The global geopolitical landscape is fracturing at a rapid pace. From the ongoing Russia-Ukraine war to heightened cross-border hostility in regions like Pakistan-Afghanistan, and most recently, intensified attacks on Lebanon and escalating Iran-U.S. tensions, the world order is increasingly being shaped by hostile conflict.
This turbulent backdrop has triggered a fundamental shift in defense priorities worldwide, with nations rushing to bolster their military capabilities like never before.
Amid this environment, as governments across the globe are signing multi-year, multi-billion-dollar contracts for advanced weaponry and aerospace systems, defense primes like Lockheed Martin LMT and BAE Systems BAESY are seeing their order books swell to historic levels.
For investors, these robust backlogs are not just numbers — they indicate solid future revenue growth and profitability, setting the stage for a strong case to increase their exposure to exchange-traded funds (ETFs) holding these defense contractors. The convergence of rising geopolitical risks and robust corporate order books makes this a pivotal moment to consider investing in defense stocks.
But before we dive into the specific ETFs, let's first justify our thesis with empirical evidence. Understanding the sheer scale of this industry’s current order book as well as its growth prospects is essential to making an informed investment decision.
The Unprecedented Boom in Defense Order Backlogs
Over the past year, the defense industry has seen an extraordinary accumulation of unfulfilled orders. Government defense spending is inherently cyclical and operates on a multi-year lag; a budget authorized today translates to contracts and revenues recognized years down the line. As a result, the primary financial indicator to watch right now is not immediate shipments, but the corporate backlog.
Major defense contractors have been posting figures that reflect this trend, underscoring the massive accumulation of demand.
For instance, Lockheed Martin, the world’s largest defense contractor, witnessed its first-quarter 2026 backlog rise 7.7% to a robust $186.4 billion, driven by strong customer demand for its combat-proven weapons.
The company has signed several framework agreements with the U.S. government in the first quarter to accelerate and scale munitions production, including advanced Patriot Missile, THAAD, and PrSM. To this end, LMT’s management expects the multi-year demand commitments defined in these framework agreements to support strategic investments in defense production infrastructure, while also enabling the company to increase production rates of these critical systems to three to four times the current levels.
Backlog of RTX Corp. RTX, a well-known missile and radar manufacturer worldwide, came at a record $271 billion at the end of March 2026, out of which defense backlog amounted to $109 billion, representing year-over-year growth of 18.5%. The company is currently investing heavily to increase production of its critical munitions, including Tomahawk, AMRAAM, and Standard Missile family, over the next decade, to meet growing demand.
BAE Systems, a technology-led defence, aerospace and security solutions provider, recorded a backlog worth approximately $110.4 billion by 2025-end, which improved 7.5% from the prior-year level. This strong backlog growth was driven by notable order intakes like the $6.6 billion worth of Maritime orders for the company’s Submarines business, the next major phase of Canada’s River Class destroyer program, and Australia’s Hobart Class combat system upgrade, along with a $6 billion order from Türkiye for 20 Typhoon aircraft and weapons.
GE Aerospace GE, a major provider of military jet engines, clinched orders worth $6.2 billion in the first quarter of 2026. The figure jumped 67% year over year, as governments across the globe continued to focus on modernizing and scaling their forces, thereby driving demand for the company’s products and services. Notable orders in the first quarter included a contract to supply T408-GE-400 engines for the U.S. Marine Corps' Sikorsky CH-53K King Stallion helicopter and another award from Turkish Aerospace Industries to continue integrating GE’s F404 engine into Türkiye's jet trainer Hurjet.
Boeing BA, renowned for both its passenger aircraft and defense equipment, recorded a backlog worth $85.8 billion in the first quarter of 2026, reflecting a 39% year-over-year surge. BA signed a seven-year defense framework agreement to expand PAC-3 Seeker production and announced a strategic partnership with Rheinmetall to offer the MQ-28 Ghost Bat to Germany during the first quarter.
Defense ETFs to Buy
As per a report from the United Nations, global military spending could reach $4.7-$6.6 trillion by 2035, with the higher end of the projection, if achieved, being nearly five times the level at the end of the Cold War.
This unprecedented military spending surge, further corroborated by the massive influx of long-term orders, as mentioned above, provides unparalleled revenue growth visibility for defense contractors. Higher order book volume gives these defense contractors the stability required to scale up operations, maximize manufacturing efficiencies, and continuously expand their profitability margins over the next decade as they convert their backlogs into successful deliveries.
However, picking individual winners can be risky, considering single-stock operational risks, such as supply-chain bottlenecks or individual program delays. Instead, investors can gain exposure to this multi-year trend through the following Defense ETFs.
iShares U.S. Aerospace & Defense ETF ITA
This fund, with net assets worth $14.21 billion, offers exposure to 49 U.S. aerospace and defense companies, including manufacturers of commercial and military aircraft. GE holds the first spot in this fund, with 21.91% weightage, while RTX holds the second spot with 14.68% weightage. BA holds 9.27% of shares in this fund, clinching the third spot, while LMT enjoys the seventh spot, holding 4.11% of shares.
ITA has surged 30.6% over the past year and charges 38 basis points (bps) as fees. It traded at a volume of 0.92 million shares in the last trading session.
Invesco Aerospace & Defense ETF PPA
This fund, with a market value worth $8.26 billion, offers exposure to 61 companies involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations. GE holds the first spot in this fund, with 9.25% weightage, while BA holds the second spot with 8.47% weightage. RTX holds 7.19% of shares in this fund, clinching the third spot, while LMT enjoys the fourth spot, holding 6.1% of shares.
PPA has soared 28.1% over the past year and charges 58 as fees. It traded at a volume of 0.17 million shares in the last trading session.
iShares Defense Industrials Active ETF IDEF
This fund, with net assets worth $4.08 billion, offers exposure to 114 companies that are well-positioned to benefit from global defense and security spending. RTX holds the first spot in this fund, with 8.05% weightage, while LMT holds the second spot with 6.76% weightage. BA holds 5.04% of shares in this fund, clinching the fourth spot, while BAESY enjoys the ninth spot, holding 2.68% of shares.
IDEF has rallied 18.7% over the past year and charges 55 bps as fees. It traded at a volume of 1 million shares in the last trading session.
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The Boeing Company (BA): Free Stock Analysis Report
Lockheed Martin Corporation (LMT): Free Stock Analysis Report
GE Aerospace (GE): Free Stock Analysis Report
Bae Systems PLC (BAESY): Free Stock Analysis Report
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
RTX Corporation (RTX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).