It's time for an article in English!
As many investors questioned the sharp drops in U.S. defense stocks after Trump took office, I decided to dive into what’s happening behind the scenes.
Introduction
The U.S. defense sector is facing a realignment in 2025 due to proposed budget cuts of about 8% per year over the next five years. This initiative, driven by the new administration, aims to reallocate roughly $50 billion in defense spending toward emerging priorities like border security, Asia-Pacific presence, and advanced technologies. Such cuts would cumulatively reduce annual defense outlays from roughly $900 billion to around $600 billion by the end of the period – about the level of 2017. These changes directly affect the nation’s largest defense contractors, which span aerospace, cybersecurity, shipbuilding, and weapons manufacturing.
The top five contractors –
Lockheed Martin $LMT (+2,14 %)
RTX Corporation $RTX (-0,9 %)
Northrop Grumman $NOC (+1,41 %)
General Dynamics $GD (+1,86 %)
and Boeing $BA (-3,66 %)
– alone account for a huge share of Pentagon procurement, with defense revenues ranging from $32–65 billion each. This report examines the top 15 U.S. defense contractors and analyzes how the 2025 budget cuts impact their programs, finances, and strategies.
Top 15 U.S. Defense Contractors (by Defense Revenue)
- Lockheed Martin ($LMT) – Aerospace & defense prime (e.g. military aircraft, missiles, satellites)
- RTX Corporation ($RTX) – Defense systems (missiles, radars, engines)
- Northrop Grumman ($NOC) – Aerospace & defense (stealth bombers, space, missiles)
- General Dynamics ($GD) – Defense (tanks, submarines, IT systems)
- Boeing ($BA) – Aerospace (military and commercial aircraft, space systems)
- L3Harris Technologies ($LHX) – Defense electronics (communications, sensors, rocket motors)
- Huntington Ingalls Industries ($HII) – Shipbuilding (aircraft carriers, destroyers, submarines)
- Leidos ($LDOS) – Defense IT and solutions (cybersecurity, R&D, autonomous systems)
- Booz Allen Hamilton ($BAH) – Defense consulting & analytics (cyber, AI, engineering services)
- Science Applications International Corp ($SAIC) – Defense IT & logistics support
- CACI International ($CACI) – Defense intelligence, IT, and electronics integration
- Textron Inc. ($TXT) – Defense platforms (military helicopters, armored vehicles)
- General Electric Aerospace ($GE) – Aircraft engines and defense power systems
- Oshkosh Corporation ($OSK) – Tactical vehicles and armaments (e.g. military trucks)
- KBR Inc. ($KBR) – Defense services (base operations, logistics, engineering)
These contractors collectively cover all major sectors of defense. The following sections detail the specific program impacts, financial performance, and strategic outlook for these companies in light of the 2025 budget cuts.
Programs and Contracts Most Impacted by Budget Cuts
💥 Major Defense Programs Facing Cuts or Changes
- F-35 Lightning II Joint Strike Fighter ($LMT) – The F-35 program, the Pentagon’s largest, faces slowed procurement. The Air Force’s FY2025 budget request cut its planned F-35A purchase from 48 to 42 jets, and Congress further reduced the total F-35 buy across services (from 68 to 58) in the 2025 defense authorization.
- F-15EX Eagle II Fighter ($BA) – The Air Force is terminating the F-15EX after 2025, capping procurement at 98 jets (down from 104). In FY25 it will buy only 18 F-15EX (vs. 24 planned), reallocating funds to R&D on next-generation air combat.
- Columbia-class Ballistic Missile Submarine ($GD, $HII) – Initially flagged for cuts, this nuclear deterrence priority may see stretched or delayed funding, though Congress is likely to resist major delays.
- Military Satellite and Space Programs ($LMT, $NOC, $LHX) – Some Defense Space Force programs could see reductions, particularly proprietary satellite constellations, as the Pentagon may turn to commercial solutions.
- Surface Ships and Navy Programs ($HII, $LMT) – The Pentagon intends to protect core surface ship programs, but scrutiny may increase on aircraft carriers and large-deck amphibious vessels.
- Missile Defense and Munitions ($RTX, $LMT, $LHX) – Funding is being redirected to missile defense and munitions, benefiting contractors like RTX and Lockheed Martin, which produce Patriot, THAAD, and PAC-3 interceptors.
🚀 Strategic Adaptations and Company Outlooks
- Lockheed Martin ($LMT) – Focusing on missile defense, hypersonic weapons, and nuclear modernization, while expanding in unmanned tech and space.
- RTX Corporation ($RTX) – Strong position in missile defense and hypersonics, with continued demand for Patriot and Stinger missile systems.
- Northrop Grumman ($NOC) – Backed by the B-21 Raider bomber and Sentinel ICBM program, positioning for long-term stability.
- General Dynamics ($GD) – Prioritizing shipbuilding and armored vehicle exports while sustaining its Gulfstream jet division.
- Boeing ($BA) – Emphasizing unmanned aircraft, space, and international fighter sales to offset reduced U.S. fighter jet demand.
- L3Harris ($LHX) – Pivoting toward open-systems, agile solutions, and cost efficiency to stay competitive in the evolving defense landscape.
📊 Financial Impact and Stock Performance Post-Cuts
- Revenue and Backlog Outlook – Many contractors entered 2025 with historic order backlogs, sustaining revenue for several years. For example, RTX cited a $218 billion backlog, and Lockheed Martin expects 2025 sales of ~$74 billion, up ~45% from 2017 levels.
- Stock Market Reaction – Defense stocks initially dipped on budget cut fears but rebounded as investors recognized sector stability. $RTX and $GD have outperformed on strong earnings.
- Congressional Mitigation – Bipartisan resistance to drastic cuts suggests final budgets may be higher than initially proposed, easing contractor concerns.
🔮 Multi-Year Outlook and Conclusions
- Defense Spending Levels – While the proposed 8% annual cuts are significant, political and geopolitical developments may lead to budget adjustments.
- Portfolio Shifts – Contractors are expected to pivot towards emerging technologies like AI, space, cyber, and hypersonics to align with long-term Pentagon priorities.
- Industry Consolidation vs. Competition – Mid-tier players may merge for scale, while Silicon Valley firms continue to disrupt traditional defense primes.
- Global Defense Landscape – Increased tensions with China and Russia may drive international defense spending, benefiting U.S. contractors through foreign military sales.
In conclusion, the 2025 budget cuts introduce challenges, but the U.S. defense-industrial base remains strong. Contractors that adapt to changing priorities – focusing on innovation, efficiency, and global markets – will be best positioned for long-term success.
What do you think—are these budget cuts a short-term setback or a long-term shift for the defense industry?
Share your thoughts and let’s discuss where the best opportunities might be.
