Lockheed Martin and Raytheon Gain as Defense Spending Climbs
-
By
Arthur Kellan
- Business
- # business news
- 4 min read
-
By
Arthur Kellan
- Business
- # business news
- 4 min read
Defense spending is rising again, and this time the move is broader. The shift is visible in Washington, across NATO and in the order books of the biggest defense contractors.
Washington’s Defense Push
The Pentagon’s fiscal 2026 request puts $961.6 billion toward the Department of Defense, with funding spread across shipbuilding, missile defense, munitions and modernization. That keeps defense near the top of the federal spending agenda, even as pressure builds elsewhere in the budget. [1]
NATO is moving the same way. All members are expected to meet or exceed the alliance’s 2% of GDP target in 2025, up from just three in 2014. Over the same period, European allies and Canada lifted collective defense spending from 1.43% of GDP to 2.02%. [2] That shift matters because it shows the trend is no longer confined to Washington. What was once presented as a response to immediate security shocks is now showing up as a more durable part of budget planning across allied economies.
The Corporate Winners Are Easy to Spot
The companies on the other side of that spending are easy to identify. Lockheed Martin finished 2025 with a record $194 billion backlog. RTX, the parent of Raytheon, ended the year with $268 billion in backlog, of which $107 billion was tied to defense. It also reported $88.6 billion in full-year sales. Northrop Grumman also ended the year with a record $95.7 billion backlog and $42.0 billion in sales. [3]
This is where the story gets bigger than one sector. Backlog is not just a sign of demand. It shows how much business is already in the system. In much of the industrial economy, customers can cut spending, wait out higher borrowing costs or delay expansion plans. Defense works differently. Once governments decide they need more missiles, stronger air defense or more production capacity, contracts tend to stay in place.
Why It Matters Beyond Defense
That gives large defense contractors something many manufacturers do not have right now: visibility. It also helps explain why investors keep returning to the sector even when the broader industrial outlook looks uneven. Order books at this scale suggest that future revenue is not dependent on a sudden pickup in consumer demand or a recovery in private capital spending. It is tied to state procurement, and that tends to move on a different timetable.
Just as important, it changes where money goes. Higher military budgets do not just raise revenue at Lockheed Martin, RTX and Northrop Grumman. They draw capital, engineering talent and factory capacity toward munitions, weapons systems, electronics and military supply chains. That has broader consequences for the economy. Public money that might have supported other priorities is increasingly tied up in defense production, while private investors are pulled toward sectors with clearer government-backed demand.
The Global Spending Shift
This is not only a Western spending story. SIPRI said global military spending climbed to a record $2.718 trillion in 2024. In real terms, the increase was 9.4% from a year earlier. That made it the tenth straight annual rise, and the steepest since at least 1988. SIPRI also said governments are giving military security greater priority than other parts of public spending. [4]
For investors, the signal is fairly clear. Defense is no longer just a trade that moves on the latest conflict headline. It is becoming one of the few industrial areas backed by steady state demand and long order books.
That helps explain why Lockheed Martin, Raytheon and their peers keep benefiting as military budgets climb. More of that spending is staying inside the defense system long enough to support growth beyond the next quarter. What markets are seeing is not just another spike in wartime demand. It is a wider shift in how capital is being allocated across the industrial economy.
Sources:
[1] U.S. Department of Defense — FY 2026 Budget Request Overview
[2] NATO — Defence expenditures and NATO’s 5% commitment
[3] Company filings and earnings releases:
Arthur Kellan
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