BAE Systems is set to face "fierce competition" from technology giants such as Google and Microsoft in areas such as cybersecurity, according to industry expects.
The company, which is the UK's largest defence contractor, is also "unlikely to have a dramatic impact on demand" from Russia's war in Ukraine, with experts from global research company Third Bridge not seeing "any major capital investment any time soon".
The conclusions come as BAE Systems published a trading update ahead of its annual general meeting.
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The group said its full-year guidance across all metrics remains unchanged, with sales expected to rise between 2% and 4% and underlying EBIT increasing between 4% and 6%.
Chief executive Charles Woodburn said: "Trading in the first quarter has been in line with expectations with strong order intake and good operational performance being maintained.
"Looking forward, our diverse portfolio, together with our focus on programme execution, cash generation and efficiencies, are helping us to navigate the challenging operating environment in the near term, while positioning us well for sustained top line and margin growth in the coming years, alongside accelerating our ESG agenda.
"Additionally, we see opportunities to further enhance the medium- term outlook as our customers address the elevated threat environment."
Allegra Dawes, senior analyst at Third Bridge, said: "BAE reconfirmed their guidance for 2022 despite supply chain and logistical challenges.
"The company projects sales growth between 2-4% and earnings growth between 4-6% compared to 2021.
"Defence spending across BAE's key geographies is set to increase in coming years which will provide positive momentum for current and future program development.
"Perhaps counter-intuitively, the Russia-Ukraine conflict is unlikely to have a dramatic impact on demand for BAE systems.
"There may be backfill orders in the short term and additional orders for updates in the medium term, but our experts don’t see any major capital investment any time soon.
"There may be opportunities in capability upgrades to some platforms.
"Yet, the leverage will likely come from outside the UK, for example, those countries that have been tied heavily into Russia and are facing pressure from the West to reduce that reliance.
"Looking forward, our experts question BAE’s ‘old-school’ corporate culture and whether it can be sufficiently agile in the rapidly changing defence industry, in particular, in new areas like cybersecurity.
"They expect to face fierce competition from internet giants like Google and Microsoft.
"Our experts highlighted the closure of BAE’s R&D facility at the Sowerby Research Centre.
"Our experts see more countries committing to meet NATO’s defence spending target of 2% of GDP.
"However, those countries including the UK would like to retain those capabilities within their own borders."
