Munich, long known for the Oktoberfest and Bayern Munich, is fast becoming one of Europe's leading centres for defence technology, as young firms building AI-powered drones and military software cluster around the Bavarian capital.
The boom is underpinned by a dramatic rise in German government spending. Germany's federal budget for 2026 allocates roughly €82.7 billion to defence, an increase of about €29.4 billion on the previous fiscal plan, with troop numbers set to rise by up to 10,000.
Including an off-budget special fund created to modernise the armed forces, total defence spending reaches around €108 billion euros for 2026 — a roughly 24% year-on-year jump that, according to the Stockholm International Peace Research Institute, marks the first time since 1990 that Germany's military spending has clearly exceeded 2% of GDP.
Firms including drone maker Quantum Systems, AI defence group Helsing, and interceptor-drone specialist Tytan Technologies are among dozens of military-tech players now based around Munich.
Quantum Systems, founded in 2015, supplies drones to Ukraine's armed forces and has expanded into land and sea systems. Tytan, founded in 2023 by two Technical University of Munich graduates after a Ukraine hackathon, has grown its staff tenfold and is opening a new production site.
