Best Defense Stocks to Buy in 2026: Top 8 Picks for Maximum Returns

Defense stocks are delivering some of the strongest returns on Wall Street in 2026, fueled by a proposed $1.5 trillion FY2027 defense budget and escalating geopolitical tensions across multiple theaters. With the sector up over 38% year-to-date, investors are asking a critical question: which defense stocks deserve a spot in your portfolio right now?

We spent weeks analyzing Pentagon contract filings, earnings transcripts, SEC 10-K reports, and backlog data across every major defense contractor. This guide breaks down the 8 best defense stocks to buy in 2026, ranked by a combination of backlog strength, contract pipeline visibility, valuation, and exposure to the three mega-trends reshaping the sector: the Golden Dome missile shield, autonomous combat drones, and AI-driven cybersecurity.

Why Defense Stocks Are Surging in 2026

Three forces are converging to create what many analysts call the strongest defense spending environment since the Reagan-era buildup of the 1980s.

First, the numbers are staggering. President Trump released his FY2027 budget request on April 3, 2026, proposing $1.5 trillion in total defense spending. That includes a $1.15 trillion base budget, which would mark the first time base defense spending crosses the $1 trillion threshold, plus $350 billion from a reconciliation bill. For context, FY2026 authorized $924.7 billion with an additional $151 billion in reconciliation funds. The proposed increase represents roughly a 24% jump in base spending and a 39% increase in total defense resources compared to FY2026 levels.

Second, the weapons inventory is depleted. Years of drawdowns supporting Ukraine, Israel, and Taiwan contingency planning have thinned stockpiles of Javelin anti-tank missiles, HIMARS ammunition, Patriot interceptors, and 155mm artillery shells. Much of the FY2026 and FY2027 contracting activity focuses on replenishment, which means guaranteed production contracts rather than speculative R&D spending. The Trump administration specifically requested $2.5 billion for increased missile and munitions production in the current fiscal year.

Third, the Golden Dome changes everything. The Pentagon’s $185 billion missile defense initiative, formally announced in early 2026, is the largest single defense program since the Strategic Defense Initiative. With $17.5 billion requested in the FY2027 budget alone, Golden Dome encompasses space-based sensors ($7.2 billion), military satellites ($3.6 billion), targeting satellites ($2 billion), next-gen ICBM interceptors ($800 million), and space command systems ($350 million). Companies positioned across this value chain are seeing contract awards accelerate.

Best Defense Stocks to Buy Right Now

1. Lockheed Martin (LMT) — The Undisputed King of Defense

Stock Price: $637.90 | Market Cap: ~$147B | Dividend Yield: ~2.1%

Lockheed Martin remains the world’s largest defense contractor and the single biggest supplier to the U.S. government. When we look at the numbers, the investment thesis is almost self-evident: a record backlog of $194 billion provides multi-year revenue visibility that virtually no other industrial company can match.

For 2026, management guided revenue between $77.5 billion and $80 billion, implying approximately 5% organic growth. But the real catalyst is what sits in the pipeline. Lockheed is a confirmed prime contractor on the Golden Dome space-based interceptor program, alongside Northrop Grumman and Anduril Industries. The F-35 program continues generating predictable cash flows with over 3,500 jets planned across allied nations, and the company’s Sikorsky helicopter division secured a $5.8 billion Black Hawk replacement contract in Q1 2026.

What makes Lockheed particularly attractive at current prices is valuation. The stock trades at roughly 17x forward earnings, cheaper than the S&P 500 average and the least expensive among its defense peers. Add a 2.1% dividend yield that has grown for 23 consecutive years, and you have a rare combination of growth and income in a sector with decades-long tailwinds.

2. RTX Corporation (RTX) — The Missile and Radar Powerhouse

Stock Price: $198.41 | Market Cap: ~$266B | Dividend Yield: ~1.8%

RTX Corporation, formed from the 2020 merger of Raytheon and United Technologies, holds the largest combined order book in the defense industry at a record $268 billion (as of Q4 2025). The company operates across three segments following its 2023 reorganization: Collins Aerospace, Pratt & Whitney, and Raytheon (which consolidated the former Missiles & Defense and Intelligence & Space divisions).

The investment case for RTX centers on its unique dual-engine business model. On the defense side, Raytheon Missiles & Defense is the primary manufacturer of Patriot air defense systems, Tomahawk cruise missiles, and Stinger/Javelin systems, all of which are seeing massive restocking orders. The Trump administration’s $2.5 billion missile production request flows directly to RTX’s production lines.

On the commercial side, Pratt & Whitney’s GTF engines power the Airbus A320neo family, the bestselling narrow-body aircraft in history. This creates a revenue stream that is largely independent of defense budgets, providing a natural hedge. Management has guided for sustainable margin expansion through 2028 as production rates normalize after the powder metal inspection issue that plagued 2024.

RTX is also deeply embedded in Golden Dome through its radar and sensor capabilities. Raytheon’s space-based sensor technology and missile tracking systems are core components of the $7.2 billion space sensor allocation.

3. Northrop Grumman (NOC) — Stealth, Space, and Golden Dome

Stock Price: $695.79 | Market Cap: ~$102B | Dividend Yield: ~1.3%

Northrop Grumman is arguably the most strategically positioned defense contractor heading into the back half of this decade. The company holds prime contractor positions on three of the most significant military programs in a generation: the B-21 Raider stealth bomber, the F/A-XX next-generation fighter for the Navy, and the Sentinel (GBSD) intercontinental ballistic missile.

Management guided for 4.5% revenue growth in 2026, but analysts at KeyBanc and Goldman Sachs expect Northrop to exceed that figure as several large government awards come through. The company is a confirmed Golden Dome contractor for space-based interceptors and satellite systems, and its Space Systems division builds the payloads that sit atop many of the Pentagon’s most classified orbital assets.

The B-21 Raider program alone is worth watching. With a potential 100+ aircraft order and per-unit costs that Northrop has kept under the $700 million target, the program provides decades of production revenue. The Air Force has begun operational testing at Edwards Air Force Base, and analysts expect a production ramp in 2027 that could add $3-4 billion in annual revenue.

For investors willing to pay a slight premium, Northrop offers the deepest exposure to the classified defense programs that are growing fastest. The average analyst price target sits near $690 (per StockAnalysis consensus of 17 analysts), roughly in line with the current price, but Golden Dome contract awards flowing through Q2 and Q3 2026 could push targets significantly higher.

4. General Dynamics (GD) — Submarines, Tanks, and Gulfstream Jets

Stock Price: $351.39 | Market Cap: ~$95B | Dividend Yield: ~1.6%

General Dynamics occupies a unique niche in the defense ecosystem. Through its Electric Boat division, it is one of only two companies on Earth capable of building nuclear submarines, and it holds the contract for the Columbia-class ballistic missile submarine, the Pentagon’s top acquisition priority.

The FY2027 budget proposal includes $65.8 billion for naval shipbuilding, covering 18 battle force ships and 16 non-battle force ships. Electric Boat is the primary beneficiary of this allocation, with Columbia-class production running at one boat per year and Virginia-class attack submarine production expected to ramp to two per year by 2028. The combined submarine backlog exceeds $40 billion.

Beyond submarines, General Dynamics Land Systems builds the Abrams main battle tank and Stryker armored vehicles, both of which are seeing upgraded variants ordered by the Army and international customers. The GDIT (General Dynamics Information Technology) division competes with Leidos for large-scale federal IT contracts.

The Gulfstream Aerospace division provides a commercial revenue stream through its G700 and G800 ultra-long-range business jets, which hold a 3-year order backlog. This diversification reduces the company’s reliance on any single defense program, making GD a lower-volatility way to play the defense spending cycle.

5. Boeing (BA) — The Turnaround Play With Defense Upside

Stock Price: $212.30 | Market Cap: ~$157B | Dividend Yield: N/A

Boeing is the most polarizing name on this list, and intentionally so. The company’s defense division, Boeing Defense, Space & Security (BDS), has been a cash incinerator in recent years, with fixed-price development contracts on the T-7A Red Hawk trainer, MQ-25 Stingray drone tanker, KC-46 Pegasus tanker, and VC-25B (Air Force One replacement) all running over budget.

So why include it? Because the worst is likely priced in, and the catalyst pipeline is real. Boeing’s F/A-18 Super Hornet production line, while winding down for the U.S. Navy, continues generating international orders. The company is the prime contractor on the Space Launch System (SLS) and has exposure to Golden Dome through its satellite and space vehicle programs. The proposed $65.8 billion shipbuilding budget also benefits Boeing’s naval systems division.

On the commercial side, the 737 MAX production rate is gradually recovering, and the 787 Dreamliner remains a cash flow machine. If Boeing can stabilize its defense margins, even getting them back to the 5-6% range from the current negative territory, the stock has significant re-rating potential. At $212, the market is pricing in continued execution failure. Any sign of improvement becomes an asymmetric catalyst.

6. L3Harris Technologies (LHX) — The Electronic Warfare Specialist

Stock Price: $358.73 | Market Cap: ~$67B | Dividend Yield: ~1.5%

L3Harris Technologies has carved out a dominant position in electronic warfare, communications systems, and intelligence, surveillance, and reconnaissance (ISR) platforms. Following the 2019 merger and the subsequent acquisition of Aerojet Rocketdyne’s propulsion business, L3Harris now controls a critical supply chain chokepoint: the solid rocket motors that power many U.S. missile systems.

This vertical integration is exactly what the Pentagon wants. With the defense industrial base under pressure to increase production rates for missile restocking, L3Harris’ Aerojet Rocketdyne division is running at full capacity. The company has invested $350 million in expanding solid rocket motor production facilities, with new capacity coming online in late 2026.

L3Harris also plays a central role in space-based communications for the Golden Dome program, and its tactical radios and secure communications systems are deployed across every branch of the U.S. military. The Artemis II lunar mission, scheduled for later in 2026, features L3Harris-built systems, providing additional visibility.

With 11 analysts rating the stock a Buy and a consensus target implying double-digit upside, L3Harris is the pick for investors who want exposure to the defense electronics and propulsion segments rather than traditional platform builders.

7. Kratos Defense & Security Solutions (KTOS) — The Drone Disruptor

Stock Price: $74.09 | Market Cap: ~$10B | Dividend Yield: N/A

Kratos is the highest-risk, highest-reward pick on this list, and it is potentially the most transformative. The San Diego-based company is at the forefront of the autonomous combat drone revolution, building low-cost, attritable unmanned aircraft that the Pentagon envisions deploying in swarms alongside manned fighters.

The XQ-58 Valkyrie, Kratos’ flagship drone, became the first Collaborative Combat Aircraft (CCA) to achieve formal Program of Record status when the U.S. Marine Corps awarded a $231.5 million contract in January 2026, with Northrop Grumman serving as prime integrator. The Valkyrie is stealthy and subsonic, capable of carrying AIM-120 AMRAAMs from internal bomb bays, with a target per-unit cost below $2 million at volume. Compare that to an F-35 at $80+ million.

Beyond the Valkyrie, Kratos disclosed a classified $750 million program codenamed Poseidon, a sole-source contract for its Air Wolf jet drone, and a fifth-generation drone under development in its Ghost Works division with an expected first flight in H1 2026. The company also secured a $61.1 million Navy contract for BQM-177A aerial targets and was selected for the DoD’s $1.1 billion Drone Dominance Program, which aims to produce approximately 350,000 military drones.

Kratos does not pay a dividend and trades at a premium multiple, reflecting growth expectations. Revenue is expected to inflect sharply in late 2026 and 2027 as production contracts move from prototype to full-rate production. For investors with a 3-5 year horizon and tolerance for volatility, KTOS offers exposure to what could be the most disruptive shift in military doctrine since stealth technology.

8. Leidos Holdings (LDOS) — The AI and Cybersecurity Play

Stock Price: $159.47 | Market Cap: ~$21B | Dividend Yield: ~1.0%

Leidos rounds out this list as the pure-play defense technology and cybersecurity contractor. While it lacks the hardware manufacturing scale of Lockheed or RTX, Leidos dominates the IT services, AI integration, and cyber defense verticals that the Pentagon is pouring money into.

The contract wins in 2026 have been relentless. In March, Leidos secured a $454.9 million contract to modernize the U.S. Air Force’s Cloud One multi-cloud platform, working across AWS, Azure, Google Cloud, and Oracle Cloud Infrastructure. In February, a $142 million award from DISA to modernize the Compartmented Enterprise Services Office brought AI-driven capabilities and Zero Trust security architecture to classified DoD networks.

Leidos also invested in Dropzone AI, bringing agentic cybersecurity capabilities into regulated federal environments. This positions the company at the intersection of two mega-trends: defense cloud modernization and autonomous cyber defense. As the Pentagon pushes its IT infrastructure toward AI-native architectures, Leidos is the contractor best positioned to execute that transition.

At roughly $159, Leidos trades at a discount to its IT services peers, partly because revenue growth is more modest than the hardware primes. But margins are superior, capital requirements are lower, and the recurring nature of federal IT contracts provides exceptional revenue predictability.

Defense Stock Comparison Table

Stock	Price	Market Cap	Backlog	Dividend Yield	Key Catalyst
LMT	$637.90	~$147B	$194B	2.1%	Golden Dome prime, F-35
RTX	$198.41	~$266B	$268B	1.8%	Missile restocking, Patriot
NOC	$695.79	~$102B	$85B+	1.3%	B-21 Raider, Golden Dome
GD	$351.39	~$95B	$95B+	1.6%	Columbia-class submarines
BA	$212.30	~$157B	$520B+ (incl. commercial)	N/A	Margin recovery, shipbuilding
LHX	$358.73	~$67B	$32B+	1.5%	Rocket motors, electronic warfare
KTOS	$74.09	~$10B	$1.5B+	N/A	CCA drones, Drone Dominance
LDOS	$159.47	~$21B	$37B+	1.0%	AI cyber, Cloud One

How to Invest in Defense Stocks

Building a defense portfolio requires balancing several factors: concentration risk across government customers, program execution risk, and the political cycle’s impact on defense budgets.

For most investors, a core position in 2-3 of the large-cap primes (LMT, RTX, NOC, or GD) provides stable, dividend-paying exposure to the secular defense spending trend. These companies have decades-long backlogs, investment-grade credit ratings, and consistent free cash flow generation.

Adding a satellite position in a high-growth name like Kratos (KTOS) or a technology-oriented contractor like Leidos (LDOS) can boost portfolio returns during periods of accelerating contract awards, though with higher volatility.

For investors who prefer broad-based exposure, the iShares U.S. Aerospace & Defense ETF (ITA) and the Invesco Aerospace & Defense ETF (PPA) offer diversified defense exposure in a single ticker. ITA has returned over 38% year-to-date in 2026, outperforming the S&P 500 by a significant margin.

Regardless of your approach, position sizing matters. Defense stocks can experience sharp drawdowns on budget sequestration fears, program cancellations, or shifts in political leadership. Keeping individual defense positions at 3-5% of a diversified portfolio limits downside risk while maintaining meaningful exposure to the sector’s upside.

What Could Go Wrong? Risks to Watch

No investment thesis is complete without a clear-eyed assessment of risks. Defense stocks face several headwinds that could derail the current rally.

Budget reconciliation failure. The proposed $1.5 trillion FY2027 budget depends on $350 billion from a reconciliation bill that has not yet passed Congress. If reconciliation spending is reduced or delayed, the most ambitious programs (including portions of Golden Dome) could see funding cuts. The base budget of $1.15 trillion is more politically durable, but the marginal spending that drives the most growth is in the reconciliation tranche.

Valuation compression. Defense stocks are not cheap by historical standards. With the exception of Boeing (which is cheap for troubled reasons) and Leidos, most large-cap defense names trade at or above their 5-year average forward P/E multiples. If the broader market de-rates due to rising interest rates or recession fears, defense stocks will not be immune.

Supply chain constraints. The defense industrial base is struggling to ramp production fast enough to meet demand. Labor shortages in skilled manufacturing, long lead times for specialized components, and supply chain fragility remain ongoing challenges. Companies that cannot hire and train enough workers will leave revenue on the table regardless of how large their backlogs are.

Program execution. Fixed-price development contracts have burned Boeing, and other contractors are not immune. Northrop’s Sentinel ICBM program has faced cost overruns, and any program breach on B-21 or Golden Dome components could pressure margins across the sector.

The Bottom Line

The defense sector in 2026 offers a rare combination of visible multi-year growth, strong cash generation, and exposure to transformative military technologies. The $1.5 trillion FY2027 budget proposal, the $185 billion Golden Dome program, and the autonomous drone revolution are creating a spending environment that could last well into the 2030s.

Our top picks for long-term investors are Lockheed Martin (LMT) for overall quality and valuation, RTX Corporation (RTX) for dual commercial-defense exposure and the largest order book in the industry, and Kratos Defense (KTOS) for high-growth exposure to the drone disruption thesis. Northrop Grumman (NOC) and L3Harris (LHX) round out a diversified defense allocation for portfolios that can handle 4-5 individual positions in the sector.

Defense spending is not a bet on conflict. It is a bet on deterrence, industrial capacity, and technological superiority. For investors willing to accept the political and execution risks, the sector offers some of the best risk-adjusted return potential in today’s market.

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