Prospective and current holders of defense stocks are sure to be fixated on Congress' next budget battle.
That's because if the Trump administration gets what it's seeking, the American war machine could experience its largest growth spurt since World War II.
The White House recently unveiled its budget proposal for America's fiscal year 2027, requesting among other things a defense budget of $1.5 trillion — a jump of 44% from fiscal 2026's enacted level.
According to JPMorgan, this would be the biggest single-year increase since 1951, amid both the Korean War and a military build-up to deter the Soviet Union.
But we're not here to horserace whether the Republican-controlled Congress will push the White House wish list to the finish line — it's an open question given the size and the unpopularity of the war in Iran. Instead, with the spotlight firmly fixed on military-linked businesses at the moment, we're simply here to help identify some of the best defense stocks in the space.
Defense stocks: Defensive plays that can play offense, too
We frequently refer to consumer staples stocks and utility stocks as "defensive" sectors because of how relatively protected their top and bottom lines are. When the economy is hurting, people might go out to restaurants less or avoid buying a few extra outfits, but they're still going to go to the grocery store and keep the lights on.
But you can make the argument that defense stocks, which feature a lot of locked-in spending from Washington, are mighty defensive in their own right.
"Defense budgets are among the most stable line items in federal appropriations," writes Rene Reyna, head of Thematic and Specialty Product Strategy ETFs and Indexed Strategies at Invesco. "U.S. military expenditures have remained steady at 3.4% of GDP."
He adds that the industry offers low correlation to broader markets, and that "defense stocks often outperformed during periods of geopolitical stress, largely because of long-term government contracts."
But the defense industry is also packed with growth opportunities — and not just from the U.S.' blockbuster budget.
According to a report from the International Institute for Strategic Studies (IISS), "European spending continued to grow at record levels, with the region allocating almost $563 billion to [defense] in 2025, almost $100 billion more than the year before."
Asian defense spending didn't grow at quite so rapid a clip, but it did accelerate, to 5.7% expansion in 2025 from 5.5% in 2024. Chinese and Russian aggression, as well as America's pullback from providing international security, were among the top drivers of spending.
How I picked the best defense stocks to buy
The aerospace and defense industries are tethered at the hip — so much so that "Aerospace & Defense" is a singular industry under the Global Industry Classification Standard (GICS).
The problem is that not every aerospace company deals in defense, and vice versa. You have to examine each company individually to get an idea of how deeply tied it is to the Pentagon.
So, I started out by screening for stocks that meet the following criteria:
- They belong to the Aerospace & Defense GICS industry.
- They have a market value of at least $300 million. I'm happy to include both large, established names and more nimble small-cap stocks, but to eliminate at least a little risk, I'm excluding microcaps and smaller.
- Their primary listing is on a U.S. stock exchange.
- They have a consensus Buy rating according to S&P Global Market Intelligence. S&P converts analyst ratings into a numerical scale; anything with a score of 2.5 or lower is considered a Buy, and the lower the score, the better the consensus rating.
- Wall Street analysts expect long-term earnings per share (EPS) growth of at least 10% annually over the next three-to-five years. In other words, there's room for both breakneck growth stocks, but also more stable companies, value-oriented companies that still have a decent expansion forecast.
Once that was done, I started looking the remaining companies' annual reports and other Securities and Exchange Commission (SEC) documents to determine whether they derived a significant amount of revenues from the U.S. Department of Defense, other federal agencies, and/or other countries' militaries.
You might notice that several well-known defense juggernauts did not make the cut. That's in large part because many defense names have run up significantly over the past year or so — many of them still remain "Buys," but with less conviction than the qualifying names here, in large part because some of their covering analysts have valuation concerns.
One last note: If you're not a stock picker, but instead would like to harness the industry through investment funds instead, check out our look at the best aerospace and defense ETFs.
Data is as of April 9.
- Market value: $66.9 billion
- Dividend yield: 1.4%
- Consensus rating: 1.67 (Buy)
L3Harris Technologies (LHX) provides government and commercial customers worldwide with end-to-end, mission-critical solutions across air, land, sea, space and cyber.
The company's segments include Space & Mission Systems (SMS), Communications & Spectrum Dominance (CSD) and Missile Solutions. Among the products and services LHX provides are precision guided munitions and subsystem solutions, electronic warfare capabilities, battlefield systems, communications and information management technologies, among many others. Some of its branded products include the portable Vampire weapon system, Iver unmanned underwater vehicles, OA-1K Skyraider II aircraft, and AN/PRC-163 handheld radios.
L3Harris' revenues are highly dependent on military spending, with the government accounting for 75% of 2025's bottom line. But its government ties are largely viewed as a positive by the Street.
"LHX includes the only proven orbiting system able to track hypersonic missiles, likely a critical need for the Trump administration's Golden Dome, the planned missile defense system for the U.S.," writes Argus Research analyst Kristina Ruggeri, who rates the stock at Buy. "L3Harris also provides communications and electronic systems for both government and commercial customers, including Lockheed Martin's F-35 supersonic jet. … We expect ongoing geopolitical tensions to provide sales and earnings growth for LHX well into the future."
Fifteen analysts currently view LHX as Buy-worthy right now. That contrasts well against just six Hold calls and zero Sells. Meanwhile, the consensus estimate for long-term EPS growth sits at 18%.
The company also pays a dividend that currently yields a little bit more than the broader market. The payout dates back to 1989 — long before the 2019 merger of Harris Corp. and L3 Technologies that created the current entity.
- Market value: $9.0 billion
- Dividend yield: N/A
- Consensus rating: 1.63 (Buy)
AeroVironment (AVAV) is a defense contractor that specializes in autonomous robotic systems. It provides uncrewed aircraft systems (UAS), loitering munitions solutions (drones that can effectively hover while identifying targets), uncrewed ground systems and unmanned maritime solutions. Products include the Puma LE ultra-lightweight aircraft, which is launchable by hand; Jump 20-X fixed-wing UAS; and Switchblade 600 Block 2 loitering munition.
AVAV also offers more than just autonomous systems. Its Badger system, for instance, is a multi-beam, multi-band ground terminal used for SATCOM, telemetry and electronic warfare missions. And the 2025 acquisition of BlueHalo also brought aboard the company's space-qualified hardware, which includes command and data handling products, spacecraft control solutions and more.
This is among the most Pentagon-dependent companies on the list. While AeroVironment doesn't break out its revenues, the company's SEC filings explain that its two reportable segments — Autonomous Systems (AxS), and Space, Cyber, and Directed Energy (SCDE) — primarily serve "organizations within or supplying the U.S. Department of Defense, other federal agencies, and international allied governments.
The company recently won a couple of Army contracts, including a $117 million deal for its P550 Group 2 aircraft and an $18 million contract for its Red Dragon long-range attack drone systems.
"These [contracts] are significant as the Army is expected to spend over $1 billion for long-range reconnaissance systems over the next 10 years," say a team of William Blair analysts, who rate the defense stock at Outperform (equivalent of Buy). "We also expect AeroVironment to win a contract for its LOCUST laser system over the next couple of months."
Stifel analysts (Buy) also highlight AVAV as a potential winner from the White House's fiscal 2027 budget proposal. "The Army's Launched Effects program request increased 119% y/y to $816 million, which aligns directly with AVAV's family of UAVs, including the Switchblade line, Red Dragon, Puma, and more," they write.
All told, AVAV boasts 16 Buys against three Holds and no Sells. Meanwhile, consensus estimates for long-term annual earnings growth sit at just under 20%.
- Market value: $172.9 billion
- Dividend yield: N/A
- Consensus rating: 1.56 (Buy)
Most people will instantly recognize Boeing (BA) for its non-military products. Namely, it's one of the world's largest commercial aircraft makers, sharing an effective duopoly with Europe's Airbus (EADSY) – the former enjoys a 40% share to the latter's 56%.
However, Boeing is a major military player, too. Its Defense, Space & Security division, which makes up roughly 30% of revenues, produces aircraft such as the F/A-18 Super Hornet, AH-64 Apache helicopter, P-8 Poseidon maritime patrol aircraft and the KC-46 aerial refueling tanker.
Of course, Boeing is also the largest contractor to NASA, so at least some those revenues aren't necessarily military-related. That said, its Global Services division, which accounts for another 25% of revenues, provides maintenance, training and logistics support to both commercial and defense, so that's some additional revenue that can be chalked up to the Pentagon.
This is the most muddied play on defense of the bunch, which means we do have to be cognizant of its commercial business, which is looking up.
"737 and 787 continue to show stability on ramping production rates, while certification progress on programs like 737-10 and 777-9 are promising steps forward," say BofA Global Research analysts, who rate the blue chip stock at Buy. "We see upside to BA's 2026 delivery targets for both 737 and 787, expecting 504 737 MAX deliveries and 100 787 deliveries in 2026. Record commercial backlog of $567 billion at year end highlights the opportunity available if BA continues along its path of methodical operational improvement."
Still, Wall Street's bullish view — BA has 22 Buys against four Holds and one Sell, and expect long-term EPS growth to average a doubler a year (off a very low floor after years of losses) — includes positivity over its military offerings, too.
"We continue to view Boeing as a key beneficiary of the Trump administration, as aircraft sales are viewed as a key negotiating tactic for trade deals, aircraft sales are key to GDP growth, and Boeing can serve numerous defense priorities such as the Golden Dome for America program," say William Blair analysts, who rate the Dow Jones stock at Outperform.
- Market value: $12.8 billion
- Dividend yield: N/A
- Consensus rating: 1.55 (Buy)
There's no confusion about how military-facing Kratos Defense & Security Solutions' (KTOS) business is.
Kratos provides unmanned platforms such as the high-performance XQ-58 Valkyrie tactical drone, BQM-167 and BQM-177 targets (used for training against threat-representative target systems), and the Mako, which works alongside manned fighter jets on tactical missions.
It also produces hypersonic systems such as the Erinyes and Dark Fury flyers, virtualized ground systems, space networks, microwave electronics, even virtual reality-based combat training platforms.
While some of Kratos' solutions do have commercial applications, the company derives roughly 80% of its revenues from the government.
KTOS recently received an upgrade to Buy from Jefferies analyst Sheila Kahyaoglu, who says the bull case is "bolstered by missile demand" and believes Kratos Government Solutions (KGS) could deliver annual revenue growth of more than 30%.
"Growth is bolstered by ramping hypersonic sales, which KTOS expects to double to ~$400 million in 2026, followed by another 75% YoY in 2027 to ~$700 million," she says. "Within KGS, Kratos Turbine Technologies (KTT) has an opportunity in missile propulsion programs including Prometheus, where $50,000 to $60,000 engines for 100s of missiles in 2026 could become 1,000s in 2028."
Wall Street has similarly optimistic views about KTOS' bottom line, expecting roughly 34% annual earnings growth over the next five years. Unsurprisingly, then, the industrial stock is full of bulls; its 16 Buys are opposed by just four Holds and no Sells.
- Market value: $12.5 billion
- Dividend yield: 0.8%
- Consensus rating: 1.50 (Strong Buy)
Leonardo DRS (DRS) is one of the purest plays among the market's top defense stocks. Only 12% of its revenues come from commercial customers, which shouldn't be a surprise. DRS isn't shy about what it is:
"Leonardo DRS is a leading provider of defense products and technologies that provide battlefield superiority today while shaping the battlefield of tomorrow for the U.S. military and our allies abroad."
The company operates through two segments — Advanced Sensing and Computing, and Integrated Mission Systems — though its key technologies are broken down into advanced sensing, network computing, force protection and electronic power and propulsion.
Leonardo DRS provides power electronics and active protection systems for tanks; missile warnings and degraded visual environment sensors for aircraft; communications, radar systems and electric propulsion for naval craft; weapon sights, night vision goggles for soldiers; and much more.
Its technologies are found across many of the biggest names in the military: Apache helicopters, Bradley tanks, F-35 jets, Patriot missile defense systems and the USS Virginia, among others.
And while the company generally doesn't target commercial applications, this past quarter, it entered into a 10-year, $100 million agreement to license its laser intellectual property to a leading quantum computing technology firm.
Still, the main draw here is defense.
"We view DRS as a compelling SMID-cap defense play that will help fill the void left by recent acquisitions in the sector and believe scarcity value alone makes the story attractive," says Truist Managing Director Michael Ciarmoli, who rates shares at Buy. "The company has broad program exposure to next-gen systems and capabilities. While U.S. defense budget uncertainty is a risk factor, we believe the company offers investors insulation from economic unknowns in the coming periods. Over time, we anticipate margins will expand and the company's valuation gap will narrow."
DRS' bottom-line growth projections are the most muted of the bunch, at 12% annually, though the stock also offers a modest yield on its nascent dividend, which kicked off in 2025. It also features the smallest coverage group, at just 10 analysts. But they're overwhelmingly positive, at eight Buys versus two Holds and nary a Sell.
