, Development, Test, and Evaluation (RDT&E)—a 27% year-over-year increase and among the largest research and development (R&D) allocations in defense history. This marks a move away from platform-centric procurement toward technologies that deliver asymmetric advantages, including AI, autonomy, cybersecurity, drones, and advanced communications.
This shift is evident in emerging priorities such as integrated air and missile defense architectures, where concepts like Golden Dome highlight the direction of modernization spending. Rather than a single system, Golden Dome reflects an architectural approach that connects space-based sensing, resilient command-and-control, and layered defense—capabilities that are inherently software-driven and dependent on sustained, multi-year investment. President Trump has indicated that Golden Dome could require approximately $175 billion over roughly three years, underscoring the scale and urgency being assigned to this modernization effort.
For industry, the implication is clear: as these architectures scale, opportunities expand beyond prime contractors. Smaller suppliers and specialized technology firms are increasingly positioned to deliver discrete capabilities within larger programs, particularly where integration, speed, and upgradeability are critical. Sustained budget growth and long-horizon modernization priorities also provide clearer multi-year visibility, rewarding teams that can execute quickly while maintaining reliability, compliance, and lifecycle support.
Closing Perspective
Looking ahead, 2026 will reward organizations that can consistently convert demand into delivery. The differentiator will be disciplined execution under real-world constraints. Teams that build resilient supply chains, integrate software-driven capabilities without compromising safety or compliance, and scale capacity fast enough to hit milestones will be best positioned to lead through 2026 and beyond.
How Performance Can Support Your 2026 Goals
As A&D programs scale in 2026, organizations will need execution-ready partners for complex, mission-critical work. Performance supports A&D OEMs, suppliers, and the DoD with high-performance engineering services including systems, software, and hardware engineering. From AI integration to schedule recovery and milestone support, Performance engineers augment in-house teams to help customers deliver in 2026 and beyond.
Connect with Performance to discuss where additional engineering or execution support could make the biggest impact.
