In early 2022, as Russian tanks rolled across the Ukrainian border and Western allies scrambled to respond, stock prices in the global defense sector quietly surged. Investors anticipated what political leaders were only beginning to admit: this was not going to be a short war. Two years on, that forecast has proven accurate – not only on the battlefield, but also on balance sheets.
Ukraine’s allies have committed well over $100bn in military aid since the invasion began, with the United States contributing the lion’s share. Much of this funding flows through a narrow funnel of defense contractors – RTX (formerly Raytheon), Lockheed Martin, General Dynamics, Northrop Grumman, and Boeing – who manufacture everything from guided missiles to armored vehicles. Publicly traded and answerable to shareholders, these companies have reaped the financial rewards of increased global insecurity.
An Industry Wired for Growth
The economic structure of the defense sector differs markedly from most other industries. Demand is not shaped by consumer choice or market saturation, but by government policy and geopolitical threat perceptions. That means firms are incentivised not merely to meet current military needs, but to expand them. “Peace,” as one former Pentagon analyst noted, “is not profitable.”
Data from Orbis Historical shows a marked uptick in revenues across major US defense contractors since 2021. RTX, the parent of missile-maker Raytheon, saw its revenues climb from $64.3bn in 2021 to over $80bn by 2024. Lockheed Martin’s turnover rose from $67bn to nearly $71bn in the same period. Even more striking is General Dynamics, which posted a record $47.7bn in revenue last year—up nearly 25% from 2021.
These increases are not just a function of more contracts; they are underpinned by structural trends. NATO countries, once complacent about defense budgets, are now pledging to meet or exceed the alliance’s 2% of GDP spending benchmark. Germany has announced a €100bn modernisation plan. Poland has committed to becoming Europe’s largest land army. Finland, newly admitted to NATO, is buying F-35s.
As procurement ramps up, the firms supplying advanced weapons systems are positioning themselves as indispensable. Contracts for missile defense, drones, AI-enabled surveillance, and long-range artillery have flowed to a small ecosystem of established players with close ties to government procurement offices.
Wartime as Business Environment
The clearest recent example of defense-sector opportunism is in Gaza. Since the outbreak of Israel’s war in the enclave, the United States has rushed emergency weapons shipments – thousands of precision-guided bombs, artillery shells, and air-defence interceptors – from its own inventories.
Those drawdowns immediately triggered restocking contracts for U.S. manufacturers. RTX, which co-produces Iron Dome’s Tamir interceptors with Israel’s Rafael at a dedicated facility in the United States, is now supplying accelerated replenishment orders. Lockheed Martin, whose PAC-3 interceptors are deployed in Patriot air-defence systems across the Middle East, has also benefited from multi-year procurement increases as Washington moves to rebuild depleted inventories and support regional partners. The result is a familiar pattern: while conflicts strain public arsenals, they simultaneously deliver fresh revenue visibility to the firms that manufacture the world’s most advanced weapons systems.
Meanwhile, Northrop Grumman’s revenue jumped from $36.6bn in 2021 to over $41bn by 2024, with profit margins holding steady near 10%. Boeing, despite its troubled civilian aerospace division, remains a critical player in military logistics and aircraft—benefiting from renewed orders and long-term contracts. Even amid quarterly losses, its defense wing has helped offset broader weaknesses.
One might assume these companies are simply responding to conflict rather than exploiting it. But their lobbying expenditures suggest a more active role. In 2023, the top five US defense contractors spent over $60m combined on lobbying Congress, according to OpenSecrets. These efforts target not just defense budgets, but foreign policy legislation, arms export approvals, and even regulatory frameworks that affect foreign military sales.
Critics argue this creates a feedback loop in which the perception of threat – not necessarily its reality – drives procurement. Arms makers benefit not only from active wars, but from preparing for potential ones. Tensions with China over Taiwan, concerns over Iranian influence, and fears of new Russian offensives all create a fertile environment for military spending. As one analyst quipped, “Insecurity is good business.”
Who Pays – and Who Profits
What is striking is the mismatch between who bears the costs of war and who profits from it. While Western taxpayers fund the bulk of arms shipments, it is shareholders – often institutional investors and hedge funds – who benefit from the returns. The top 10 investors across the big five defense firms include names like Vanguard, BlackRock, and State Street.
Meanwhile, in Ukraine, reconstruction costs are expected to exceed $500bn. In Gaza, civilian infrastructure lies in ruins. The Pentagon itself warns of strained inventories and logistical backlogs, even as contractors report strong order books and optimistic outlooks.
The defense sector’s ability to turn crisis into capital should not be underestimated. As global tensions persist – and in some cases, escalate – defense firms will continue to post record earnings. Whether this represents a necessary response to a dangerous world or an industry that thrives on permanent conflict is a question governments, voters, and shareholders must grapple with.
In the words of former US President Dwight D. Eisenhower, who first warned of the “military-industrial complex”: “We must guard against the acquisition of unwarranted influence… The potential for the disastrous rise of misplaced power exists and will persist.”
Today, those words read less like prophecy, and more like a line from an annual report.
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