This article looks at the 10 Best Performing Defense Stocks So Far in 2026.
Defense stocks have been pressured since the start of the Iran war, following robust returns over the past few years. The iShares U.S. Aerospace & Defense ETF (ITA), which tracks leading companies in the aerospace and defense industry, is down 11% since March, while the S&P 500 has returned nearly 9% during the same period.
In a research note to investors on May 14, Citi reiterated its earlier stance that defense stocks were struggling due to a mix of weak earnings and what it described as ‘changing top-down themes’. The firm said the sector was highly vulnerable to fears of disruptions from artificial intelligence, just as companies in other industries are.
Citi analysts further noticed that defense companies that had discussed artificial intelligence or software in their recent earnings calls had seen their share price move in the opposite direction to an index of AI-focused stocks. The firm was quoted as saying the following by CNBC:
“Despite the best efforts of the management teams to argue otherwise, the anti defense services AI narrative is only getting louder.”
While the firm anticipates revenue growth in the back half of the year, Citi says it is reluctant to buy the dip. However, it added that if the current sentiment continues, it could present buying opportunities for investors.
With that said, let’s now head to the list of the best performing defense stocks so far in 2026.
Methodology
We screened for mid-cap or larger stocks in the aerospace and defense industry. From there, we picked the top 10 companies with the highest year-to-date percentage returns in share price, as of the close of business on Friday, May 22, 2026. Then we listed them in ascending order of their returns. Both pure-play defense stocks and aerospace companies with significant exposure to the defense sector are part of our list. Where two or more stocks were tied on returns, we ranked them based on the hedge holdings in these companies according to Insider Monkey’s database for Q4 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10 Best Performing Defense Stocks So Far in 2026:
10. V2X, Inc. (NYSE:VVX)
YTD Return: 32%
Number of Hedge Fund Holders: 33
V2X, Inc. (NYSE:VVX) is among the 10 Best Performing Defense Stocks So Far in 2026. Last week, the company announced that it had secured a contract from the Naval Air Systems Command for the Large Aircraft Infrared Countermeasures (LAIRCM) program.
The LAIRCM is a vital national security system that enhances the survivability of military aircraft and protects them against infrared-guided missiles. Under the terms of the agreement, several Marine Corps KC-130J aircraft will be integrated with aircraft survivability systems at the company’s modernization and integration center in Crestview, Florida.
In a press release on May 18, V2X, Inc. (NYSE:VVX) said it was awarded the contract because of its robust track record of supporting complex modification programs in the past, and this contract further reinforces its reputation as an important provider of aircraft modification and survivability solutions for defense customers.
Jeremy C. Wensinger, President and CEO, was quoted as saying the following:
“LAIRCM is a vital capability that enhances aircraft survivability in contested environments. We are proud to continue supporting the U.S. Navy with proven expertise in aircraft modification, modernization,and mission system integration that directly contributes to warfighter safety and mission success.”
In other news, the company reported strong results for the first quarter earlier this month, with double-digit growth in both revenue and net income, and ended the quarter with a record backlog of $13.8 billion. Given the encouraging momentum, the management said it was raising its outlook for the full year.
V2X, Inc. (NYSE:VVX) provides innovative solutions and support services that integrate the digital and physical environments. It is an important player in the defense sector, providing vital mission solutions to customers in around 47 countries worldwide. The stock is up 32% year-to-date.
9. Leonardo DRS, Inc. (NASDAQ:DRS)
YTD Return: 32%
Number of Hedge Fund Holders: 35
Leonardo DRS, Inc. (NASDAQ:DRS) is among the 10 Best Performing Defense Stocks So Far in 2026. The stock has returned 32% year-to-date as of the close of business on May 22.
On May 18, the company unveiled Tenum 640 Orbit, an uncooled thermal drone camera, during the SOF week in Tampa, Florida. The camera module is designed to be a cost-optimized payload for uncrewed aerial, land, and maritime platforms.
Greg Christison, vice president, Sensors & Aviation, at Leonardo DRS, Inc. (NASDAQ:DRS), believes the launch of Tenum 640 Orbit will help in quicker integration and broader adoption in smaller autonomous platforms, without compromising on performance.
The thermal camera uses an uncooled VOx microbolometer and captures pictures with a resolution of 640 x 512. It also offers imagery at 60 frames per second, which helps enhance the ability to detect, track, and navigate during both day and night, as well as in environments with low visibility.
In other news, the company has had a strong financial start to fiscal 2026, with Q1 revenue increasing 6% year-over-year to $846 million. Net earnings came in at $62 million, up 24%, while diluted EPS grew 21% from the prior year’s period to $0.23. It ended the quarter with a record funded backlog of $4.7 billion, up 8% year-over-year.
As of the close of business on May 22, Wall Street has a Moderate Buy rating on the stock with an average share price upside potential of 18%.
Leonardo DRS, Inc. (NASDAQ:DRS) provides advanced defense technologies and solutions for national security needs to the U.S. government and its allies.
