Military stocks performance overview

02 December 2025

Defense spending across the European Union and NATO has skyrocketed in response to the geopolitical tensions, notably Russia’s invasion of Ukraine. Governments are committing unprecedented budgets to modernize armies, air defenses, ammunition, and strategic deterrence to ensure relevant defense levels amid rising global tensions. This major shift has boosted military stocks performance across prominent European companies, especially for companies supplying equipment and systems to national and defense-industrial programs. EU and NATO member countries have collectively increased defense allocations, with Germany alone accounting for over 60 billion euros in new military contracts, making one of the largest such investments in its history.

Understanding military stocks performance

Unlike technology and consumer stocks, the best military stocks tend to be driven by government budgets, long-term cycles, and geopolitical risk assessments. These companies often operate under multi-year contracts, meaning revenue visibility and order backlogs are clearer than in many other sectors. And those contracts are usually in billions, not millions, meaning the growth potential for years is significant. As a result, military stocks performance analysis must be centered on defense spending commitments by countries, backlog growth, and structural shifts in national security policies.

The EU and NATO are expanding their military spending to oppose growing threats and rocket tests from Russia, and they are building infrastructure first to ensure they can develop and manufacture weaponry themselves. They want to ensure they will not solely rely on USA weapons and equipment, and as a result, military stocks are about to explode across Europe.

Best military stocks: European defense leaders

Below are some of the most interesting and leading defense stocks tied directly to the rising European military expenditures and broader NATO spending.

Rheinmetall AG (Frankfurt: RHM)

Investing in military stocks in the EU and NATO can not be discussed without this one prominent player. Rheinmetall is one of the most cited examples in evaluations of military stocks' performance tied directly to European rearmament. The company is a giant manufacturer of armored vehicles, artillery, air defense systems, and ammunition. Its role in Europe is essential as Germany and EU members expand ground forces and ammunition stockpiles. Its products are well-represented in government contracts, including a recent project concerning ammunition and artillery projects. Defense stocks in Europe rallied sharply alongside renewed military focus, with Rheinmetall among the top performers. Its stock rallied sharply after the EU mentioned it was ready to increase financing for military projects to ensure NATO could be relevant against the growing Russian threat.

BAE Systems plc (United Kingdom)

BAE Systems is one of the largest defense contractors in Europe and globally. The primary business focus of this major military manufacturer is on air and land systems, submarines, electronic systems, and cybersecurity. As you can see, its business operations are very diverse and cover most of the important and complex military sectors, making it a significant company not only for EU and NATO countries, but also for the global audience.

Apart from being a too-big-to-fail company, BAE Systems has a total value of confirmed and future work of over $ 75 billion, which dwarfs many other big companies in the same sector. This provides a years-long revenue stream, making its stock very stable and future-proof. Investment in Eurofighter programs, AUKUS (Australia‑UK‑US) submarine development, and advanced company systems continue till this day, and since Europe is going to increase its military even further, Bae systems is a good contender to get even more funding and develop new projects. The stock of BAE Systems has experienced strong growth amid rising defense budgets and expanding export opportunities. As Europe tries to develop its own military programs, the company that develops its fighter jets and submarines will get more spotlight in the future for sure.

Overall, BAR systems has a well-diversified portfolio across many different defense segments, which makes it one of the best military stocks for a diversified portfolio.

Leonardo S.p.A. (Italy)

Leonardi, as the name suggests, is Italy’s largest defense and aerospace company with a wide range of products from helicopters to integrated systems. The main focus of its business is on helicopters, avionics, combat systems, and defense electronics. Its defense and security units have seen more and more contracts due to EU defense spending growth. As a result, its sales and revenue figures have an upward trend as more payments cause growing revenue. The moment Italy starts to expand its military budget, Leonardo will be among the first to experience an even stronger bullish trend, making its equity very attractive when investing in military stocks in 2026.

The company does not solely rely on its country. Leonardo benefits from both domestic and export demand, as well as participation in multinational defense programs, which is a combination that can greatly boost its stock performance.

Thales Group (France)

Thales operates across a diverse range of defense tech segments, such as radars, air defense, sensors, and cyber. Its main strength lies in its products, which include command and control systems, avionics, radars, and secure communications for the military. Its revenue trends are also on the stronger side as Thales reported revenue growth and raised forecasts on the strength of defense demand, with reasons already discussed above. The company’s technology solutions play a crucial role in modern defense domains beyond traditional platforms, and include cybersecurity and autonomous systems.

Overall, Thales’ advanced and diverse defense technology makes it a core name in discussions of military stocks performance analysis for the recent European defense boom.

Saab AB (Sweden)

Saab is a crucial Nordic defense contractor company known for its fighter aircraft, radar, and surveillance systems. The Gripen airfighter is a modern fighter jet that is among the best in the world, while being cheap and very high-tech at the same time. The company experiences strong order intake and solid sales growth, making its stock strong with robust demand and expanding backlogs. Sweden’s NATO ascension and regional defense spending increases have made the demand strong, and as a result, the company has a very bright future ahead. As an exporter to multiple allied nations, Saab illustrates how defense stocks with diversified geographic exposure

Rolls‑Royce Holdings (United Kingdom)

European military stocks analysis is impossible without mentioning this one company. Apart from being one of the most recognised car brands for ultra luxury vehicles, Rolls-Royce has been playing a critical role in the global aviation industry. It produces propulsion systems for many jets across the world, whether military or civilian. The company produces engines for fighter jets and naval propulsion systems, including submarine power units. Defense narratives also contributed to the share price strength of Rolls-Royce. The company shows an important point: military stocks are not limited to pure defense contractors; rather, they include aerospace supply chains, propulsion systems, and integrated platform supplies.

Military stocks 2026 prediction - Broader patterns revealed

Across Europe in 2025, there were many indications and rhetoric among government officials, giving signals to investors that defense stocks would inevitably rise. As a result, defense stocks went sharply higher. Socks such as Rheinmetall, BAE Systems, Thales, Leonardo, and Saab have traded at multi-year highs, often outpacing major indices and stocks in other sectors. European defense indices — like the STOXX Europe Aerospace & Defense index also rose alongside these individual stocks.

Performance vs. US defense equities

While European defense stocks have spiked, U.S. defense equities have mostly shown mixed patterns. For example, Lockheed Martin’s stock performance lagged despite its record contract size due to patriot missile orders. Investors were concerned about cash flow and production bottlenecks. They were trained to move their capital into more attractive European stocks. Other U.S. defense companies remain strong but do not show a bullish trend similar to European peers. What this shows is that investors are more focused on European stocks to ensure they do not miss a rally.

Broader patterns

Overall, this rally has been one of the most obvious and easy events to spot for investors, and many of them have generated significant gains as the European defense sector grew rapidly. These movements were fueled mostly by macro defense themes rather than short-term technical factors like breakouts or psychological level breaks. It was solely caused by Trump’s administration rhetoric, aiming for Europe to develop its own defense sector and protect itself without the need to get help from the United States. As a result, almost all of the stocks described above rose sharply, giving traders and investors one of the best opportunities in this sector.

Investing in the best military stocks: Key factors to consider

Investors considering investing in military stocks in 2026 need to evaluate several key factors, such as order backlogs (they have a lot of contracts in the long run), revenue visibility, global demand, modern warfare trends, technology trends, risk factors, valuations, and so on.

Order backlogs and revenue visibility

Order backlogs simply mean the total value of signed contracts and orders a defense company has received but not yet completed, delivered, or recognized as revenue. Revenue visibility, on the other hand, is a large and growing backlog that provides strong visibility into a company's future revenue streams, which is a key metric for investors. As a result, the companies that show strong demand in their contracts and are expected to manufacture or develop and deliver products to contractors in the future, make a strong case to be considered as promising stocks in your portfolio of defense equities.

Unlike many other industries out there, defense companies usually have multi-year backlogs, which essentially is a pre-committed revenue. This is because these companies mostly rely on government contracts, which ensure steady and future-proof cash availability. Backlogs for firms like BAE systems for example, exceed 75 billion pounds, providing decades of revenue stability. So, in essence, you can be assured that the company will be out there working on its projects for the next 10 years at least, which is very stable and robust. This also makes earnings much more predictable and less sensitive to short-term market fluctuations, providing a great value, especially for risk-averse investors.

Export markets, global demand

Export markets and global demands are crucial pieces in your military stocks performance analysis for 2026. Many European defense firms do not rely solely on domestic contract budgets. Export sales to allied nations, especially in countries and regions like the Middle East and Southeast Asia, ensure a diversified stream of revenue and reduce dependence on a single government’s budget. Diversification is key to a company's long-term survival and cash flow health.

Risk factors and valuations

Military stocks analysis also requires correctly evaluating all risks. While long-term defense spending trends strongly support the sector growth, several risks remain:

Political risks - Future changes in government priorities will slow spending
Valuation changes - Fast price spikes in defense stocks, such as the case with Rheinmetall’s sharp rise, mean that valuation might become extended
Supply chain pressure - Complex manufacturing pipelines, which are usually the case with defense companies, can affect delivery schedules.

If there is a major shift in tone from the defense sector, then the companies might struggle in the long term in this sector, which makes it important to track major news.

Military stocks 2026 prediction

Looking ahead to 2026, investors who are tracking defense spending trends generally expect continued strength, but the growth might be modest as the initial reaction from investors slowly vanishes. The main reasons for this possible slowdown include sustained defense budgets, modernization cycles, and geopolitical uncertainty. NATO and EU allies plan multi-year defense spending budgets. Older platforms are usually replaced with next-gen systems frequently, keeping order books full, which ensures a consistent revenue stream. Persistent tensions provide strategic reasons for defense spending. However, since the initial rally was dramatic, the growth might slow down.

While an exact forecast for returns is still difficult, most military stock performance analysis suggests that defense stocks are well-positioned and should deliver strong long-term growth, especially for companies with diversified portfolios and exposure to multiple markets.

Practical ways to invest in military stocks

Investing directly in defense stocks like Rheinmetall, BAE Systems, Leonardo, Thales, Saab, and Rolls‑Royce is the fastest and most efficient way to become exposed to this sector and catch all of its growth potential.

For broader exposure without investing in individual stocks, defense and aerospace ETFs (Exchange Traded Funds), such as WisdomTree Europe Defence UCITS ETF, include a basket of major defense stocks. By investing in ETFs, you can get yourself exposed to the whole sector or several stocks at the same time by investing in just one instrument. ETFs provide diversification within the military sector. Some investors, on the other hand, blend defense stocks with industrial and aerospace companies that have ongoing defense projects like engines or avionics. This way, they can capture defense sector growth without overconcentration.

Conclusion

Military stocks analysis is a complex task, but very much possible when you consider the most important factors. The performance of military stocks over the past few months has been directly influenced by geopolitical shifts, escalating defense budgets across the European region, and structural rearmament across Europe and Nato allies. Unlike many other volatile sectors, defense equities benefit from long-term contracts from governments and countries, enabling them to have diversified portfolios, factors that have supported sustained growth in 2025 in military stocks performance. Companies such as Rheinmetall, BAE Systems, Leonardo, Thales, Saab, and Rolls‑Royce are among the best examples of defense equities in Europe with strong links to current and future defense spending. In 2026, the combination of continued military modernization, export demand, and strategic defense policies across NATO and its allies suggests that defense stocks will remain relevant in 2026 investment portfolios that seek stability and persistent growth.

Overall, the best military stocks are those that are positioned to benefit from sustained defense budgets, technological relevance, and export diversification.