Three innovative aerospace stocks, AeroVironment, Joby Aviation and Rocket Lab, soared Thursday amid a wave of defense and industry news. President Donald Trump and the Pentagon laid out their defense priorities in the 2026 budget request. NATO pledged to hike its defense spending target. Rocket Lab secured a launch contract with the European Space Agency.
The 2026 U.S. defense and national security budget request released Thursday calls for $892.6 billion in spending, which is flat compared to last year's request.
Small drones saw an increase in spending for the budget, according to reports, while President Trump also requested more missiles.
F-35 fighter jets and warships saw declines in requests for the year.
AeroVironment, producer of the Switchblade drone that has been heavily used in Ukraine, should benefit. Joby Aviation, which makes electric vertical take off and landing vehicles (eVTOLs), has a few contracts with the Defense Department and Air Force. The company has also made progress on FAA certification for its aircraft over the past two quarters, and will commence Type Inspection Authorization flight testing this year.
NATO Boosts Spending Target, ESA Satellite Initiative
Elsewhere, NATO countries on Wednesday largely agreed to hike their military spending in order to appease Trump's demand.
The NATO members pledged to allocate up to 5% of their national GDP to defense and related sectors by 2035, according to reports. The commitment includes a review in 2029 to evaluate progress and assess Russian threat developments.
The new target includes 3.5% for "core defense spending," up from a prior target of 2%. The other 1.5% will go toward "military adjacent" projects, the New York Times reported. Those would include improved roads and bridges, better emergency health care and cybersecurity issues.
While not confirmed, "adjacent" projects could include satellite initiatives. The European Space Agency selected Rocket Lab to deploy the first pair of satellites for a future navigation constellation for Europe, the company announced Thursday.
The SpaceX competitor will use its Electron rocket to launch and deploy two "Pathfinder A" spacecraft for the ESA. European contractors Thales Alenia Space and GMV will provide the spacecraft. The launch is expected to occur no earlier than December 2025.
The mission will test a new approach for low-Earth orbit positioning and navigation services, in an effort to improve Europe's global navigation system.
Rocket Lab And Aerospace Stocks Rally
AeroVironment stock soared nearly 16% Thursday, continuing to rally after its earnings report on Wednesday. AVAV stock is up 77% so far this year.
Joby shares surged 11.3%, adding to its 16.5 gain in 2025.
Rocket Lab jumped 11.7% to push to new highs. RKLB stock has rocketed 42% year-to-date.
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