Citi Bullish on Defense Satellite Stocks
Citi analysts are highlighting L3Harris, Iridium, and Lockheed Martin as key beneficiaries of expected growth in the defense satellite budget for FY2027. The financial firm's note signals Wall Street's confidence in the long-term demand for space-based defense capabilities.
The bullish outlook hinges on the Space Development Agency's (SDA) Proliferated Warfighter Space Architecture (PWSA), a massive constellation in low-Earth orbit designed for missile defense and to serve as the backbone for Joint All Domain Command and Control (JADC2). The agency is leveraging a "spiral development" model, fielding new capabilities in "tranches" every two years to rapidly advance space-based capabilities. L3Harris is a key contractor for the PWSA's Tracking Layer, securing an $843 million contract for 18 Tranche 3 satellites in December 2025. The company is involved across all existing tranches of the program, from Tranche 0 to Tranche 3, and is also developing satellites for the Missile Defense Agency's Hypersonic and Ballistic Tracking Space Sensor (HBTSS) program. A 2026 corporate restructure merged L3Harris's space capabilities to better align with the Pentagon's two-year development cycle. Lockheed Martin also secured a major Tranche 3 Tracking Layer award in December 2025, with a potential value exceeding $1 billion for 18 satellites. This contract brings Lockheed Martin's total to 124 space vehicles for the PWSA's Tracking and Transport layers. The company is simultaneously advancing the next generation of GPS satellites, the GPS IIIF series, which provide up to eight times improved anti-jamming capabilities. Iridium provides the global, resilient communications layer for the military. The U.S. Space Force awarded Iridium a five-year, $85.8 million System Infrastructure Transformation and Hybridization (SITH) contract in December 2025. This contract focuses on technological refreshes and security upgrades for the military's dedicated ground stations and support centers. The investment in these satellite constellations is part of a broader shift toward "deterrence by denial" through proliferated Low Earth Orbit (pLEO) systems. The SDA has used Other Transaction Authority (OTA) agreements to rapidly award contracts for its Tranche 2 Tracking Layer to a mix of primes, including L3Harris, Lockheed Martin, and Sierra Space, for a total of 54 satellites. This spending is underpinned by a proposed increase in the U.S. defense budget for fiscal year 2027 to $1.5 trillion. The significant boost is intended to fund the development of what has been termed a "Dream Military," with a specific focus on advanced space-based architectures like the PWSA, also known as the "Golden Dome" initiative.
