NATO has fundamentally redefined what it means to defend the alliance. At the 2025 NATO Summit in The Hague, allies made a commitment to investing 5% of Gross Domestic Product (GDP) annually on core defense requirements and defense and security-related spending by 2035.
This represents a dramatic escalation from the previous 2% GDP benchmark. The commitment also includes a condition about how they are to invest that money. NATO allies will be expected to commit to spending around 3.5% of GDP on “hard defense” that will include weapons and troops, and (for the first time) an additional 1.5% on defense-related investments such as cybersecurity.
This transformation reflects a sobering recognition that modern warfare extends far beyond traditional battlefields. Cyber threats to the security of the Alliance are complex, destructive, and coercive, and are becoming ever more frequent. The digital domain has become the new frontier where nation-states wage asymmetric conflicts, targeting everything from power grids to financial systems.
These developments have profound implications for service providers, product vendors, and integrators, creating a seismic shift that will turbocharge demand for vulnerability-management platforms, incident-response services, and secure-by-design software across the Alliance. Rather than fragmented, discretionary spending driven by periodic security scares, NATO members now face consistent, multi-year procurement cycles aligned with national security imperatives.
NATO's Redefined Defense Spending Framework
The alliance's new 5% GDP target represents more than just increased military expenditure; it constitutes a comprehensive reimagining of national security in the 21st century.
Despite pushback and an eventual exception for Spain, the revolutionary component lies in the extra 1.5% of GDP going to security-related infrastructure, such as cyber warfare capabilities and intelligence. This segment encompasses investments in critical infrastructure protection, including energy grids, transportation networks, and communication systems, alongside comprehensive network defense capabilities and resilience measures against hybrid threats.
Why Cybersecurity is Now Core to Collective Defense
NATO's strategic recalibration reflects hard-learned lessons from current geopolitical conflicts. Cyberspace is contested at all times, and malicious cyber events occur every day, from low-level to technologically sophisticated attacks.
Malicious cyber activity has increased substantially in recent years, ranging from ransomware and espionage to politically motivated cyberattacks and sophisticated malware used in the war in Ukraine and other conflicts.
The ongoing war in Ukraine has served as a stark wake-up call, demonstrating how digital warfare complements military operations through coordinated bombardments with wiper malware, extensive phishing campaigns, and sophisticated digital assaults designed to paralyze civilian infrastructure alongside military targets.
The emphasis of dedicated cybersecurity spending extends beyond prevention to encompass resilience; ensuring critical systems can recover quickly from attacks without sustained disruption to essential services.
Direct and Indirect ICT Spending Impact
NATO's restructured approach to defense spending creates multiple channels for Information and Communication Technology (ICT) investments. ICT investments in Europe will top $11 billion in 2025. The direct ICT spending within the 3.5% core defense allocation will initially be modest compared to the overall defense budget, as military modernization priorities focus heavily on rearming efforts, modernizing legacy equipment, rebuilding naval fleets, and replenishing armament supplies.
The transformative opportunity lies in the 1.5% allocation for security-related investments. This funding stream focuses on securing critical infrastructure from both cyber and physical threats, enhancing national and international cybersecurity capabilities through advanced technological solutions, and investing in emerging technologies like Internet of Things (IoT) security and digital twin technologies.
The most significant portion of spending in this category addresses foundational cybersecurity requirements: fortifying existing networks, implementing robust data protection measures, and developing sovereign data and cloud capabilities that reduce dependence on potentially compromised foreign technologies. This represents a shift from reactive cybersecurity spending to proactive, comprehensive digital infrastructure hardening.
Beyond direct allocations, the European Union's €800 billion ($926 billion) ReArm Europe spending plan includes a €1.5 billion pot of money to boost Europe's defense industrial base between 2025 to 2027.
Major European defense contractors are driving unprecedented demand for innovative IT solutions and comprehensive digital transformation initiatives, including the development of secure, sovereign cloud platforms specifically designed for defense data requirements.
Opportunities for the Cybersecurity Industry
NATO's spending mandate creates increased demand for specific cybersecurity solutions that directly address alliance priorities. Vulnerability management platforms represent a critical growth area, as strengthening cyber defenses and fortifying existing networks requires comprehensive systems to identify, assess, and remediate security risks across complex infrastructure environments.
Incident response services occupy another high-priority category, reflecting NATO's focus on proactive detection and ensured rapid recovery capabilities. NATO allies are planning to boost cyber defense coordination through joint exercises focused on improving critical infrastructure resilience.
The Alliance's commitment to information sharing protocols, early warning systems, and joint incident response exercises creates substantial opportunities for service providers capable of operating across national boundaries and security clearance levels.
Secure-by-design software development represents a fundamental shift in procurement priorities, driven by NATO's emphasis on supply chain integrity and compliance with evolving regulations like the EU's Cyber Resilience Act and NIS2 Directive. This approach minimizes dependencies on potentially compromised technologies while ensuring that security considerations are embedded throughout the software development lifecycle.
Cloud infrastructure development represents another significant opportunity, particularly for cloud security designed specifically for defense applications and sensitive data management. The emphasis on reducing dependence on foreign technology providers creates openings for European and allied technology companies to develop alternatives to global cloud platforms.
NATO's recognition that 80% of critical infrastructure remains privately owned drives deeper public-private collaboration initiatives. Governments increasingly rely on private companies for threat intelligence, incident response capabilities, and specialized expertise. The Alliance plans to establish enhanced information sharing mechanisms, early warning systems, and joint training exercises between public and private sectors.
Challenges and Considerations
Fiscal constraints pose a substantial challenge, particularly for southern European members facing economic pressures. Despite the declaration, Spain's Prime Minister Pedro Sanchez has argued that the country will avoid meeting the spending target of 5% of GDP.
Spain's position that existing defense spending suffices highlights internal tensions within the alliance that could lead to budget allocation delays and uneven implementation across member states.
The desire for European technological sovereignty creates additional complexity, as significant portions of new cybersecurity funding could benefit large American technology companies, despite European aspirations to develop indigenous capabilities and diversify the cybersecurity market. The European Union's ReArm Europe spending plan specifically aims to boost Europe's defense industrial base, but questions remain about how much of NATO's cybersecurity spending will ultimately support European versus American firms.
Long-term commitment uncertainty represents perhaps the most significant challenge, as future governments may redefine priorities despite current ambitious targets. While NATO requires allies to submit annual plans and progress reviews, the extent to which this oversight applies to the full 5% spending target versus just core defense requirements remains unclear.
Strategic Imperatives and Investment Outlook
The transformation in NATO's cybersecurity approach could cause fundamental strategic adjustments from technology providers. Vendors traditionally focused on enterprise or civilian solutions could prioritize the defense market, adapting their technologies and business models to meet military requirements and security clearance standards.
Artificial intelligence-driven solutions represent particularly promising adaptation opportunities, as AI applications span from battlefield operations to logistics optimization and threat detection. Broader collaboration and dual-use innovation emerge as key success factors, enabling technology providers to leverage civilian market expertise while meeting defense-specific requirements.
Conclusion
NATO's commitment to allocate 5% of GDP to defense spending, with 1.5% specifically dedicated to cybersecurity and critical infrastructure protection, represents a profound strategic reorientation that embeds digital resilience at the core of alliance security posture.
As NATO Secretary General Mark Rutte stated, “This is a quantum leap that is ambitious, historic and fundamental to securing our future”.
The shift creates unprecedented market opportunities for technology providers willing to embrace the complexity and requirements of defense markets. Success demands agility, innovation, and sophisticated collaboration between public and private sectors, as the alliance seeks to balance security effectiveness with technological sovereignty and cost efficiency.
This represents not merely an adaptation to current threats, but a forward-looking investment in capabilities needed to maintain alliance security and technological advantage throughout the coming decade.
About the Author: Sam Bocetta is a freelance journalist specializing in U.S. diplomacy and national security with an emphasis on technology trends in cyberwarfare, cyberdefense and cryptography.
Editor’s Note: The opinions expressed in this guest author article are solely those of the contributor and do not necessarily reflect those of Fortra.
