Military contractor shares have been among the market’s standout performers this year, and the latest escalation in the Middle East has only added fuel to the fire. After U.S. and Israeli forces struck Iran, defense and energy stocks jumped sharply while travel stocks took a hit. Volatility spiked, with the VIX climbing past 22 as investors scrambled to reprice risk assets.
Even before this week’s events, defense names had been gaining ground throughout early 2026, driven by geopolitical friction in Greenland, Venezuela, and Ukraine. The bigger picture is even more compelling: global defense spending is projected to hit $3.1 trillion by 2030, with U.S. military budgets potentially reaching $1.5 trillion under current proposals in Congress.
Analysts point out that this isn’t just a wartime trade. Spending has become structural — tied to long-cycle modernization programs, AI-enabled weapons systems, and faster development timelines that are pushing sector valuations toward tech-like territory.
Against this backdrop, here are ten defense and aerospace stocks worth watching, spanning everything from large-cap contractors to nimble small-cap specialists:
Astronics (ATRO) makes aircraft lighting and connectivity systems and recently posted record quarterly revenue of $240M. Its products feed into programs like the Bell MV-75 attack helicopter.
ATI Inc. (ATI) supplies specialty alloys for jet engines and has beaten earnings estimates five quarters in a row. JPMorgan flagged it as a top aerospace pick, partly because customers are moving away from Russian titanium.
AAR Corp. (AIR) distributes aircraft parts and runs maintenance programs for both commercial airlines and government clients. Revenue grew 16% in its most recent quarter, and earnings are expected to rise around 20% this fiscal year.
Innovative Aerosystems (ISSC) builds cockpit electronics for military jets, including the F-16. Revenue jumped 36% year-over-year last quarter, and the company is targeting growth from $90M to $250M in annual sales.
Bombardier (BDRBF) hit record revenue of $9.55B in 2025, powered by strong private jet demand and a growing defense services arm. It’s been outpacing rivals by a wide margin over the past year.
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Lockheed Martin (LMT) ended 2025 with a record $194B backlog — about 2.5 times its annual sales — and is ramping up PAC-3 missile production more than threefold. It also offers 23 straight years of dividend growth.
RTX Corporation (RTX) saw its Raytheon division in the spotlight after Tomahawk missiles were deployed in strikes on Iran. The company holds a $268B backlog and is targeting production of up to 1,000 Tomahawks annually.
Karman Holdings (KRMN) is a younger company — IPO’d just over a year ago — supplying missile and space launch programs. Revenue has compounded at 24% annually over three years, and it recently won a contract tied to the Golden Dome missile defense program.
Kratos Defense (KTOS) makes drones, rocket systems, and space hardware. Revenue rose 18.5% in 2025, and the company is ramping Valkyrie drone production while aiming to double hypersonics revenue to $400M this year.
V2X (VVX) handles aircraft modernization, cyber operations, and space sensor services with a $60B qualified pipeline. It trades at just 12x earnings — a notable discount relative to sector peers.
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