Military Simulation and Virtual Training Market: Risks & Rewards

Platform Type, Application, and Growth Drivers

By platform type, flight simulation held the largest share in 2025 at 39.3%, reflecting the growing complexity of modern military aircraft and avionics systems that demand specialized, high-fidelity training. Vehicle simulation is expected to see the fastest growth, at a projected CAGR of 5.8%, as militaries prioritize networked, joint-force training exercises.

By application, the air segment led the market in 2025, while the ground segment is expected to grow fastest, driven by the rising sophistication of modern ground warfare systems, tactics, and communications technology.

Key growth drivers behind this trajectory include the high cost and risk associated with live-fire and real-world training, rising defense modernization budgets, growing adoption of VR/AR-based simulation systems, and militaries' increasing emphasis on multi-domain, networked training exercises that mirror real-world joint operations.

Key Players Shaping the Industry

The market features a mix of established aerospace and defense giants alongside specialized simulation technology providers. Leading companies profiled in current market research include:

• BAE Systems
• Bohemia Interactive Simulations
• CAE Inc.
• Collins Aerospace
• Cubic Corporation
• CymSTAR
• Exail
• Guardiaris

Among these, Northrop Grumman and Thales stand out as major players with broad, cross-domain simulation portfolios:

• Northrop Grumman delivers high-fidelity, immersive training solutions spanning air, land, sea, space, and cyber domains, incorporating VR, AR, and constructive simulation to build scalable training platforms for individual, unit, and joint-force readiness.
• Thales provides high-fidelity simulators for air, land, and naval forces, replicating real-world battlefield dynamics and environmental conditions to help personnel build tactical skill and situational awareness without the cost or risk of live exercises.

Recent Developments

The past year has seen a wave of strategic partnerships and major contract wins that signal where the industry is heading — toward more connected, data-rich, and rapidly deployable training ecosystems:

• April 2026 — Varjo x VRAI: Varjo partnered with VRAI to integrate VRAI's HEAT analytics software into Varjo's simulation ecosystem, giving customers built-in data capture and performance visualization to improve training effectiveness through analytics-driven insights.
• March 2026 — BAE Systems x Danish Army: BAE Systems secured a seven-year contract to build the backbone of the Danish Army's next-generation virtual training environment, deploying VBS4, Blue IG, VBS Builder Edition, and TerraTools Platinum — a major upgrade from the legacy VBS3 system, supporting mission rehearsal, course-of-action development, and long-term force planning.
• November 2025 — Rheinmetall x Varjo: Rheinmetall integrated Varjo's extended reality headsets into its deployable virtual land training platforms, aimed at rapidly scaling training capacity across European and NATO forces operating in geographically dispersed locations.