Donald Trump has been clear: he is targeting a defence budget of around $1.5 trillion as early as 2027, a 50% increase from 2026. A windfall for defence giants that have already been benefiting, since 2022, from the sector's acceleration.

Missiles and shipbuilding drive orders

In the United States, this momentum is reflected in the average book-to-bill ratio, which is positive over 12 months, indicating orders outpacing sales.

As a result, General Dynamics is booking orders for munitions, armoured vehicles and naval systems, and reports "very solid” demand signals from the administration. The group's Marine segment rose 22% in Q4 2025.

Meanwhile, Lockheed Martin, RTX, Northrop Grumman and L3Harris highlight strong demand for missiles, notably illustrated by Lockheed's new multi-year agreement for PAC-3 MSE interceptors.

Here too, the figures are telling: at Lockheed Martin, the Missiles and Fire Control division posted 18% year-on-year growth in Q4 2025 and expects 14% sales growth in 2026.

Rising European commitments

On the Old Continent, budget commitments have also risen sharply over the past 18 months, supporting demand beyond 2030. Defence spending increased significantly (+63%) between 2021 and 2025, reaching around €380bn in the latter year, the Council of the European Union notes.

On October 16, 2025, the Council and the European Parliament also reached a provisional agreement on the European Defence Industry Program (EDIP). Under the EDIP, the EU plans to provide €1.5bn in grants for 2025-2027 to strengthen the European defence industry.

BofA reports that in Europe, the book-to-bill ratio is therefore expected to remain above 1.2x until 2030, as increases in the budgets of European NATO member countries take effect.

The sector has been advancing since mid-2023, clearly driven by Thales, Rheinmetall and BAE. Kongsberg, Indra and Saab are also posting strong growth, driven respectively by missiles (Naval & Joint Strike Missiles), the FCAS and Eurofighter programmes for Indra, and Dynamics activities for Saab.

According to BofA, BAE (Electronic Systems division, following its acquisition of Ball Aerospace) and Leonardo via DRS, as well as Renk, are best placed to benefit from the rise in the US budget, as they are the groups most exposed to the missiles, air defence and shipbuilding segments. The broker also reiterates its buy rating on these three stocks.