Defense technology.
Who gets the money.

How much of the Pentagon's money goes to the companies everyone calls the "future of defense?" Less than 1%.

In fiscal 2025, the 15 biggest defense-tech upstarts won about 0.84% of the Pentagon's contract dollars, and SpaceX, Palantir, and Anduril took most of that. Yet in January, those three were worth more combined than the five largest defense contractors.

That's the gap to understand about defense technology stocks going into 2027. Defense technology, or defense tech, is the shift away from a few exquisite, decades-long weapons programs toward software, sensors, autonomous systems, and cheaper weapons built in volume. It's the story everyone is buying, and Washington has bought in on paper. Commercial products are now the default, program managers can go around the big contractors, and underperforming contractors are barred from buybacks and dividends.

The money, though, is still going to factories. After months of war with Iran drained interceptor stockpiles, the 2027 budget request asks for nearly nine times as many PAC-3 missiles as this year. Most of the money for new entrants sits in a $350 billion request that Congress hasn't even introduced yet.

This list of defense technology stocks splits along that gap. The insurgents with real contracts come first, then the factory owners the money is actually flowing to, the mid-tier contractors rebuilding themselves around products, Europe, and two private companies building factories of their own.

These two are the new entrants that already have big, multi-year commitments from the government, which is more than most of the field can say.

Palantir NASDAQ: PLTR

Palantir is the upstart that crossed over. Its U.S. government revenue grew 90% last quarter to $809 million. In 2025 the Army folded 75 separate contracts into a single enterprise agreement capped at $10 billion over a decade.

More important, the Pentagon made Palantir's Maven targeting software a formal program of record this year. That means a standing budget line instead of a pilot that has to be re-won, and the 2027 request includes $2.3 billion for Maven and the related fires network. Software companies rarely get that status.

Anduril

Anduril is the purest bet that the procurement shift is real. In March the Army signed an enterprise contract with it worth up to $20 billion over ten years, rolling more than 120 separate purchases into one. Anduril was also one of 12 companies picked to prototype space-based interceptors for Golden Dome.

Investors have priced in a lot. Anduril raised $5 billion at a $61 billion valuation this spring and was reportedly in talks at about $100 billion by July. A $20 billion ceiling is permission to sell, not money in hand. 2027 is when Anduril has to show the orders filling it.

Wars are won with what you can build in volume, and right now that means the companies that already own the missile lines. They're the defense technology stocks the budget actually favors.

Lockheed Martin NYSE: LMT

Lockheed Martin makes PAC-3 interceptors, the missiles the U.S. and its allies just spent months firing at Iranian missiles. In January it signed a seven-year framework with the Pentagon to take PAC-3 production from about 600 a year to 2,000, and it agreed to quadruple THAAD output.

Its backlog hit a record $230 billion. It also bought back zero stock in the first half of 2026, down from $1.25 billion a year earlier, as the White House pushed contractors to spend on capacity instead.

L3Harris NYSE: LHX

L3Harris owns Aerojet Rocketdyne, one of the few U.S. makers of the solid rocket motors that nearly every interceptor needs. In September Lockheed handed it a $4.7 billion, seven-year contract for PAC-3 propulsion. L3Harris is building around 60 facilities to nearly triple PAC-3 motor output and quadruple THAAD's.

The Pentagon is in on it directly. It paid $1 billion for convertible preferred stock in L3Harris's missile business, which turns into roughly 10% of the unit if that business goes public by the end of 2027. The missile unit is the reason to own the stock.

Karman Space & Defense NYSE: KRMN

Karman makes the subsystems inside missiles and spacecraft: structures, propulsion parts and the hardware that holds the expensive pieces together. When the primes triple output, suppliers like Karman have to triple too. Its revenue grew 58% last quarter, and its backlog has grown 65% since the end of 2025.

Washington wants to buy products, not hours. These mid-tier contractors are rebuilding themselves around that.

CACI NYSE: CACI

CACI spent decades as a services contractor, billing the government for people. Now it's turning into a manufacturer. It bought ARKA, a maker of space-based sensors, for $2.6 billion in March, and it opened a defense-electronics plant in Rochester, New York, that more than quadruples its manufacturing floor.

It also has a product of its own in the field. After testing at Yuma, its SkyValor counter-drone system is being deployed to the southern border, which is a hardware sale, not a staffing contract.

Mercury Systems NASDAQ: MRCY

Mercury builds the processing hardware that goes inside radars, electronic-warfare systems and missiles. It sits a layer below the primes, so the production surge reaches it a few quarters later.

It's reaching it now. Orders in Mercury's latest quarter hit a record $660 million, nearly double a year earlier, at more than twice what it shipped. Backlog is above $1.9 billion.

NATO members agreed last year to raise defense spending to 5% of GDP by 2035, and Europe is buying the technology it skipped for 30 years.

Hensoldt XETRA: HAG

Hensoldt is one of Europe's most tech-focused listed defense pure plays: radars, optics and electronic warfare. Its orders doubled in the first half of 2026 to €2.8 billion, and its backlog passed €10 billion. Hensoldt is a cleaner way to own European rearmament than buying tanks and shells.

The sharpest new entrants have figured out that winning in defense means owning production, so they're building it.

Saronic

Saronic makes autonomous surface vessels, and it's building its own shipyard in Texas to produce them. It raised $1.75 billion at a $9.25 billion valuation in March. The yard, called Port Alpha, is planned to cost $3.2 billion and come online in 2028. A software-first startup building a shipyard tells you where it thinks the bottleneck is.

Castelion

Castelion is building low-cost hypersonic missiles. The Army reportedly plans a multi-year framework for its Blackbeard missile starting in fiscal 2027, the first time a non-traditional company has gotten that kind of long-term munitions deal. The 2027 budget request includes 353 low-cost hypersonic strike weapons.

The Pentagon is becoming a shareholder in the companies it buys from.

It paid $1 billion for a stake in L3Harris's missile unit. It owns a piece of MP Materials, the rare-earth miner. The White House is restricting buybacks at underperforming contractors. In return, Washington is offering what defense companies never used to get: multi-year volume guarantees and help paying for factories.

That rewrites the deal for anyone holding defense technology stocks. Owning a defense prime used to mean 30-year programs, predictable margins and cash coming back as buybacks and dividends. Now the customer sets the volume, caps the payouts and sits in the cap table. The factory owners get more certainty and hand back less cash, and in 2027 their stocks will start trading like it.

Nobody is offering the insurgents that bargain. To get paid at scale, they'll have to build the factories themselves.