The defence and aerospace giant posted an 8 per cent rise in overall group sales to £17.9bn, but saw underlying earnings fall 1 per cent to £1.68bn due to previously reported slow sales of its Eurofighter Typhoon fighter jets.
Its bullish outlook comes as welcome cheer after BAE warned in November 2015 results would be hit by the move to slow jet production, while it also announced up to 371 jobs were being axed.
BAE now expects recovering defence budgets around the world to see its earnings per share rise by between 5 per cent and 10 per cent in 2016.
Britain increased its budget for defence equipment in November, to £178bn over the next 10 years, while BAE is also expected to benefit from improving military spend in the United States.
BAE chief executive Ian King said the group was well placed to benefit as “defence budgets recover”, which comes after a spending squeeze in recent years.
Shares in the FTSE 100-listed firm rose 2 per cent after the results.
BAE said the UK government’s recent spending commitments were “helpful” and added it continued to hope for additional Typhoon contracts as it holds ongoing talks. It also said a surge in demand for cyber security was providing a “substantial” boost to its applied intelligence business.