Rising Geopolitical Tensions - 3 Defense Stocks to Watch in 2026

Ongoing global conflicts and escalating rivalries are compelling governments to continuously reinforce their military capabilities. Conflicts like the continuity of Russia-Ukraine war, ongoing instability in the Middle East, and rivalry among major powers are intensifying, and governments can no longer rely on aging military equipment or minimal inventories. Instead, they are systematically upgrading weapons, vehicles, aircraft, missile defense systems, and cyber capabilities, while also rebuilding depleted ammunition and improving troop readiness.

Defense priorities are shifting toward artificial intelligence-enabled platforms, cyber and space capabilities, intelligence and surveillance systems, and sophisticated missile defense. These modernization efforts aim to improve speed, precision, and resilience, driving investment in next-generation systems across multiple defense domains.

U.S. defense spending is at historically elevated levels, as President Trump has proposed a 13.4% increase, bringing the fiscal 2026 defense budget to $1.01 trillion. This scale of funding provides the Pentagon with greater flexibility to place new orders, expand existing programs and accelerate long-term procurement plans.

Companies like Archer Aviation ACHR, GE Aerospace GE and Howmet Aerospace HWM are positioned to benefit from the evolving defense market.

Defense Sector Positioned for Sustained, Long-Term Expansion

Defense-sector growth is being driven not only by higher government spending but also by the evolution of modern militaries. Governments are maintaining strong, multi-year defense budgets that provide funding stability, while simultaneously modernizing forces through upgrades to legacy equipment and investments in next-generation technologies. In addition, the expansion of commercial and dual-use fleets is creating new demand for defense contractors. Together, these trends support sustained, structural growth.

According to a report by Coherent Market Insights, the global aerospace and defense market is estimated to reach $1,470.43 billion by 2032, at a compound annual growth rate of 8.2% during 2025-2032.

3 Defense Stocks to Watch in 2026

The stocks, discussed below, carry a Zacks Rank #2 (Buy) each and have solid growth potential in 2026. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Archer Aviation: Headquartered San Jose, CA, the company is involved in designing and developing electric vertical takeoff and landing aircraft for use in urban air mobility. Archer Aviation is focusing on developing advanced, hybrid-electric electric Vertical Take-Off and Landing aircraft (eVTOLs) for military applications, partnering with defense firms, securing major contracts and making strategic acquisitions to build in-house defense manufacturing capabilities.

The Zacks Consensus Estimate for Archer Aviation’s 2026 earnings implies a year-over-year increase of 12.6%. The stock has gained 13% over the past month. 

GE Aerospace: Based in Evendale, OH, the company is a leading designer, developer and producer of jet engines, components and integrated systems for military, commercial and business aircraft. Growing popularity for the company’s propulsion & additive technologies, critical aircraft systems and aftermarket services in the defense sector is driving the Defense & Propulsion Technologies business’ performance. During the first nine months of the year, the company secured a $5 billion contract from the U.S. Air Force to supply F110 engines, parts and support services as part of a Foreign Military Sales program.

The Zacks Consensus Estimate for GE Aerospace’s 2026 revenues and earnings implies a year-over-year increase of 11.7% and 13%, respectively. The stock has gained 7.1% over the past month. 

Howmet Aerospace: Headquartered in Pittsburgh, PA, the company provides engineered solutions for customers in the transportation and aerospace (both defense and commercial) industries. Notably, it offers forged wheels for commercial use in the transportation industry. It also provides aerospace fastening systems, components used in jet engines and structural parts made of titanium used in defense and aerospace applications. 

In December 2025, Howmet Aerospace announced that it has entered into a definitive agreement to acquire Consolidated Aerospace Manufacturing, LLC, a leading global designer and manufacturer of precision fasteners, fluid fittings, and other complex, highly engineered products for demanding aerospace and defense applications, from Stanley Black & Decker, Inc. The transaction is expected to be closed in the first half of 2026. This deal will allow HWM to better serve aerospace and defense customers with a broader offering of mission-critical fastening solutions. 

The Zacks Consensus Estimate for Howmet Aerospace’s 2026 revenues and earnings implies a year-over-year increase of 11.4% and 19.7%, respectively. The stock has gained 4% over the past month. 

 

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This article originally published on Zacks Investment Research (zacks.com).

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