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Global military spending recently climbed to record levels, led by the United States, Europe and Asia.
Defense stocks, backed by longterm government contracts, can offer relatively stable revenue streams.
Some of the best defense stocks to buy now include Elbit Systems, ATI and Astronics.
With geopolitical tensions on the rise and defense budgets growing worldwide, aerospace and defense companies are increasingly on investors’ radars. Global military spending recently climbed to record levels, led by the United States, Europe, and key Asia Pacific nations, as governments modernize capabilities across air, sea, cyber and space. From traditional prime contractors to next-generation space systems developers, the defense sector offers a range of opportunities with different risk-reward profiles.
Below you will find a comprehensive look at the best defense stocks, how they behave across market cycles, and strategies for incorporating them into a portfolio.
Are defense stocks a good investment?
Defense firms often operate in oligopolistic markets, backed by long-term government contracts and multiyear procurement programs. This can translate into relatively stable revenue streams compared with purely commercial businesses, especially during economic slowdowns when federal spending tends to be more predictable than consumer demand.
Examples of leading public defense companies:
Lockheed Martin Corporation (LMT) – A top U.S. prime contractor on fighter jets, missiles, and advanced defense systems.
RTX Corporation (RTX) – Parent of Raytheon Technologies with strong positions in missile defense and avionics.
Northrop Grumman Corporation (NOC) – Major systems integrator known for stealth bombers and space systems.
General Dynamics Corporation (GD) – Builds combat vehicles, submarines, and defense electronics.
Boeing Company (BA) – Aerospace and defense manufacturer with significant military contracts.
Intuitive Machines, Inc. (LUNR) – Emerging space technology and services company working with NASA and U.S. national security space programs.
These names represent different segments — from legacy primes to newer space-oriented contractors.
Do defense stocks outperform the market?
Historically, defense equities have:
Delivered competitive long-term returns versus broad indexes like the S&P 500.
Shown resilience during geopolitical shocks when investors rotate toward “stable” government-linked revenue streams.
Benefited from increased defense appropriations and supplemental spending bills.
Still, performance varies by company and period.
Below, we analyze and rank the best defense stocks using a blend of Zacks Rank signals, Style Scores, and fundamental metrics to identify compelling opportunities in today’s market.
This is our short term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. How good is it? See rankings and related performance below.
The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank.
An industry with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.
The Zacks Sector Rank assigns a rating to each of the 16 Sectors based on their average Zacks Rank.
A sector with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The sector with the best average Zacks Rank would be considered the top sector (1 out of 16), which would place it in the top 1% of Zacks Ranked Sectors. The sector with the worst average Zacks Rank (16 out of 16) would place in the bottom 1%.
The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.
The scores are based on the trading styles of Value, Growth, and Momentum. There's also a VGM Score ('V' for Value, 'G' for Growth and 'M' for Momentum), which combines the weighted average of the individual style scores into one score.
Value ScoreA
Growth ScoreA
Momentum ScoreA
VGM ScoreA
Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.
As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
Elbit Systems is a defense-electronics contractor with heavy exposure to land systems, C4I and Cyber, ISTAR and electronic warfare. In Q4 2025, revenue grew 11% as several combat-exposed businesses posted sharp increases, and year-end backlog reached $28.1 billion, giving multi-year demand visibility. Elbit also increased R&D to broaden ammunition and munitions and night-vision offerings, positioning it for modernization budgets.
Potential Risks
War-driven volume can strain production. The company has cited supply-chain disruption, logistics delays and workforce impacts from reserve call-ups. Political and export-approval risk around Israel-related work can pressure sentiment.
Forecast
A Zacks Rank #2 (Buy) with Style Scores of A for Growth, B for Momentum and D for Value points to favorable revisions rather than cheapness. The Price, Consensus & EPS Surprise chart shows 2026 EPS stair-stepping higher and 2027 resetting higher again, with mostly green surprises.
This is our short term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. How good is it? See rankings and related performance below.
The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank.
An industry with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.
The Zacks Sector Rank assigns a rating to each of the 16 Sectors based on their average Zacks Rank.
A sector with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The sector with the best average Zacks Rank would be considered the top sector (1 out of 16), which would place it in the top 1% of Zacks Ranked Sectors. The sector with the worst average Zacks Rank (16 out of 16) would place in the bottom 1%.
The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.
The scores are based on the trading styles of Value, Growth, and Momentum. There's also a VGM Score ('V' for Value, 'G' for Growth and 'M' for Momentum), which combines the weighted average of the individual style scores into one score.
Value ScoreA
Growth ScoreA
Momentum ScoreA
VGM ScoreA
Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.
As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
ATI makes specialty metals and components used in jet engines and other aerospace and defense systems. In Q1 2026, sales rose slightly as aerospace & defense grew 6% year over year, while earnings and adjusted EBITDA improved on a favorable mix and execution. Management also raised full-year adjusted earnings and cash-flow guidance.
Potential Risks
Results are tied to aircraft production and program cadence. As such, an OEM slowdown can hit volumes. The business is capital-intensive, and missteps on pricing, yields, or input costs can squeeze margins. The stock’s momentum can fade if upgrades pause.
Forecast
A Zacks Rank #2 with B for Growth and Momentum and D for Value favors revision strength over cheapness. The chart shows 2026-2027 EPS estimates climbing in steps with mostly positive surprises; price is already above the 2026 track, so further lifts toward 2027 are the swing factor.
This is our short term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. How good is it? See rankings and related performance below.
The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank.
An industry with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.
The Zacks Sector Rank assigns a rating to each of the 16 Sectors based on their average Zacks Rank.
A sector with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The sector with the best average Zacks Rank would be considered the top sector (1 out of 16), which would place it in the top 1% of Zacks Ranked Sectors. The sector with the worst average Zacks Rank (16 out of 16) would place in the bottom 1%.
The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.
The scores are based on the trading styles of Value, Growth, and Momentum. There's also a VGM Score ('V' for Value, 'G' for Growth and 'M' for Momentum), which combines the weighted average of the individual style scores into one score.
Value ScoreA
Growth ScoreA
Momentum ScoreA
VGM ScoreA
Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.
As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
Astronics supplies power, connectivity, lighting and test solutions for commercial aircraft and military platforms. In its latest reported quarter, sales increased 12% and Aerospace's operating margin expanded, while the company delivered record quarterly bookings and backlog ($734.3 million) and raised the 2026 revenue guidance. With activity expected to ramp up through the year, the setup is improving amid a commercial-aviation recovery and steadier defense work.
Potential Risks
The model is still lumpy. Test programs and retrofit cycles can slip, and integrating Bühler Motor Aviation adds execution risk. If supply-chain constraints return, incremental volume may not translate into higher margins.
Forecast
A Zacks Rank #2 with A for Growth but D for Momentum and Value suggests good revisions with choppier trading. The chart shows 2026 EPS estimates stepping sharply higher and extending into 2027, with recent surprises mostly green.
This is our short term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. How good is it? See rankings and related performance below.
The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank.
An industry with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.
The Zacks Sector Rank assigns a rating to each of the 16 Sectors based on their average Zacks Rank.
A sector with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The sector with the best average Zacks Rank would be considered the top sector (1 out of 16), which would place it in the top 1% of Zacks Ranked Sectors. The sector with the worst average Zacks Rank (16 out of 16) would place in the bottom 1%.
The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.
The scores are based on the trading styles of Value, Growth, and Momentum. There's also a VGM Score ('V' for Value, 'G' for Growth and 'M' for Momentum), which combines the weighted average of the individual style scores into one score.
Value ScoreA
Growth ScoreA
Momentum ScoreA
VGM ScoreA
Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.
As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
Innovative Aerosystems is a niche avionics supplier with exposure to military cockpit upgrades. In fiscal Q1 2026, net sales rose 36.5% and gross margin exceeded 54%, lifting net income and cash flow. Management also highlighted lower leverage, giving room to fund growth and a defense ramp as production is brought in-house. Momentum in both military programs and the commercial aviation market supports the company's improving earnings base.
Potential Risks
Customer concentration and program timing can swing quarters, and acquisition integration is a key execution variable. Also, small-cap liquidity can amplify drawdowns if margins normalize.
Forecast
A Zacks Rank #2, along with Growth A but Momentum F and Value C flags strong revisions with higher volatility. The chart shows forward estimates snapping higher into 2026-2027 and recent green surprises, alongside sharp price volatility, positive if estimate momentum persists.
This is our short term rating system that serves as a timeliness indicator for stocks over the next 1 to 3 months. How good is it? See rankings and related performance below.
The Zacks Industry Rank assigns a rating to each of the 265 X (Expanded) Industries based on their average Zacks Rank.
An industry with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%.
The Zacks Sector Rank assigns a rating to each of the 16 Sectors based on their average Zacks Rank.
A sector with a larger percentage of Zacks Rank #1's and #2's will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4's and #5's.
The sector with the best average Zacks Rank would be considered the top sector (1 out of 16), which would place it in the top 1% of Zacks Ranked Sectors. The sector with the worst average Zacks Rank (16 out of 16) would place in the bottom 1%.
The Style Scores are a complementary set of indicators to use alongside the Zacks Rank. It allows the user to better focus on the stocks that are the best fit for his or her personal trading style.
The scores are based on the trading styles of Value, Growth, and Momentum. There's also a VGM Score ('V' for Value, 'G' for Growth and 'M' for Momentum), which combines the weighted average of the individual style scores into one score.
Value ScoreA
Growth ScoreA
Momentum ScoreA
VGM ScoreA
Within each Score, stocks are graded into five groups: A, B, C, D and F. As you might remember from your school days, an A, is better than a B; a B is better than a C; a C is better than a D; and a D is better than an F.
As an investor, you want to buy stocks with the highest probability of success. That means you want to buy stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Score of an A or a B in your personal trading style.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity. The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season.
The technique has proven to be very useful for finding positive surprises. In fact, when combining a Zacks Rank #3 or better and a positive Earnings ESP, stocks produced a positive surprise 70% of the time, while they also saw 28.3% annual returns on average, according to our 10 year backtest.
Draganfly is a small-cap drone and software developer with defense-adjacent exposure through military and government UAV work. In fiscal Q1 2026, revenue rose to $2.3 million, and gross profit improved despite an inventory write-down that pressured reported margin. The quarter also highlighted progress that can matter for defense adoption, including a Canadian Armed Forces capability demonstration and a SwarmOS integration milestone with Palladyne AI aimed at autonomous swarm operations.
Potential Risks
Losses remain sizable, and the cash jump was driven by financing, raising dilution risk if burn persists. Contract timing and component costs can keep results choppy.
Forecast
A Zacks Rank #2 is supportive, but a D for Value and an F for Growth and Momentum signal weak style-factor backing. The chart shows 2026-2027 consensus EPS resetting higher, yet surprises are mixed and the price remains well below those forward tracks.
The Zacks Rank is a proprietary stock-rating model that uses trends in earnings estimate revisions and earnings-per-share (EPS) surprises to classify stocks into five groups: #1 (Strong Buy), #2 (Buy), #3 (Hold), #4 (Sell) and #5 (Strong Sell). The Zacks Rank is calculated through four primary factors related to earnings estimates: analysts' consensus on earnings estimate revisions, the magnitude of revision change, the upside potential and estimate surprise (or the degree in which earnings per share deviated from the previous quarter).
Zacks builds the data from 3,000 analysts at over 150 different brokerage firms. The average yearly gain for Zacks Rank #1 (Strong Buy) stocks is +23.62% per year from January, 1988, through June 2, 2025.
Selections for Best Defense Stocks are based on the current top ranking stocks on Zacks Indicator Score, Style Scores and fundamentals. All stocks have a daily trading volume of at least 100,000 shares and has a stock price of at least $5. All information is current as of market open, May 13, 2026.
General questions about defense stocks
What are defense stocks?
Defense stocks are shares of companies that develop, manufacture, and maintain military equipment, weapons systems, aircraft, cybersecurity solutions, and space infrastructure. Many balance government contracts with commercial operations.
What are the benefits of investing in defense stocks?
Long government contract visibility: Multi-year deals provide predictable revenue.
High barriers to entry: Regulatory and technical requirements limit competition.
Dividend potential: Some established contractors pay steady dividends.
Strategic importance: Defense spending tends to continue even during economic slowdowns.
Why do defense stocks go up during wars or conflicts?
Periods of heightened conflict often signal future increases in military procurement, which can lead to higher demand for weapons systems, logistics support, and modernization programs.
How does government spending affect defense stocks?
Defense budgets are a primary revenue driver. In the U.S., annual appropriations well above $800 billion in recent years support sustained demand for existing and next-generation systems.
Contract awards, budget extensions, and supplemental funding directly add to order backlogs.
Are defense stocks recession-proof?
Defense equities are often considered defensive because government contracts are less sensitive to consumer demand cycles. During downturns, primes like Lockheed Martin and General Dynamics have often shown smaller drawdowns than highly cyclical groups, benefiting from ongoing military spending. However, they are still equities and can decline during broad market downturns.
Which defense stocks perform best during inflation?
Companies with strong pricing power or contracts with cost-inflation adjustments tend to weather inflation better. Digital solutions, avionics, and advanced systems providers often have more margin resilience than heavy industrial manufacturers.
Can defense stocks be held forever?
Some investors hold major primes indefinitely due to stable cash flows and dividends. However, long-term technological shifts and defense policy priorities should prompt periodic portfolio review.
Are defense stocks ethical investments?
Opinions vary. Some investors avoid defense due to ESG concerns, while others view national security as a necessary public good. Investment suitability depends on personal values.
Defense stocks: Comparative and Risk Evaluation
Defense stocks vs. defense ETFs: Which is better?
Individual stocks offer company-specific upside but carry higher singular risk. Defense-oriented ETFs like the iShares U.S. Aerospace & Defense ETF (ITA) or SPDR S&P Aerospace & Defense ETF (XAR) provide diversified exposure across contractors.
Are defense stocks risky?
Key risks include:
Budget cuts or changes in procurement priorities.
Delays or cancellations of major programs.
Export restrictions and geopolitical policy shifts.
Smaller or niche players often experience greater volatility than large primes.
How dependent are defense companies on government contracts?
Many defense firms derive a significant portion of revenue from government orders. Primes like Lockheed Martin or Northrop Grumman often see more than half of their revenues tied to defense budgets.
Emerging companies like Intuitive Machines also work with NASA and the Department of Defense for space and communications services.
Do defense stocks do well in bear markets?
Defense names sometimes outperform more cyclical sectors because their sales are backed by government spending. But they still may decline in broad market selloffs.
Should defense stocks be part of a diversified portfolio?
Including defense stocks can add diversification benefits — particularly exposure to government-linked revenue streams — but concentration risk should be managed with balance across other industries.
Defense stocks strategies and portfolio
How to select defense stocks
Consider:
Contract backlog and visibility.
Balance-sheet health.
Dividend track record and payout ratio.
Exposure to next-generation technologies (hypersonics, AI, space).
International sales mix.
Which defense stocks perform best during inflation?
Look for firms with adaptable pricing terms in contracts and strong margins, such as avionics and systems integrators.
When should I sell defense stocks?
Consider selling when:
Valuations become extended relative to fundamentals.
Major programs are canceled or reduced.
Strategic focus shifts away from core growth areas.
Can defense stocks be held forever?
Long-term holding can make sense for stable, dividend-paying defense giants, but technological disruption and budget evolutions necessitate regular reassessment.
Defense stocks alternatives
If you want exposure to security themes without individual defense equities, alternatives include:
Broad industrial or technology ETFs with defense allocations.
International aerospace firms.
Cybersecurity companies supporting military and government networks.
Space infrastructure players like Intuitive Machines, which bridge commercial exploration and national security roles.
Bottom line
The best defense stocks combine government-linked demand with innovation and balance-sheet strength. Large primes like Lockheed Martin, RTX, Northrop Grumman, and General Dynamics anchor many portfolios, while emerging space-defense companies such as Intuitive Machines offer higher growth potential.
Balancing diversification, valuation discipline, and strategic themes — from traditional weapons systems to space-enabled defense infrastructure — can help investors navigate this complex sector.
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