Defense stocks outperformed

Defense contractors have been among the market’s stronger performers as governments raised military budgets and pushed faster weapons procurement. (sipri.org) The recent social roundup cited RTX shares up about 110.6% over three years and Northrop Grumman up about 60.6% over the same span. RTX ended 2025 with a $268 billion backlog, including $107 billion tied to defense work. (x.com) (sec.gov) Other large contractors reported the same pattern in orders. Lockheed Martin finished 2025 with a record backlog of nearly $194 billion, and General Dynamics ended the year with $118 billion in backlog after a 1.5-to-1 book-to-bill ratio. (lockheedmartin.com) (gd.com) The demand shift tracks a broader rise in military spending. Stockholm International Peace Research Institute said world military expenditure reached $2.718 trillion in 2024, up 9.4% from 2023, the steepest annual increase since at least 1988. (sipri.org) Europe has been a major driver. Stockholm International Peace Research Institute said military spending in Europe rose 17% to $693 billion in 2024, and the European Commission followed in March 2025 with its ReArm Europe and Readiness 2030 package to help member states raise defense investment and joint procurement. (sipri.org) (ec.europa.eu) The North Atlantic Treaty Organization data points the same way. Its 2025 defense expenditure report said figures for 2024 and 2025 were estimates, and its updated April 10, 2026 explainer said allies committed at the 2025 Hague summit to invest 5% of gross domestic product annually on core defense and related security spending by 2035. (nato.int 1) (nato.int 2) Company filings show how that turns into revenue. RTX said Raytheon increased output by 20% across several munitions and air-defense programs in 2025, including Patriot, Advanced Medium-Range Air-to-Air Missile, and Coyote systems. (sec.gov) Lockheed Martin told investors demand stayed elevated for missile defense and strike systems. In its 2026 proxy, the company said it had reached long-term agreements to triple Patriot PAC-3 Missile Segment Enhancement production and quadruple Terminal High Altitude Area Defense production. (lockheedmartin.com) Not every defense name moved for the same reason. RTX also benefited from its commercial aerospace businesses, including Collins Aerospace and Pratt & Whitney, which means its stock reflects both airline demand and weapons demand rather than defense orders alone. (sec.gov) The trade still carries the usual risks from budgets, politics, and execution. RTX said its 2026 outlook depends in part on government defense spending, and NATO notes that national estimates can diverge from media reports and domestic budget definitions. (rtx.com) (nato.int) For now, the sector’s edge has been simple: more governments are ordering more equipment, and the biggest contractors are reporting larger backlogs, higher output, and multiyear production plans. (lockheedmartin.com) (gd.com) (sec.gov)