The high volume in one order helps them, but net profit is probably similar to that for commercial sales.
Military contracts are completely different to normal commercial contracts, which makes them REALLY expensive to service. You need to experience it to understand how deep this goes.
I will give an example, when the company I work for sells equipment to a commercial buyer, or indeed buys anything from a seller overseas, we pay or get paid 50% with order and 50% before it ships. On big contracts that may become 50% with order, 40% before it ships, 10% on acceptance. These are our standard terms and all our suppliers use much the same for anything worth more than £2K. These arrangements have replaced LoCs around the world, following the fiasco in 2008 when banks ripped everyone off and refused to honour LoCs they issued. It means commercial buyers and sellers do not need to borrow to finance the trade. It is also fast.
Now take the same equipment we sell to a military buyer.
1. We have to do many more exhibitions, events, demos and evaluations of the equipment than for any commercial buyer. Some evaluations cost millions of pounds, which we have to foot, where they test everything again even though it already has all the CA, CE and other certifications, and a ton of paper from independent test labs.
2. Once they pick our kit, we then have to compete in a tender for it, that involves further cost and there is no guarantee of winning as vested interests affect tender selection in most countries. Getting from the start to just this point takes anything form several years to a decade.
3. The purchase contract involves us the supplier paying them, the buyer, 5% of the contract value as a performance guarantee and in return the buyer issues us with a Letter of Credit from a bank to pay the contract value upon delivery into country if every piece of equipment and every line of paperwork is correct. We get back the 5% after the warranty period - at least a year later if they deem fit to pay it back.
4. We then have to pay banks to turn the LoC into cash to fund the production.
5. We produce the goods and deliver into country, the goods are inspected. For some countries that is easy, some countries that is hard. There are some countries where their embassy sends someone out to inspect everything before it is shipped, and retest every single item, looking for any deviation whatsoever which they then will use as cause to reject the whole lot ... unless we agree a discount. When this happened to us last, the inspector did not find a single thing wrong but told us this was the first contract he had inspected where everything was right and he had been doing the job for 10 years working in Europe for that country (which is outside Europe). It is like a tax inspection, even if everything is in order they want to get something out of you, and it costs you a fortune to go through even when you have done everything right. Even when all is right the buyer then wants to change their mind about some things and try to negotiate down.
6. One needs full spares and support in country. That can cost a few hundred £K to set up, depending on what the equipment is.
7. For military equipment, the chain above is hard, so it is not unusual to have 5 companies in the path between manufacturer and buyer in order to handle their demands. Five companies means five margins, stacked in a compound manner.
8. Service and maintenance is where most military suppliers, that are not shifting kit that goes bang and rebuy, make their money. I have seen many absurd maintenance contracts where the buyer could buy all new every year for the cost of their maintenance.
Hence military equipment has to be several times more expensive to the end use than the equivalent commercial sale, to make the same net profit.
End result of the procurement process, is equipment is priced three times higher, often far from the best, is often bordering on obsolete or out of date, as the buyers prefer vested interests rather than newer companies.