TheChek News Flow

How modern drone warfare is forcing arms producers to rethink

UK start-up Isembard is linking hundreds of small machine shops into a decentralised military manufacturing network

The war in Ukraine has exposed the limits of a defence industry geared to producing small numbers of expensive weapons, as modern drone warfare demands cheaper systems that can be redesigned and manufactured in weeks.

As governments race to adapt — backed by initiatives such as the UK’s £5bn drone transformation plan announced last week as part of its Defence Investment Plan — a new generation of manufacturers is emerging.

Among them is UK start-up Isembard, which aims to combine precision military manufacturing with the speed and scalability of consumer electronics supply chains.

The company, its name is a nod to the British engineer Isambard Kingdom Brunel, is betting that the future of arms manufacturing will not resemble that of the large contractors or “defence primes” of the last century, but a software-driven network linking hundreds of small machine shops into a decentralised production model.

Isembard operates on a franchise model, where it provides advice, software, financing support, manufacturing processes and a pipeline of work, allowing new operators to establish factories under its brand in months rather than years.

The start-up’s customers include defence newcomers such as drone makers Anduril and Tekever, as well as the established contractors such as the UK’s Babcock International. 

From one factory in London at the start of 2025, it now boasts six in the UK, including a factory that opened this week in Swindon, a hub for drone production, and seven in other countries, including the US, France and Germany.

“The pace of hardware innovation and scaled production is strongly bottlenecked by your ability to manufacture parts quickly,” said Isembard engineer Rory Rose at the company’s London factory, where two gigantic computerised milling machines turn aluminium billets into drone parts. 

He contrasts the west’s fragmented production base with China’s manufacturing clusters, where designers can often receive components within a day.

“If it takes six to eight weeks to get a part turned around, the number of design iterations you can complete in a year is an order of magnitude lower,” he says. “Your ability to make leading-edge hardware is just much worse.”

Before the proliferation of drone warfare in Ukraine, the defence industry was dominated by large players that spent years designing and producing relatively small numbers of complex, expensive equipment: exquisitely engineered fighter aircraft, missiles and warships that were expected to remain in service for decades. That focus is changing with the advent of drones.

“There is this real move from doing low numbers of very expensive systems to needing to produce hundreds or thousands of unmanned systems,” Rose said.

The benefits of automation are already being applied by Q5D, an early stage company based near Bristol in south-west England, that has developed robotic tools combined with software to automate the manufacturing of wiring harnesses used in drones and other equipment — one of the industry’s biggest production bottlenecks. 

Wiring is usually the “slowest part of any manufacturing process because it’s pretty much always done by hand,” said Steve Bennington, chief executive. 

The company has a three-year sole-supplier contract to automate wire harness manufacture for the US Army which is hoping to make a million drones a year. Q5D counts Lockheed Martin among its backers, an investment that will enable the US contractor to introduce automated wiring into its supply chain.

The company usually offers to do wiring “40 to 50 per cent cheaper” than conventional methods, said Bennington. For drones, the process itself is in the range of “two times” faster. 

Other defence tech start-ups, including Estonia’s Frankenburg Technologies, which is building affordable missile systems, are similarly focused on speed and scale. 

The company, which in June opened what it says is the world’s “first affordable air defence missile mass-production facility”, in Riga, uses commercial off-the-shelf components as much as possible, said Kusti Salm, chief executive. The focus, he added, was on building “very low capex assembly factories” with an emphasis on localising production. 

Nato’s military leaders agree that manufacturing will have to change to suit the new era. “We need to get people to be comfortable with procurement cycles which are far, far faster than what they have been brought up in,” said Johnny Stringer, Nato deputy supreme allied commander Europe, at a drone conference in Riga in May. “If you’ve been in procurement for the last 30 years, you’re comfortable with big programmes that last many, many decades.”

“We need to be in that space where we are testing, adjusting, failing, learning, procuring much, much faster than has been the case,” he said.

Ukraine’s drone losses average about 670,000 per month according to Nato data from May. Both Ukraine and Russia buy most of their drones or components from China in industrial quantities — but Nato has made it clear it wants the domestic capacity to manufacture such quantities.    

Several companies offer manufacture of non-China drone components. One of the largest in Europe is Croatia’s Orqa. Srdjan Kovacevic, Orqa’s co-founder and CEO, says the model is to provide easily scalable, EU-sourced “Lego bricks for companies’ own solutions”. The company last month signed a C$150mn contract with Canada’s Remote Robotic Systems.  

Stringer said Nato’s 32 countries should be easily capable of producing 1mn drones a month. “If we can’t do that across 32 nations, then frankly we should be shot,” he joked in May.

Nevertheless, rapidly increasing production has proved to be elusive.  

“The big drone companies are still on relatively small contracts,” said Linus Terhorst of the Royal United Services Institute. “We still see, especially in the drone world, that large-scale contracts are not coming through . . . [which] is hampering companies’ attempts to scale production,” he said. 

One catch is that cash-strapped governments have stockpiled big quantities of drones, which can then become obsolete overnight. That has left manufacturers in a bind over whether to invest in production or not.

“Factories win wars,” said Alexander Fitzgerald, co-founder and CEO of Isembard on the eve of the Defence Investment Plan, which was delayed by months over wrangling between the UK Treasury and the Ministry of Defence. 

Factories cannot be built without orders, “so let’s stop agonising about this plan and commit to increasing production today”.

EasyJet reaches outline agreement on £5.5bn takeover by Castlelake

UK airline’s board says it is minded to recommend proposal by US private credit group

EasyJet and Castlelake have come to a preliminary agreement on a £5.5bn takeover of the UK budget airline by the US private credit group.

The UK airline said in a statement on Sunday that the two companies had agreed in principle to financial terms that would take easyJet private if a firm offer was made by Castlelake and the deadline for a bid was extended to next month.

EasyJet said the agreement involved a cash offer by Castlelake of £6.90 per share. An easyJet spokesperson said the offer valued the airline’s equity at about £5.5bn on a fully diluted basis.

It added that the proposal from the private credit group was “at a value that the board would be minded to recommend” to its shareholders.

The announcement caps a dogged pursuit of easyJet by Castlelake, which has decades of experience leasing aircraft and also owns a large stake in Scandinavian airline SAS. 

EasyJet rejected four previous offers from Castlelake as undervaluing the airline, but last month said it would enter talks as it sought a more attractive bid.

Under UK takeover rules, Castlelake had until Sunday at 5pm to make a firm offer or walk away but the deadline will now be extended until August 3.

In rejecting Castlelake’s earlier offers, easyJet called the approaches “highly opportunistic” and said the private credit group was seeking to buy the airline when its shares were depressed by the Iran war that has hit all carriers. 

Castlelake’s fourth rejected offer was at £6.50 per share, valuing easyJet at £4.9bn. 

Investors in easyJet previously told the FT they expected the airline’s board to engage with Castlelake at £7 per share.  

Once Castlelake said it could raise its offer above £4.9bn if it had access to more financial information about easyJet, the airline agreed to co-operate to allow limited due diligence. 

EasyJet said at the time it had concerns about “ownership structure and deliverability” of Castlelake’s plan for the airline, but that it needed more details.

Founded as a low-cost alternative to British Airways, easyJet’s network has grown to be one of the largest in Europe.

EasyJet is seeking to make £1bn of annual profits in the medium term by expanding its holidays business with a new fleet of passenger jets that are more fuel efficient compared to previous ones.

The airline’s shares have failed to recover fully from the Covid pandemic and have not traded above £7 since 2021.

Margin expansion, sales growth, and a reliable dividend payment make the stock a good bet for volatile times.

Key Points

Philip Morris International has proved it can move new products through the Food and Drug Administration’s authorization processes. With margins expanding thanks to smokeless tobacco products and sales growing for its traditional combustible products, the stock’s ability to satisfy investors looks equally reliable. A stable and growing dividend also helps the case for Philip Morris stock as a relative haven in a volatile market.

For context, the company is transitioning from a traditional tobacco supplier to one that sells smoke-free and reduced-risk products. Of its $43.4 billion in total sales that analysts expect for 2026, according to FactSet, nearly half—$19.1 billion—is forecast to come from smoke-free offerings.

In June, the company launched “Zyn Ultra,” the latest iteration of its tobacco-free nicotine pouches. Zyn Ultra is similar to Altria Group’s “on! PLUS,” and an important part of Philip Morris’ strategy to capture market share for these types of products. The FDA this week said many of the company’s Zyn products, though not yet Ultra, could be marketed with a modified risk claim. The market treated this as a setback, sending shares down more than 1% on Wednesday.

Investors might not have anticipated the need to add more risk claims, but the end result—that Philip Morris can sell and market the products in the U.S.—is a net positive. Its smokeless U.S. business went from near zero a few years ago to roughly 6% of total revenue in this year’s first quarter. It can grow more from here.

“The U.S. is a small contributor but an important growth market,” writes Morningstar analyst Kristoffer Inton.

Philip Morris’ other fast-growing products, namely its IQOS heated tobacco product that heats—but doesn’t burn—a reduced amount of tobacco, are in good regulatory standing. In April, the FDA renewed the company’s authorization to sell and market several IQOS products that have reduced exposure to the toxins in cigarettes.

Philip Morris is well-established in this “heat not burn” product market, which Grandview Research says should grow 36% annually, from $20 billion in 2023 to more than $165 billion by 2030. Philip Morris is responsible for more than 75% of heat-not-burn product volumes sold globally, management said on its first-quarter earnings release. The company grew smoke-free shipments (which encapsulates all nontraditional cigarettes) slightly more than 9% year over year in 2026’s first quarter, driven by nearly 12% international growth.

These numbers don’t even do the story full justice. Growth should soon look even faster than in the quarter, given that U.S. volumes dropped 21.2% on the back of inventory declines. Retailers had increased inventory in the fourth quarter after a shortage for a few years, which meant they didn’t need as much inventory to start this year. But U.S. inventory levels will normalize, and they should return to growth next year, according to consensus forecasts compiled by FactSet.

Despite the slowdown in growth, some analysts emphasize that underlying demand looks strong, given short-term inventory dynamics. “Overall performance was a standout” in the first quarter, wrote Stifel analyst Matthew Smith.

Analysts expect smoke-free sales to grow 12% in 2027 to $21.4 billion. That would bring total sales to $46.2 billion, corresponding to just over 6% growth. The legacy “combustible tobacco” revenue is growing in the low-single digits globally on the back of consistent price increases, even as volumes decline.

The smoke-free business carries higher gross margins, so its faster growth is why analysts forecast the company’s overall gross margin to rise marginally, from 68% to almost 69% by 2027. Competitor Altria had an almost 65% overall gross margin in its first quarter.

That means Philip Morris can achieve close to double-digit annual earnings per share growth for the long term. Already, it grew adjusted EPS by 12% annually for the two years ended in 2025.

This could bring the stock higher in line with that growth, as long as the current price-to-forward-earnings multiple is reasonable. In fact, at just over 19 times earnings, the multiple could rise to something in the high 20s—it was 23 times as recently as early 2025—so the stock could rise faster than earnings.

A main risk is increased regulatory scrutiny for the smokeless tobacco products so important to the company’s growth and margins. While this week’s FDA decision is ultimately positive, it demonstrates that regulatory approval is unpredictable, at the least.

The company pays out most of its earnings in the form of dividends, but cash flows are strong enough to still leave cash to invest in the business. Right now, expected dividends for the coming four quarters yield just over 3%. Overall, the total annual return of stock price gains plus dividends could come out to over 20%.

Buy the stock. We’ve smoked this company out.

Bending Spoons, the Milan-based tech conglomerate that made headlines for acquiring the likes of AOL and Vimeo, went public on the Nasdaq this week with a pop, briefly reaching a market capitalization over $25 billion.

While Bending Spoons stock has slightly slumped since then, its market cap remains twice double its previous private valuation of $11 billion, confirming investor appetite for its playbook and portfolio, which includes digital brands such as Meetup, Eventbrite, and WeTransfer.

Bending Spoons’ strategy shares similarities with private equity, with the difference that it holds onto the brands it acquires. Its focus is on making them more financially successful — with tech and AI, but also often through price hikes and layoffs that have caused controversy.

Speaking to TechCrunch, co-founder and chief product officer Matteo Danieli said some of the scrutiny was due to the fact that products such as Evernote were genuinely loved by their users. But he said that despite all the changes, customer retention has been “remarkably stable.”

The user base of Bending Spoons itself has grown significantly in its 13 years of existence, and particularly in the last couple of years. As of March 2026, its portfolio served over 500 million monthly active users and more than 9 million monthly paying customers, according to its filing.

This also goes against the idea that Bending Spoons acquires dead companies, a narrative that entrepreneur Joe Hyrkin has been battling since selling digital publishing platform Issuu to the Italians in 2024.

“’Old internet brands’ is the wrong frame,” Hyrkin wrote on LinkedIn after the IPO. “They acquire products with real customer behavior, then integrate them into a centralized system of product, engineering, data, monetization, AI, and operating discipline.” This seems to be working: Bending Spoons reported $1.31 billion revenue in 2025; but its market capitalization indicates that investors anticipate even more.

The little-known backstory is that Bending Spoons was born out of the remains of Evertale, a Copenhagen-based startup that participated in Disrupt SF 2011’s Startup Alley and raised seed funding for itsphoto-sharing app, Wink.

Evertale failed not long after, and investors were able to exit, but its founders and a couple of employees kept working together, initially on in-house apps. Soon enough, the team made its first acquisition, followed by many others, CEO and co-founder Luca Ferrari told the venture podcast 20VC in one of his rare interviews before the company decided to go public.

In 2020, Bending Spoons made an exception to its policy of no longer building its own products when it created and donated Immuni, Italy’s official COVID-19 contact-tracing app. But other than that, it has mostly been honing a formula: identifying a popular product it thinks it can improve inside and out, and buying it from owners who have reached their limits in some way.

This approach was long orthogonal to VC, and Bending Spoons remained bootstrapped for years. But it eventually raised equity financing several times, including in 2022, 2024 and 2025. Pre-IPO, it also had VIP backers like tech industry bigs Eric Schmidt, Mike Krieger, and Xavier Niel; and stars Andre Agassi, Bradley Cooper, Maluma, The Weeknd, and The Chainsmokers.

After the acquisition, Bending Spoons is anything but a passive owner, making changes to the products’ user experience and features, as well as to the underlying tech; monetization strategy, including pricing; and team organization, including headcount.

While this focus on efficiency and revenue overlaps with private equity strategies, Bending Spoons claims a key difference: It “aims to hold forever, and has never sold an acquired business.” It is building a live portfolio, not presiding over a tech graveyard.

While Bending Spoons acquired several companies between 2014 and 2021, including the AI-powered photo enhancer Remini, its most notable acquisitions happened more recently.

In 2022, it acquired Filmic, known for its popular video- and photo-editing apps, and laid off the entire staff in December 2023.

In a deal also announced in 2022 and finalized in early 2023, Bending Spoons also acquired Evernote, the note-taking app that had reportedly reached a $1 billion valuation before hitting trouble. Layoffs followed the acquisition, as well as cuts to Evernote’s free offering.

The first half of the following year, 2024, was particularly active, with the acquisition of Meetup, app maker Mosaic Group, and Hopin’s StreamYard all happening within six months.

In July 2024, it went on to acquire the publishing platformIssuu and the file transfer serviceWeTransfer, where it later cut staff and made changes to its free plan, introducing stricter limits. In December 2025, WeTransfer’s cofounder Nalden criticized Bending Spoons’ decisions and said he was building another file transfer service.

In November 2024, Bending Spoons announced it would spend $233 million on an all-cash take-private deal to acquire video platform Brightcove. The acquisitions continued apace in early 2025, with route planner Komoot and management software maker Harvest.

Bending Spoons also announced its intention to acquire Vimeo in a $1.38 billion all-cash deal, and soon after, to acquire AOL from Yahoo for an undisclosed amount. (Disclosure: Both AOL and Yahoo are former owners of TechCrunch, and Yahoo retains a small interest.)

In December 2025, Bending Spoons announced it would acquire yet another well-known brand: Eventbrite — and for only some $500 million, a far cry from the company’s $1.76 billion valuation when it went public in 2018.

The Vimeo deal closed in the latter half of 2025, and was followed by massive layoffs impacting most of the workforce including the entire video team. The acquisitions of AOL, Eventbrite and Tractive were also completed this year.

Four of Bending Spoons’ cofounders have remained at its helm over the years: Matteo Danieli, Luca Ferrari, Francesco Patarnello, and Luca Querella. The IPO made them billionaires, at least on paper, while retaining control of the company, with more than 80% of the voting power.

Some of their decisions will affect workers. According to the company, it added “1,830 full-time equivalent team members through the acquisitions of AOL, Eventbrite, and Vimeo” but has already “parted ways” with many, and will continue. “Once the transformations of the three businesses are substantially complete later in 2026, we expect only a few hundred to remain.”

This headcount reduction presumably won’t affect the number of “Spooners” — the term Bending Spoons reserves to some core team members that have gone through its highly selective hiring process. There are currently some 620 of them, but that number hasn’t grown fast: in 2025, it only made 286 hires out of some 800,000 job applications.

Core headcount may not have increased by much, but productivity has. “In part helped by progress in AI, revenue per full-time equivalent Spooner increased from $1.12 million in 2023 to $2.57 million in 2025, and was $0.97 million in Q1 2026,” the company said. It helped it escape the SaaS reckoning it now also hopes to benefit from.

“As many businesses struggle to adapt, our ability to expand the earnings of an acquired business may improve,” Bending Spoons observed. In addition, “an environment of greater uncertainty could provide opportunities for us to acquire businesses at more favorable valuations.”

Despite what it sees as a favorable moment, Bending Spoons has remained selective in its acquisitions, but keeps on a wide net. By its own reporting, it sourced over 2,500 acquisition opportunities in 2025, conducted in-depth analyses of approximately 200 of them, and completed six acquisitions. More will certainly follow — that’s the playbook.

“We’ve identified more than 1,000 digital businesses (both private and public) that could be attractive acquisition targets in the future, representing nearly $400 billion in aggregate estimated revenue in 2025,” Ferrari wrote in a letter on behalf of the Bending Spoons team.

The playbook hasn’t changed, but the hint at take-privates is a reminder that the company has gone from paying “$10,000 for our first acquisition” to now “pursuing acquisitions in the billions of dollars.”

What follows may be even more intense. “As AI enables us to accomplish more with fewer people, the scalability of our acquisition and transformation model should improve as well,” Ferrari predicted.

While Chinese investors are turning away from America, the conglomerate’s US$6.8 billion cash acquisition could encourage more home sales

Berkshire Hathaway’s all-cash acquisition of home builder Taylor Morrison for US$6.8 billion is likely to trigger more investment in the US housing market, as institutional confidence in the segment encourages more home purchases in the world’s largest economy by local and overseas buyers, according to analysts.

The US-based conglomerate made the investment in May, deepening its bet on the US residential property market.

It marked the first multibillion-dollar acquisition under CEO and president George Abel, who was appointed to his current post in January after chairman Warren Buffett stepped down from his post overseeing the group’s operation.

“A cash-holding Chinese or Hong Kong investor can use the same logic to buy a single American property or a housing-related company with a decent yield,” said Kashif Ansari, founder and group CEO of Juwai IQI, which serves Chinese and other Asian buyers seeking overseas properties.

“Will other institutional investors follow the lead? Yes, undoubtedly,” Ansari said. “People who follow the housing industry see consolidation in the works. That means smaller companies are being bought up, all other things being equal, bigger ones.

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“Ultimately, there will be fewer American housing companies out there, and they will have bigger balance sheets.”

It was the 12th year in a row that Chinese buyers were the largest foreign investors in the US’ residential real estate, data from the National Association of Realtors (NAR) showed.

03:00

US adds Alibaba, BYD, Baidu and other Chinese tech giants to military blacklist

The NAR has real estate professionals as members who cover commercial and residential properties from 1,200 local associations and boards in 54 US states and territories.

As of the first three months of the year, Juwai IQI’s data showed that the US was the fourth most popular country for Chinese buyers after Australia, Thailand and the UK, based on the number of inquiries that the firm tracked in the period.

The US was a top investment destination for Chinese buyers until 2021 but had dropped its ranking since then, according to Ansari.

In the 12 months ending March 2025, foreign buyers bought 78,100 existing homes worth US$56 billion in the US with investors from China accounting for 15 per cent, or 11,700 homes, with a total value of US$13.7 billion, according to the latest data compiled by the NAR.

Tensions between Beijing and Washington worsened following US President Donald Trump’s trade war with China that began in 2017. In his second term starting last year, Trump reignited the trade dispute with China, escalating tariffs levied on Chinese exports in a bid to revive manufacturing jobs in the US.

Despite the rift, agents said the US property market held several drawcards for Chinese investors, including its top-notch education, attracting Chinese students to enrol in American universities.

“Education has always been a big driver for Chinese home purchases in the United States,” Ansari said. “It’s no surprise that the US fell down the list of top destinations at the same time as the number of Chinese students studying in the US also dropped.”

The number of Chinese students studying in the US has fallen by 8 per cent since 2022, and 13 per cent since 2015, according to Ansari.

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Beyond education, the US property market remained “one of the most trusted vehicles” for global wealth transfers, according to luxury property agency Sotheby’s International Realty.

“What draws homebuyers, beyond returns, is the strength of the market itself – deep liquidity, transparent ownership and long-term value that holds up across cycles,” a spokeswoman for the group said.

The market is watching out for a potential interest rate increase in the US following quarterly projections released last month, with nine Fed officials anticipating a tightened monetary policy by the end of this year. An updated policy statement also removed language that indicated the likelihood of an interest-rate cut this year.

For buyers of upscale homes in the US, including Chinese investors, Sotheby’s Realty said they “have historically shown less sensitivity to rate movements than the broader market, in large part because a significant share purchase in cash”.

“This insulates their purchase decisions from financing costs altogether,” the spokeswoman said.

“Where any individual investor lands on timing is a conversation for them to have with their own adviser, not something we’d presume to answer on their behalf.”

Additionally, Ansari said that for investors looking to buy property in the US and planning to “get a mortgage from a US financial institution, then it would make sense to buy before rates go up, all other things being equal”.

UK airline’s board says it is minded to recommend proposal by US private credit group

EasyJet and Castlelake have come to a preliminary agreement on terms of a takeover that would value the airline at more than £5bn.

The UK airline said in a statement on Sunday that the two groups had agreed in principle to fresh financial terms that would take easyJet private if a firm offer was made by Castlelake and the deadline for a bid was extended to next month.

EasyJet said the latest proposal from the US private credit group had been “at a value that the board would be minded to recommend” to shareholders.

Alliance chief Mark Rutte said defense contractors are trying to keep pace with demand as members pump up spending

BRUSSELS—When NATO Secretary-General Mark Rutte took office in 2024, his biggest challenge was getting the alliance’s European members to spend more on defense.

Now, with tens of billions of new dollars pouring into the continent’s militaries, the problem is how to quickly turn that money into potent weapons and more capable armed forces.

“A year ago was all about promises” of additional spending, Rutte told The Wall Street Journal ahead of the planned North Atlantic Treaty Organization summit in Ankara, Turkey, this week. This year “it’s about delivery,” he said.

It is a high-stakes race, with the allies caught between an increasingly belligerent and well-armed Russia to the east and, to the west, an American president who publicly questions NATO’s value and whose aides have signaled plans to scale back U.S. military commitments to Europe.

On Thursday, in a post on Truth Social, Trump complained about European military spending and said the U.S. doesn’t get “any benefit” from belonging to NATO.

During a televised Oval Office visit with Trump, Rutte touted the defense-spending increases by European allies and Canada, which he dubbed the “Trump Trillion.” His message: Europe has stepped up and responded to U.S. demands that it do more, building a NATO 3.0.

Last year, the alliance’s non-U.S. members boosted military spending by 20% over 2024 levels, to $574 billion, according to NATO. German outlays rose 24%, to $114 billion, according to the Stockholm International Peace Research Institute, and Berlin is aiming to spend roughly $180 billion in 2029—roughly triple the 2024 level.

Already the pace and scope of Europe’s increases are threatening to outstrip defense contractors’ ability to keep up with demand for sophisticated armaments. Around $300 billion in weapons have been ordered from U.S. companies, Rutte said.

“We are basically reaching the absorption-capacity level,” Rutte said, with governments working to overcome two main bottlenecks.

One is industrial capacity, already strained by the Ukraine conflict and the need for the U.S. and its partners to rebuild stocks after expending large amounts of munitions in the war with Iran. The second limitation is the ability to recruit and train new soldiers to expand fighting forces.

Countries seeking to protect domestic companies are also duplicating efforts, such as building too many different types of armored vehicles. That kind of fragmentation is inefficient. It also means less cash for things such as air defense and deep-strike missiles.

Large systems that need to integrate armed forces across the continent, like intelligence, communications and reconnaissance capabilities, could also be at risk of losing out.

Overcoming these hurdles “is the key issue we have to discuss next week,” Rutte said. Now that the money is coming in, the defense industrial base is producing more and “we really accelerate that pace.”

U.S. Ambassador to NATO Matthew Whitaker said Wednesday that making progress in Ankara was critical. “It’s not just about spending money,” he said. “Ultimately it’s about the capabilities that are bought with that spending.”

Whitaker called for more consolidation of European defense companies. “There needs to be a real push to reconcile the entire defense industry—make it more efficient, have it produce more of what’s needed,” including air defense, deep precision strike and unmanned systems.

Across NATO, said Whitaker, “We’re going to make sure that we cannot have all this spending…go into just inflation. This has to go into real systems, real equipment, real armaments, real weapons.”

The price of a 155mm artillery shell—among NATO’s most basic ammunition—has more than quadrupled since Russia’s 2022 invasion of Ukraine, as ballooning budgets have hit constricted supply, NATO and industry officials say.

In Ankara, alongside the leaders’ meetings, NATO will hold an industry forum for arms-production executives and government planners to hash out how to accelerate and expand output.

NATO officials expect to announce billions of dollars in contracts, preliminary deals and joint-production agreements at the event Tuesday.

The West is up against a Russia whose economy is already on a war footing as a result of its costly invasion of Ukraine, with resources and capacity across industries devoted to the war effort.

Europe isn’t there yet. But Rutte says public attitudes across the continent have shifted starkly since 2022, when Russian forces embarked on the largest ground war in Europe since World War II, boosting support for higher military spending.

“The shift in mindset taking place now is that defense has to be at the core and center of what we are doing,” Rutte said. “It includes the defense industrial base, it includes conventional industries, really thinking through how they can be supportive.”

NATO can also learn useful lessons from Ukraine, especially on the importance of building a defense industry nimble enough to rapidly innovate, develop and adapt new weapons as changing battlefield conditions require. Ukraine has been especially successful with this in the case of drones.

“It’s not about producing drones, but having the production capacity to produce drones because the technology itself is constantly adapting and is changing every two or three weeks,” Rutte said.

Plus: The end of Anthropic’s Fable ban, high-earner families explore alternative schools, how data-center water use is actually higher than reported, and more

What’s Elon Musk planning for cellphones?

I’ve been hearing folks in the satellite, telecom and space industries discuss this for years. It is a question that gained traction as Musk’s SpaceX spooled up a big business providing home-broadband using the company’s Starlink fleet—and more recently started providing limited connections for phones in remote areas through carriers, including T-Mobile.

Could a bigger phone push be far behind? Some evidence is trickling out.

Point one: Some investors in SpaceX have seen a prototype handset-style device, my Journal colleagues reported this week. People familiar with the device described it as slimmer than an iPhone and running on a proprietary operating system.

Point two: In the run-up to SpaceX’s massive public offering last month, longtime company president Gwynne Shotwell talked about possibly building out a ground network to provide mobile service, Patience Haggin and I found for a separate story. The company has also considered partnering with a cellular provider.

A big part of SpaceX’s future will be using Starlink satellites to connect mobile devices. Possibly rolling out a proprietary handheld device and spending big to bolster its satellite connections with ground-based infrastructure would clearly demonstrate the scale of SpaceX’s ambition—and likely prompt responses from rivals.