President Donald Trump‘s fiscal 2026 defense budget request signals a strategic pivot toward advanced missile systems and unmanned warfare capabilities while scaling back traditional fighter jet procurement, potentially reshaping revenue streams for major defense contractors.
What Happened: The $892.6 billion defense and national security budget, flat compared to fiscal 2025, cuts F-35 Lightning II orders to 47 units from the 68 requested in former President Joe Biden‘s final budget proposal, Reuters reported, citing budget materials released on Wednesday by the White House.
Lockheed Martin Corp. (NYSE:LMT), the F-35’s sole manufacturer, faces reduced near-term revenue from the program despite House appropriators proposing to increase the buy to 69 aircraft.
The budget emphasizes procurement of long-range precision munitions, including the Joint Air-to-Surface Standoff Missile Extended Range and Long Range Anti-Ship Missile, both manufactured by Lockheed Martin. These weapons systems align with Pentagon priorities for Indo-Pacific operations designed to counter Chinese military expansion.
Naval shipbuilding also faces constraints, with only three warships included in the base budget request. General Dynamics Corp. (NYSE:GD) and Huntington Ingalls Industries Inc. (NYSE:HII), primary builders of Virginia-class submarines and surface vessels, will see reduced procurement volumes as the Navy eliminates 7,286 civilian positions to control costs.
Why It Matters: The budget allocates increased funding for small drone systems, reflecting lessons learned from the Ukraine conflict, where unmanned aerial vehicles proved cost-effective force multipliers. This shift benefits emerging defense technology companies competing for Pentagon contracts alongside traditional prime contractors.
Trump’s Golden Dome missile defense initiative, estimated to cost over $175 billion, receives initial funding through a separate $150 billion defense package. The program has attracted interest from non-traditional defense players, including SpaceX, Palantir Technologies Inc. (NYSE:PLTR), and artificial intelligence companies seeking to disrupt the established contractor base.
The budget includes a 3.8% military pay raise while retiring aging platforms to reduce operational costs, according to the report.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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