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Market themes↑ heating up

The war-driven defense buildup

The Iran war and a proposed $1.5 trillion budget are filling missile makers' order books, but their stocks have stalled.

Market value moved since Jan 2026
−$38Bwinners

Combined change in market value of the companies the theme hits directly. Ripple effects aren't counted, and not every dollar of each move is down to this theme.

What's happening

War becomes revenue in steps. Congress appropriates money, the Pentagon signs contracts, and companies add them to backlog. Revenue arrives only as weapons are delivered, over years. On Jan. 7, Trump called for a $1.5 trillion military budget for fiscal 2027, up from $901 billion, with $350 billion through a separate bill stalled in the Senate. He also barred buybacks and dividends at contractors that fall behind on production. The U.S.-Israeli war on Iran, which began in late February, used up interceptors. In June Lockheed won up to $35 billion to raise THAAD output from 96 to 400 a year over seven years. On Oct. 22 the Pentagon and Lockheed reached a 10-year framework for 850 F-35s, not yet priced or funded. A June request for $87.6 billion in war funding has not passed. Since Oct. 1 a stopgap has held Pentagon spending at last year's levels and barred faster production, through Dec. 11.

Who wins, who pays, and why

Missile and interceptor makers win first, because the war used up what they build. Lockheed's missile sales grew 24% last quarter; its backlog hit a record $292 billion, including a $52.5 billion PAC-3 order. Raytheon's sales rose 14% on Patriot and Standard Missile. Northrop's backlog reached a record $109.6 billion. Software and space suppliers gain more slowly: Palantir is helping build software for Golden Dome, a missile shield the Pentagon prices at $185 billion through 2035. Shareholders give up cash: under the January order, Lockheed bought back no stock in the first half, after $1.25 billion a year earlier. And the stocks priced in the demand early. In March the sector traded at 32 times expected earnings, against 20 for the S&P 500, so orders lifted prices only in October.

Where it stands Lockheed rose 24% from Oct. 9 to Oct. 28 on record orders and an F-35 deal, but Congress has not funded the F-35 buy or the 2027 budget.

Who wins, who loses

Tends to rise
  • LockheedLMT
    +$27B market value since Jan 2026

    Backlog hit a record $292 billion, including a $52.5 billion PAC-3 award; shares rose 7% Oct. 22 on results and an F-35 framework.

    Read the breakdown →
  • RTXRTXnot in the 100
    −$6B market value since Jan 2026

    Raytheon sales rose 14% last quarter on Patriot, Standard Missile and Tomahawk; defense is $164 billion of its $340 billion backlog.

  • Northrop GrummanNOCnot in the 100
    −$19B market value since Jan 2026

    Backlog reached a record $109.6 billion in September, yet shares are down 9% since Jan. 6 and 28% from their March 2 peak.

  • General DynamicsGDnot in the 100
    −$8B market value since Jan 2026

    Its defense units booked $14.7 billion of orders last quarter; it also builds Gulfstream jets. Shares are down 8% since Jan. 6.

  • L3Harris TechnologiesLHXnot in the 100
    −$14B market value since Jan 2026

    Makes missile rocket motors and space sensors; shares are down 25% since Jan. 6, including a drop after it ousted its CEO in August.

  • Kratos Defense & Security SolutionsKTOSnot in the 100
    −$9B market value since Jan 2026

    Drone and hypersonic test vehicle maker; rose 13.8% on Jan. 8 after the budget call, then fell 54% by Oct. 9.

  • AeroVironmentAVAVnot in the 100
    −$9B market value since Jan 2026

    Drone maker rose 8.3% on Jan. 8, then fell 57% after cutting its forecast in March when the Space Force ended a contract.

  • Palantir TechnologiesPLTRripple effect

    U.S. government revenue rose 90% to $809 million last quarter, 42% of sales; it is helping build Golden Dome's software.

    Read the breakdown →
  • General ElectricGEripple effect

    Defense and propulsion revenue rose 16% to $3.4 billion last quarter, about a quarter of sales; airline engines drive the rest.

    Read the breakdown →
  • BoeingBAripple effect

    Beat Northrop to build the Navy's next carrier fighter, F/A-XX, on Sept. 29; development is worth over $20 billion. Commercial jets still drive the stock.

    Read the breakdown →
  • Rocket Lab CorporationRKLBripple effect

    Won an $816 million Space Development Agency contract for 18 missile-tracking satellites, its largest ever, with deliveries through 2029.

    Read the breakdown →
Tends to fall

None identified yet.

    When it moved markets

    1. Week of Oct 19Lockheed rose 7% on Oct. 22 after reporting a record $292 billion backlog and a 10-year framework for 850 F-35s; it gained 9.4% for the week.
    2. Week of Jul 20Lockheed rose 10.5% on July 23 after raising its forecast on a record $230 billion backlog; RTX rose 10% for the week after raising its own.
    3. Week of Jun 15The U.S. and Iran signed a deal to end the war. Lockheed fell 4% on June 18 and 5.4% for the week; Northrop fell 5.2%.

    Sources

    1. 1LMT historical prices · Yahoo Finance, 2026-10-09
    2. 2RTX historical prices · Yahoo Finance, 2026-10-09
    3. 3NOC historical prices · Yahoo Finance, 2026-10-09
    4. 4GD historical prices · Yahoo Finance, 2026-10-09
    5. 5LHX historical prices · Yahoo Finance, 2026-10-09
    6. 6KTOS historical prices · Yahoo Finance, 2026-10-09
    7. 7AVAV historical prices · Yahoo Finance, 2026-10-09
    8. 8Lockheed Martin Form 10-Q, quarter ended June 28, 2026 (shares outstanding) · Lockheed Martin via SEC EDGAR, 2026-07-21
    9. 9RTX Form 10-Q, quarter ended June 30, 2026 (shares outstanding) · RTX via SEC EDGAR, 2026-07-23
    10. 10Northrop Grumman Form 10-Q, quarter ended June 30, 2026 (shares outstanding) · Northrop Grumman via SEC EDGAR, 2026-07-21
    11. 11General Dynamics Form 10-Q, quarter ended April 5, 2026 (shares outstanding) · General Dynamics via SEC EDGAR, 2026-04-29
    12. 12L3Harris Form 10-Q, quarter ended July 3, 2026 (shares outstanding) · L3Harris via SEC EDGAR, 2026-07-24
    13. 13Kratos Form 10-Q, quarter ended June 28, 2026 (shares outstanding) · Kratos via SEC EDGAR, 2026-08-05
    14. 14AeroVironment Form 10-Q, quarter ended Aug. 1, 2026 (shares outstanding) · AeroVironment via SEC EDGAR, 2026-09-09
    15. 15'BEWARE': Trump order demands some defense firms halt paying dividends, buying back stock · Breaking Defense, 2026-01-07
    16. 16Defense Stock Rally Extends as Geopolitics Stays Tense · Bloomberg, 2026-01-08
    17. 17Global defense stocks advance after Trump calls for higher US military budget · Reuters via Yahoo Finance, 2026-01-08
    18. 18Lockheed Martin and the U.S. Department of War Expand THAAD Interceptor Production · Lockheed Martin, 2026-01-29
    19. 19US defense stocks see no Iran war lift after early surge · Reuters via Defense News, 2026-04-02
    20. 20Golden Dome's projected cost just jumped $10 billion · Defense One, 2026-03-17
    21. 21Lockheed inks massive THAAD deal worth up to $35B · Breaking Defense, 2026-06-24
    22. 22White House sends Congress $87.6 billion supplemental spending request after Iran war · Stars and Stripes, 2026-06-24
    23. 23Lockheed Martin Reports Second Quarter 2026 Financial Results (Exhibit 99.1) · Lockheed Martin via SEC EDGAR, 2026-07-23
    24. 24Lockheed Martin lifts 2026 forecasts as Pentagon seeks to restock weapons · Reuters via BNN Bloomberg, 2026-07-23
    25. 25RTX Reports Q2 2026 Results (Exhibit 99) · RTX via SEC EDGAR, 2026-07-23
    26. 26Northrop Grumman Reports Second Quarter 2026 Financial Results · Northrop Grumman via SEC EDGAR, 2026-07-21
    27. 27General Dynamics Reports Second-Quarter 2026 Financial Results · General Dynamics, 2026-07-29
    28. 28L3Harris ousts CEO Kubasik over conduct breach, names insider Mehta as replacement · Reuters via BNN Bloomberg, 2026-08-17
    29. 29AeroVironment falls after revenue, profit miss and lowered outlook · Seeking Alpha, 2026-03-10
    30. 30Palantir Technologies Q2 2026 earnings summary · Quartr, 2026-08-03
    31. 31GE Aerospace Announces Second Quarter 2026 Results · GE Aerospace via SEC EDGAR, 2026-07-16
    32. 32Boeing Reports Second Quarter Results · Boeing via SEC EDGAR, 2026-07-28
    33. 33Rocket Lab Awarded $816M Prime Contract to Build Missile-Defense Satellite Constellation for U.S. Space Force · Rocket Lab, 2025-12-19
    34. 34The fight over the FY27 defense budget is on. Here's 13 key issues for Congress to resolve. · Breaking Defense, 2026-08-27
    35. 35House passes funding stopgap, averting government shutdown in October · Breaking Defense, 2026-09-01
    36. 36The Pentagon Starts Fiscal 2027 on a Stopgap · ClearanceJobs, 2026-10-01
    37. 37Defense Stocks Stand Down: Why NOC, LMT, RTX & Others Lag Amid U.S.-Iran War · Schwab Network, 2026-09-04
    38. 38Oil prices fall, stocks rally as US, Iran sign framework to end war · Al Jazeera, 2026-06-18
    39. 39Lockheed Martin Reports Third Quarter 2026 Financial Results (Exhibit 99.1) · Lockheed Martin via SEC EDGAR, 2026-10-22
    40. 40New Framework Agreement for Multiyear F-35 Production and Sustainment · Lockheed Martin, 2026-10-22
    41. 41Pentagon, Lockheed agree to 10-year deal for 850 F-35 jets · Defense News, 2026-10-22
    42. 42Lockheed receives up to $53.9B to boost PAC-3 MSE production · The Defense Post, 2026-07-31
    43. 43Navy Selects Boeing to Build Next-Generation F/A-XX Fighter · AVweb, 2026-09-30
    44. 44RTX Reports Q3 2026 Results (Exhibit 99) · RTX via SEC EDGAR, 2026-10-20
    45. 45Northrop Grumman Reports Third Quarter 2026 Financial Results · Northrop Grumman via SEC EDGAR, 2026-10-20
    46. 46Lockheed Martin (LMT) historical prices · Yahoo Finance, 2026-10-28
    47. 47Northrop Grumman (NOC) historical prices · Yahoo Finance, 2026-10-28