Defense Spending Surge Creates Spotlight on Lockheed Martin, GE Aerospace, and Red Cat Holdings

Global Defense Budgets Are Climbing — Here's What That Means for Investors

A structural shift in global military spending is reshaping the defense sector, creating significant momentum for companies positioned across aerospace, missile systems, and emerging drone technology. With the U.S. already deploying roughly $1 trillion in defense outlays this year, the Trump administration has put forward an even more ambitious $1.5 trillion budget proposal for fiscal year 2027 — a figure that would represent a historic expansion of American military investment.

Beyond U.S. borders, NATO member nations have committed to raising core defense spending to 5% of their gross domestic product by 2035, signaling that international demand for defense systems and services is likely to remain elevated for years to come.

Three companies — Lockheed Martin (NYSE: LMT), GE Aerospace (NYSE: GE), and Red Cat Holdings (NASDAQ: RCAT) — each offer distinct exposure to this spending environment, ranging from established defense giants to a speculative drone manufacturer.

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Lockheed Martin: Record Backlog Signals Long-Term Demand

As the world's largest defense contractor by total revenue, Lockheed Martin occupies a central role in U.S. military procurement. Its flagship F-35 Lightning II program alone is projected to generate an estimated $2.1 trillion in value over its 94-year lifecycle, providing the company with a foundation of long-term, predictable cash flows.

Lockheed's portfolio extends well beyond the F-35. The company produces the F-16 and F-22 fighter aircraft, along with missile defense systems including the High Mobility Artillery Rocket System (HIMARS) and the Guided Multiple Launch Rocket System (GMLRS), plus sea- and space-based missile technologies.

In its most recent second-quarter results, Lockheed reported sales of $20 billion alongside net earnings of $1.8 billion. Perhaps most notably, the company's order backlog reached a record $230 billion — a year-over-year increase of $64 billion — reflecting sustained institutional demand for its platforms. Management also raised full-year revenue guidance to a range of $79.75 billion to $81.75 billion, representing approximately 8% growth over the prior year.

Income-focused investors may also note that Lockheed has raised its dividend for 23 consecutive years, demonstrating a consistent track record of shareholder returns even through varying defense budget cycles.

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GE Aerospace: Aftermarket Engine Business Drives Recurring Revenue

GE Aerospace, spun off from General Electric in 2024 alongside GE Vernova and GE HealthCare, has carved out a dominant position in both commercial and military aviation propulsion. The company's joint venture with Safran Aircraft Engines — CFM International — produces the LEAP engine used in the Boeing 737 MAX and Airbus A320 families, commanding a 39% share of the commercial aircraft engine market.

This market position is particularly valuable because aircraft engines require continuous maintenance, upgrades, and parts replacement throughout their operational lives. That aftermarket dynamic generates steady, recurring revenue streams that analysts note tend to be more resilient than new equipment sales during economic downturns.

GE Aerospace's second-quarter performance reflected the strength of that model. Revenue climbed 24% year over year to $13.3 billion, while free cash flow surged 43% to $3 billion. LEAP engine deliveries rose 41%, orders grew 17%, and the company's total backlog now exceeds $210 billion — with commercial services accounting for more than 80% of that figure.

The company's defense footprint is also expanding. Its F404 engines were selected by Turkish Aerospace Industries for the HÜRJET advanced jet trainer program, and the CT7 engines were chosen to power the U.K. Ministry of Defense's new medium helicopter initiative, adding to an already diversified military revenue stream.

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Red Cat Holdings: High-Risk Drone Exposure in a Competitive Field

For investors with a higher tolerance for risk, Red Cat Holdings presents a markedly different profile. The company operates as a pure-play defense drone manufacturer — a niche that has attracted growing attention as the Pentagon accelerates its investment in unmanned systems, counter-drone technologies, and low-cost mass-production platforms.

Red Cat has worked to comply with the National Defense Authorization Act by eliminating Chinese-sourced components from its supply chain, a prerequisite for partnering with U.S. military programs. The company is currently participating in the Pentagon's $1.1 billion Drone Dominance Program, which aims to procure hundreds of thousands of low-cost tactical combat drones by 2027.

However, the competitive dynamics of this program introduce meaningful uncertainty. Red Cat was among 19 companies to advance to Phase 2, but the field is expected to narrow to just five long-term suppliers by 2027. The company remains unprofitable as it scales manufacturing capacity, and the outcome of the procurement process remains far from guaranteed.

Data suggests the market has already priced in considerable uncertainty — the stock is currently trading approximately 57% below its 52-week high, reflecting both the speculative nature of the opportunity and broader concerns about execution risk.

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What to Watch Going Forward

The trajectory of the U.S. defense budget, NATO spending commitments, and the outcome of key procurement competitions will likely serve as critical benchmarks for all three companies in the months ahead. For Lockheed Martin and GE Aerospace, backlog conversion rates and margin performance will be key metrics to monitor. For Red Cat, the Drone Dominance Program's Phase 2 outcomes — expected to become clearer by 2027 — represent the most significant near-term catalyst.

As global defense spending continues its structural expansion, analysts note that the sector broadly may see sustained institutional interest from investors seeking exposure to long-cycle government contracts and rising military budgets worldwide.