Military Electro Optical and Infrared Systems Market Size & Share Analysis - Growth Trends & Forecasts (2025 - 2030)

Military Electro-optical and Infrared Systems Market Analysis

The Military Electro-optical And Infrared Systems Market size is estimated at USD 9.16 billion in 2025, and is expected to reach USD 10.52 billion by 2030, at a CAGR of 2.8% during the forecast period (2025-2030).

The military electro-optical and infrared systems market is experiencing significant transformation driven by technological advancements and changing defense priorities. Major defense powers are increasingly focusing on developing indigenous manufacturing capabilities to reduce dependency on foreign suppliers, with several countries establishing local production facilities and research centers. This shift is exemplified by recent developments like the March 2022 announcement by Saudi Arabia's General Authority for Military Industries regarding the localization of their new multi-use monitoring system, Zarqa Al-Yamama-Zali, representing a significant step in developing domestic electro-optic sensor capabilities.

The industry is witnessing a strong trend toward system integration and multi-sensor fusion technologies. Companies are actively working on merging multiple sensors into single devices, focusing on raw data fusion and on-platform processing capabilities to deliver real-time information sharing across military platforms. This evolution is evidenced by recent contracts such as L3Harris Technologies' June 2022 agreement worth USD 205 million to deliver a Shipboard Panoramic Electro-Optic/Infrared system for enhanced fleet protection, demonstrating the growing demand for integrated surveillance solutions in military surveillance systems.

Strategic partnerships and industry consolidation are reshaping the competitive landscape, as companies seek to combine complementary capabilities and expand their market reach. For instance, in November 2021, Abu Dhabi-based EDGE Group and L3Harris Technologies announced a partnership to establish a WESCAM MX-Series electro-optical and infrared systems service center in the UAE, highlighting the industry's move toward localized service capabilities and technology transfer arrangements. These collaborations are particularly focused on developing next-generation sensors with enhanced capabilities in areas such as wide field-of-view distributed-aperture sensors and persistent 360-degree surveillance.

The market is seeing increased emphasis on size reduction and power optimization in EO/IR systems, driven by the growing demand for man-portable equipment and unmanned platforms. Manufacturers are investing in research and development to create smaller, lighter sensors without compromising performance capabilities. This trend is reflected in recent technological developments, such as the introduction of new carbon-based materials, nano-materials, and metamaterials that are fundamentally changing how EO/IR systems are designed and built. The US Defense Department's January 2022 contract worth USD 49.6 million for advanced targeting sight systems demonstrates the ongoing investment in compact, high-performance optical systems, including military infrared cameras and military thermal imaging technologies.

Military Electro-optical and Infrared Systems Market Trends

Rising Defense Expenditures

The profound changes in the international strategic landscape have led to significant increases in defense spending globally, driven by growing hegemonism, unilateralism, and power politics that have fueled several ongoing global conflicts. Military powerhouses have been focusing on augmenting their military firepower and defensive capabilities through increased defense budgets. For instance, the US House of Representatives recently approved a USD 840 billion defense budget for the next fiscal year beginning October 2023, with a USD 37 billion increase in the Pentagon budget focusing on providing funds to Ukraine's military and competing with China. This increased spending has enabled several major procurement programs for advanced electro-optical and infrared systems across different military platforms.

The emphasis on capability upgrades encompasses several technical aspects, leading to the phase-out of legacy military assets and their replacement with advanced systems featuring sophisticated EO/IR capabilities. This is evidenced by several recent high-value contracts, such as the US Special Operations Command's USD 96 million contract with L3Harris Technologies for WESCAM MX electro-optical, infrared, and laser designator sensor suites. These modernization initiatives are being implemented across various military branches to ensure combat readiness and enhance operational capabilities. The growing defense budgets have particularly benefited the development and procurement of advanced sensor systems that provide enhanced situational awareness and target acquisition capabilities.

Increasing Necessity to Enhance the Military ISR Capabilities and Battlefield Situational Awareness

Growing asymmetric threat environments globally are necessitating the need for more advanced Intelligence, Surveillance, and Reconnaissance (ISR) capabilities for militaries. There is an increasing focus on integrating different systems to work together to create enterprise-like systems that provide a broader view of the entire ISR spectrum. Military forces worldwide are shifting their focus toward real-time intelligence gathering and enhanced situational awareness, leading to the incorporation of advanced technologies in different modalities like EO/IR systems, RADAR systems, and signals intelligence systems into ISR payloads to obtain multi-mission data gathering capabilities.

In the current battlefield scenario, militaries are required to operate during days, nights, and under adverse weather and limited visibility conditions, where human vision is insufficient. This has led to increased adoption of advanced EO/IR sensors that can be mounted on aerial, land, and sea-based vehicles or made man-portable to identify and track moving targets and assess threats from a distance in challenging environmental conditions. For instance, the US Navy's recent USD 205 million contract for the Shipboard Panoramic Electro-Optic/Infrared (SPEIR) system represents a generational leap in using 360-degree EO/IR imagery for enhanced situational awareness. The system provides improved passive mission solution capability, marking a significant advancement in battlefield awareness capabilities. This advancement is complemented by the integration of night vision for military and thermal imaging for military technologies, which are crucial for operations in low-light and adverse conditions.

Growing Procurement of Unmanned Systems

The growing adoption of unmanned systems for ISR purposes has increased the demand for better motion imagery capabilities of EO/IR sensors to provide day-night, long-range surveillance capabilities, thus enhancing the militaries' ability to identify targets and perform threat assessment. This is complementary to the situational awareness obtained through their manned counterparts. Unmanned systems are being deployed for a wide variety of missions, primarily focusing on ISR and long-duration missions where data collection is essential. However, their role is expected to expand to cargo transportation and more manned-unmanned teaming operations, where they can act as extensions for manned aircraft.

Several manufacturers are developing and launching EO/IR systems specifically designed for the evolving requirements of unmanned systems. These systems are being integrated into various platforms, from small tactical drones to large unmanned aerial vehicles, providing enhanced reconnaissance and surveillance capabilities for deployed military forces. Additionally, unmanned ground vehicles are utilizing a variety of electro-optical and radar sensors to provide unprecedented reconnaissance and surveillance capabilities, while also being used to increase ground troops and land vehicles' safety by detecting and averting threats like IEDs. This growing integration of EO/IR systems in unmanned platforms is driving significant technological advancements in sensor capabilities and miniaturization. The inclusion of thermal cameras for military technology in these systems further enhances their capability to operate effectively in diverse environments, ensuring comprehensive surveillance systems for military support.

Segment Analysis: By Platform

Air-based Segment in Military Electro-optical and Infrared Systems Market

The air-based segment dominates the military electro-optical and infrared systems market, accounting for approximately 54% of the total market share in 2024. This significant market position is driven by the increasing integration of advanced EO/IR systems in various aerial platforms, including fighter aircraft, military helicopters, and unmanned aerial vehicles (UAVs). The growing emphasis on enhancing aerial surveillance, reconnaissance, and combat capabilities has led to substantial investments in airborne EO/IR technologies. Modern military aircraft are increasingly being equipped with sophisticated electro-optical targeting systems, infrared search and track (IRST) capabilities, and multi-spectral imaging systems to provide superior situational awareness and targeting precision. The segment's dominance is further reinforced by the rising procurement of military aircraft and the continuous modernization of existing aerial fleets across major military powers.

Land-based Segment in Military Electro-optical and Infrared Systems Market

The land-based segment is experiencing the fastest growth in the military electro-optical and infrared systems market, driven by increasing investments in ground force modernization programs worldwide. This growth is fueled by the rising demand for advanced night vision for military devices, thermal imaging systems, and electro-optical sights for infantry weapons. The segment is witnessing rapid technological advancements in areas such as man-portable EO/IR systems, vehicle-mounted observation systems, and ground-based surveillance equipment. Military forces are increasingly focusing on enhancing their ground forces' capabilities through the integration of sophisticated EO/IR systems in armored vehicles, combat vehicles, and infantry equipment. The growing emphasis on improving situational awareness and combat effectiveness in urban warfare scenarios has led to increased adoption of thermal sights for military and night vision technologies in land-based platforms.

Naval Segment in Military Electro-optical and Infrared Systems Market

The naval segment plays a crucial role in the military electro-optical and infrared systems market, offering specialized solutions for maritime operations and naval warfare. This segment focuses on providing advanced surveillance and targeting capabilities for various naval platforms, including frigates, destroyers, and patrol vessels. Naval EO/IR systems are particularly important for maritime patrol, coastal surveillance, and anti-submarine warfare operations. These systems are designed to operate effectively in challenging maritime environments, providing critical capabilities such as long-range target identification, maritime surveillance, and threat detection. The segment continues to evolve with the integration of advanced technologies like panoramic infrared search and track systems and multi-sensor electro-optical systems for naval applications. The inclusion of surveillance systems for military enhances the effectiveness of these naval platforms.

Military Electro-optical And Infrared Systems Market Geography Segment Analysis

Military Electro-Optical and Infrared Systems Market in North America

North America represents a dominant force in the military electro-optical and infrared systems market, driven by substantial defense budgets and continuous technological advancements. The region's market is characterized by significant investments in research and development, particularly in advanced sensor technologies and integrated systems. Both the United States and Canada maintain robust defense modernization programs, with a strong focus on enhancing their surveillance and reconnaissance capabilities, including the deployment of military surveillance systems. The presence of major defense contractors and technological innovators further strengthens the region's position in the global market.

Military Electro-Optical and Infrared Systems Market in the United States

The United States maintains its position as the largest market in North America, holding approximately 86% of the regional market share in 2024. The country's dominance is supported by its extensive military modernization initiatives and substantial defense budget allocations. The U.S. military's focus on maintaining technological superiority has led to significant investments in advanced EO/IR systems across all platforms—air, land, and naval. This includes the integration of military thermal cameras and military infrared cameras, which are pivotal in enhancing operational capabilities. The country's robust defense industrial base, including major contractors and specialized technology firms, continues to drive innovation in EO/IR technologies. The emphasis on developing next-generation capabilities, particularly in areas such as multi-spectral imaging and integrated sensor systems, further reinforces the United States' market leadership.

Military Electro-Optical and Infrared Systems Market Growth in the United States

The United States is also experiencing the highest growth rate in North America, with a projected CAGR of approximately 3% from 2024 to 2029. This growth is driven by increasing investments in advanced military technologies and the ongoing modernization of existing platforms. The U.S. military's focus on enhancing its ISR capabilities across all domains has led to sustained demand for sophisticated EO/IR systems, including military imaging systems. The country's commitment to maintaining technological superiority through programs like the F-35 Joint Strike Fighter and various unmanned system initiatives continues to drive market expansion. Additionally, the integration of artificial intelligence and machine learning with EO/IR systems is creating new opportunities for market growth.