Global military expenditure continues its upward trend. The U.S. military budget for fiscal year 2026 has already reached $838.5 billion, and President Trump has proposed increasing the 2027 budget to $1.5 trillion, a figure nearly double that of the 2026 level. It is worth noting that this wave of military expansion is not unique to the United States.
Germany has been significantly increasing its defense budget in recent years and has now become the world’s fourth-largest military spender, trailing only the United States, China, and Russia. German Chancellor Friedrich Merz plans to double the already substantially expanded military budget within the next five years to achieve NATO’s target of defense spending accounting for 3.5% of GDP. As old and new conflicts continue to simmer around the globe, defense companies are becoming highly watched investment targets in the coming years. The two leading companies mentioned below currently present considerable allocation value.
Rheinmetall (RNMBY) This German giant, headquartered in Düsseldorf, has long surpassed its original role as an artillery manufacturer. Today, the company’s business encompasses a full range of equipment including trucks, tanks, ships, and satellites, supplying military hardware to dozens of European armed forces, including those of Italy, Ukraine, the Netherlands, the United Kingdom, and Germany itself.
Benefiting from the surge in German defense spending and Europe’s overall military build-up, Rheinmetall’s 2025 annual report, released on March 11, showed: full-year sales reached €9.9 billion (a 29% increase year-on-year), operating profit was €1.8 billion (a 33% increase), the order backlog grew by 36%, and the net profit margin improved from 9.19% to 11.8%. Analysts predict that as German defense expenditure continues to grow towards the end of this decade, the company will usher in a golden period of development.
Lockheed Martin (LMT) This company can be considered the American equivalent of Rheinmetall, but its business is more focused on the aerospace sector. This defense giant’s products cover the five operational domains of air, land, sea, space, and cyber. Its most renowned products include the Black Hawk helicopter, the F-16 Fighting Falcon, the F-35 Lightning II, and the still-in-service F-22 Raptor. Additionally, the company produces a vast array of radar systems, naval weapons, and munitions.
Against the backdrop of the U.S. plan to further expand its military budget, Lockheed Martin finished 2025 strongly: full-year sales reached $30.25 billion (a 6% increase year-on-year). Although full-year operating profit fell by 17%, the fourth quarter surged by 80% quarter-on-quarter. The company maintained a net profit margin of 6.69% and forecasts 5% sales growth for the full year 2026. If the Trump administration’s proposal for a $1.5 trillion military budget is ultimately realized, this defense giant is expected to maintain steady growth in the coming years.
