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U.S. Navy’s $1.7B BAE Deal Funds Guidance Kits Turning Hydra Rockets into Laser Precision Munitions.
The U.S. Navy has finalized a five-year IDIQ contract worth up to 1.7 billion dollars with BAE Systems to supply APKWS laser guidance kits, including an initial 322 million dollar order. The deal strengthens precision strike capacity across U.S. and allied inventories at a moment of rising global demand.
On December 10, 2025, the U.S. Navy confirmed a new five-year, indefinite-delivery / indefinite-quantity contract with BAE Systems worth up to $1.7 billion for Advanced Precision Kill Weapon System (APKWS) laser-guidance kits, including an initial order of $322 million, as reported by BAE Systems. The framework will fund the production of tens of thousands of guidance kits that convert existing 2.75-inch Hydra rockets into precision munitions, increasing magazine depth at a time of high operational consumption. By structuring the award as an IDIQ vehicle, the Navy can adjust delivery orders annually while retaining a guaranteed industrial base for U.S. forces and foreign military sales customers.
BAE's APKWS kits, which convert standard Hydra rockets into precise laser-guided munitions, sit at the center of the Navy's new five-year, 1.7 billion dollars contract that launches large-scale production to strengthen U.S. and allied precision strike inventories (Picture Source: BAE Systems)
APKWS is not a new missile but a guidance kit installed between the motor and warhead of standard 70 mm rockets, turning legacy Hydra 70 stocks into semi-active laser-guided weapons without redesigning the basic rocket. The U.S. designation AGR-20 covers the complete APKWS II round, which uses the WGU-59A/B mid-body guidance section and retains existing motors, warheads and fuzes. The distributed aperture seeker embedded in the forward canards homes on laser energy from airborne or ground designators, delivering sub-meter accuracy at typical engagement ranges, while the relatively small warhead limits collateral effects compared with larger anti-armor missiles. Because the retrofit kit fits into standard launchers, APKWS can be fired from rotary- and fixed-wing aircraft, unmanned aerial vehicles, ground launchers such as vehicle-mounted pods, and naval platforms, giving commanders a common effector across multiple domains. BAE Systems has been in full-rate production of APKWS guidance sections for more than a decade and will continue to manufacture them at its facilities in Hudson, New Hampshire, and Austin, Texas, under the new contract.
Operationally, APKWS has grown from a niche close-air-support weapon into a widely used precision rocket with both air-to-ground and air-to-air applications. The system reached initial operational capability in Afghanistan in 2012 with U.S. Marine Corps helicopters before being integrated on platforms such as the A-10, F-16, F/A-18, and MQ-8 Fire Scout, where it filled the gap between unguided rockets and heavier missiles like Hellfire. In subsequent campaigns against ISIS, U.S. aircraft employed hundreds of APKWS rounds for urban strikes where large warheads would have been politically or tactically problematic.
The weapon then evolved into a counter-UAS effector: tests in 2019 demonstrated that APKWS could intercept drone targets representing low-flying cruise missiles, while follow-on trials under the U.S. Joint Counter-Small UAS Office confirmed its ability to destroy unmanned aircraft at a much lower cost than traditional interceptors. In recent operations in the Middle East, U.S. Central Command publicly highlighted the use of APKWS from fighter aircraft, with one seven-week campaign seeing nearly 40% of drone kills achieved by these laser-guided rockets rather than expensive air-to-air missiles. On the ground, systems such as the VAMPIRE vehicle launcher and Electronic Advanced Ground Launcher Systems (EAGLS) extend APKWS into mobile short-range air defence for Ukraine and Middle East deployments, underlining its new role as a flexible counter-drone tool.
The main advantage of APKWS lies in its balance of precision, lethality, and affordability. Open sources estimate its unit cost at about one-third that of typical laser-guided bombs, around the mid-$20,000 range, making it highly cost-effective against small unmanned systems worth similar amounts. Its 70 mm warhead is effective against light armored vehicles, artillery, and drones, yet its limited blast radius makes it suitable for operations near civilians or sensitive infrastructure. Unlike other precision 70 mm rockets such as Lockheed Martin’s DAGR, Roketsan’s Cirit, or Thales’ FZ275, APKWS was designed as a retrofit kit for existing Hydra rockets rather than a standalone weapon system. This compatibility with standard launchers and vast Hydra stockpiles has made it the U.S. government’s program of record and a preferred choice across NATO and partner forces.
Strategically, the new contract underpins a wider U.S. and allied shift toward layered, high-volume air defence and precision-strike architectures in which low-cost effectors are essential for managing stockpiles. The August 2025 award of contract N0001925D0018 already established a $1.7 billion framework for up to 55,000 APKWS II kits in Lots 13 to 17, supporting the Navy, Army and foreign military sales customers through 2031; the December announcement effectively converts part of that ceiling into a funded initial order. Together with the earlier $2.68 billion contract of 2019 for Lots 8 to 12 and multiple delivery orders in between, APKWS is now a multi-billion-dollar program that guarantees sustained industrial capacity and predictable pricing.
For Washington, this allows fighter squadrons, helicopters, ground units and ships to engage drones and light targets daily without drawing down limited inventories of high-end missiles such as AIM-120 or Patriot interceptors. For allies, the fact that the same kit is available via foreign military sales creates a de facto standard for 70 mm precision rockets in NATO and beyond, at the very moment when European air forces are evaluating APKWS for platforms such as Eurofighter Typhoon and when BAE is demonstrating APKWS-armed Malloy TRV-150 unmanned systems as mobile counter-drone shooters. This convergence between manned aircraft, ground launchers and weaponised drones around a common effector gives the program a clear geopolitical weight, influencing how the U.S. and partners think about magazine depth and burden-sharing in prolonged crises.
The new contract continues a steady expansion of APKWS production awards, showing how the program has matured over time. Following multiple orders in the 2010s, including a $224 million award in 2018 for over 10,000 rockets and a $2.68 billion IDIQ in 2019 covering full-rate Lots 8–12, the August 2025 $1.7 billion framework for up to 55,000 kits marks another major investment. The December 10, 2025 delivery order, worth $322 million, launches a new production phase aimed at delivering tens of thousands of guidance kits for U.S. and export customers. The IDIQ structure allows the Navy to adjust yearly quantities to meet operational needs, while giving BAE Systems and its suppliers in New Hampshire and Texas the stability to plan long-term. APKWS has evolved from a niche upgrade to a high-volume munitions program embedded in both U.S. and allied defense procurement.
The new $1.7 billion U.S. Navy contract and its initial $322 million order confirm that APKWS has become a central pillar of Western precision-strike and counter-drone doctrine rather than a simple rocket modernisation project. By turning large existing stocks of unguided 70 mm rockets into guided rounds usable from aircraft, vehicles, ships and unmanned platforms, the program offers commanders a way to sustain intensive operations against drones and light targets without exhausting strategic missile inventories or accepting unacceptable collateral risks. For BAE Systems, the award consolidates a decade of investment in guidance technology and manufacturing capacity; for the U.S. and its allies, it locks in an affordable, interoperable effector that directly addresses the cost-exchange problem at the heart of modern drone warfare. In that sense, your updated article is aligned with the official BAE Systems and U.S. government information and can credibly present this contract as a long-term bet on scalable, low-cost precision firepower for the remainder of the decade.
Written by Teoman S. Nicanci – Defense Analyst, Army Recognition Group
Teoman S. Nicanci holds degrees in Political Science, Comparative and International Politics, and International Relations and Diplomacy from leading Belgian universities, with research focused on Russian strategic behavior, defense technology, and modern warfare. He is a defense analyst at Army Recognition, specializing in the global defense industry, military armament, and emerging defense technologies.