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.
8. Curtiss-Wright Corporation (NYSE:CW)
YTD Return: 32%
Number of Hedge Fund Holders: 59
Curtiss-Wright Corporation (NYSE:CW) is among the 10 Best Performing Defense Stocks So Far in 2026. On May 14, the company declared a quarterly dividend of $0.26 per share. The payment is scheduled for July 6 to all stockholders as of June 15.
This is an 8% increase over the previous dividend and marks the 10th consecutive year the company has raised its dividend, resulting in an annual payout of $1.04 per share. As of the close on Friday, CW has an annual dividend yield of 0.14%.
Curtiss-Wright Corporation (NYSE:CW) has become an attractive pick for investors due to its robust backlog of orders and an increase in global defense spending. The stock has returned 32% year-to-date as of the close on May 22. Over the past 12 months, it has been up 76%.
Wall Street has a Moderate Buy rating on its shares and anticipates an average upside of 8%. Recent updates include Citigroup, which on May 18 raised the price target to $775 from $728 and maintained a Neutral rating.
The company reported a 13% increase in sales for Q1 2026 to $914 million. Operating income came in at $160 million, up 23% year-over-year, and diluted EPS of $3.46, improving from $2.68 in the prior year’s period. It received new orders worth $1.2 billion during the quarter, taking the total backlog to $4.3 billion. Following the results, the management announced to raise its guidance for the full year across all major metrics.
Curtiss-Wright Corporation (NYSE:CW) is an integrated business that provides engineered products, solutions, and services for the aerospace and defense markets.
7. Elbit Systems Ltd. (NASDAQ:ESLT)
YTD Return: 33%
Number of Hedge Fund Holders: 25
Elbit Systems Ltd. (NASDAQ:ESLT) is among the 10 Best Performing Defense Stocks So Far in 2026, with returns of 33% year-to-date, as of the close on May 22. While Wall Street analysts have a Hold rating on the stock, they see a further 17% upside to its share price.
On May 20, the company announced that S&P Global Ratings Maalot Ltd. has raised its long-term rating to ‘ilAAA’ and reiterated its short-term rating of ‘ilA-1+’. The firm, in its rating report, also shared a stable outlook for the defense contractor’s B, C, and D-series notes.
In its report, S&P Global Ratings Maalot Ltd. noted Elbit Systems Ltd. (NASDAQ:ESLT)’s improving financial ratios, operational efficiency, a high backlog of orders, and ongoing geopolitical tensions as among the reasons behind the adjustment.
In other news, earlier this month, the company’s subsidiary, Cyclone, secured a $34 million contract from Israel’s Ministry of Defense to develop extended range capability for the country’s F-35 ‘Adir’ fighter jet.
The agreement will include building and integrating external fuel tanks based on an existing design previously prepared for the F-16. The contract is set to enhance the aircraft’s operational range and flexibility, while also cutting dependency on aerial refueling.
Elbit Systems Ltd. (NASDAQ:ESLT) is a defense technology company providing next-generation solutions across multiple domains, including airborne, land, and naval systems.
6. Mercury Systems, Inc. (NASDAQ:MRCY)
YTD Return: 34%
Number of Hedge Fund Holders: 34
Mercury Systems, Inc. (NASDAQ:MRCY) is among the 10 Best Performing Defense Stocks So Far in 2026. The company’s shares are up 34% year-to-date as of the close on May 22. Several analysts have adjusted their price targets on the stock this month following the company’s third-quarter results.
Recent updates include Goldman Sachs, which on May 11 raised its price target on the stock to $68 from $60 but maintained a Sell rating. The adjustment came as part of the firm revising its model post the company’s third-quarter earnings report.
On May 10, Jefferies also hiked its price target on Mercury Systems, Inc. (NASDAQ:MRCY) to $95 from $80 after the company raised its full-year guidance for 2026 during the earnings call. The firm reiterated its Hold rating on the stock. Earlier on May 7, Canaccord Genuity increased its price target by $4 to $106 while maintaining a Buy rating.
Quarterly revenue was reported at $236 million, representing an 11.5% organic increase. Adjusted earnings per share came in at $0.27 compared to $0.06 during the same period last year. Bookings grew by $348 million in Q3, taking the backlog to a record $1.6 billion.
Mercury Systems, Inc. (NASDAQ:MRCY) now anticipates top-line growth for fiscal 2026 in the mid-single digits, up from initial estimates of low single digits. Adjusted EBITDA margin for the full year is expected in the mid-teens, against earlier forecasts of near mid-teens. Moreover, the company sees positive free cash flow ahead in the fourth quarter.
Mercury Systems, Inc. (NASDAQ:MRCY) provides mission-critical processing that helps enhance the accessibility of advanced technologies used in complex aerospace and defense missions.
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