The U.S. defense budget just got a historic boost and Goldman Sachs believes a group of arms contractors could be primed for a surge in revenue, growth and market interest as the Pentagon begins deploying its $156.2 billion in fresh funding.
Following President Donald Trump's July 4th signing of the "One Big Beautiful Bill Act," the Department of Defense is set to receive targeted appropriations for core programs such as shipbuilding, missile defense, nuclear systems and low-cost autonomous technologies.
In a note shared on Tuesday, Goldman Sachs analyst Noah Poponak identified four defense stocks that stand out as key beneficiaries of this legislation.
What's In The New Defense Budget?
Title II of the new legislation’s tax directs $156.2 billion in appropriations across 13 specific defense categories. Highlights include:
- $29.2 billion for shipbuilding
- $24.4 billion for integrated air and missile defense (Golden Dome)
- $25.4 billion for munitions and supply chain resilience
- $16.0 billion for scaling low-cost weapons
- $8.6 billion for air superiority initiatives
- $10.8 billion for nuclear force modernization
Goldman Sachs Says These Defense Stocks Could Soar
Goldman believes the funding will translate into new awards over the next few years, boosting bookings, organic growth, margins and capacity expansion for these key players:
Huntington Ingalls Industries Inc. (NYSE:HII): Poponak said, "There is substantial support for the maritime workforce and supply chain in the Act," pointing to more than $5 billion in funding tied to industrial base and manufacturing process improvements. HII has already received a $1.3 billion workforce investment award this year, and Goldman expects more to follow, which is expected to lift shipbuilding margins in the near to medium term.
L3Harris Technologies Inc. (NYSE:LHX): The Act allocates $24.4 billion to Golden Dome, and Goldman believes LHX is well positioned to win tech and satellite contracts in that program. "Aerojet Rocketdyne has technological moats around missile propulsion," the note said, adding that these capabilities align with additional munitions and propulsion funding in the bill.
Kratos Defense & Security Solutions Inc. (NASDAQ:KTOS): KTOS has invested heavily in lower-cost drones, propulsion systems and space equipment, all of which are central to the Pentagon's current procurement shift. "KTOS's emphasis on lower-cost, technically acceptable products that can be built at scale" matches the Department of Defense's push for affordable and mass-producible solutions.
AeroVironment Inc. (NASDAQ:AVAV): AVAV's tactical drones, including the Switchblade line, could benefit from the $1.4 billion allocated to small unmanned aerial systems (sUAS). The bill provides additional billions to test, develop and procure sUAS and commercial derivative tech, areas where AVAV is considered a front-runner.
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