This article looks at the 9 Defense Stocks That Will Skyrocket.
Smaller U.S. defense stocks have surged in 2025, driven by the Pentagon’s shift towards agile and adaptable combat systems. Another critical factor has been the rapid surge in demand for next-generation, low-cost military technology as nations modernize their militaries with AI-powered drones and unmanned vehicles that are cheap and cut dependence on ground forces.
The NYSE Arca Defense Index is up 46% YTD, as of the close on October 7, comfortably surpassing the S&P 500 Index’s gains of 14.42% during the period. Mid-to-small cap firms have been the major gainers on the index, with drone makers leading the pack.
New defense technology startups, such as Anduril Industries, are also attracting billions in funding, which is posing a challenge to legacy contractors. Industry experts believe that, unlike the traditional defense giants, the new startup firms are leaner, faster, and software-first. Moreover, most of them are building technology to help close the critical technology gaps that are vital to national security.
With that said, let’s now head over and examine the defense stocks that will skyrocket.
Our Methodology
For this article, we used screeners to identify defense stocks that are expected to perform strongly over the next 12 months with an average share price upside potential of 20% or greater. From there, we selected the top 9 stocks and ranked them in ascending order of their upside potential. Additionally, we also included data on hedge fund holdings in these companies as of Q2 2025 to provide further insight into investor interest.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Note: All data is as of the close of the day on October 6, 2025.
9 Defense Stocks That Will Skyrocket
9. TransDigm Group Incorporated (NYSE:TDG)
Share Price Upside Potential: 23.39%
Number of Hedge Fund Holders: 79
TransDigm Group Incorporated (NYSE:TDG) is among the 9 Defense Stocks That Will Skyrocket. On September 30, BMO Capital initiated coverage of the stock with an Outperform rating and assigned a price target of $1,420 for its shares.
The firm’s analyst, Michael Goldie, sees several growth levers and stated that despite limited visibility, large-scale M&A will eventually materialise, serving as a re-rating catalyst for the stock. BMO Capital further argued that patient investors in the meanwhile can ‘collect healthy distributions’ (including special dividends) with price and productivity driving margin expansion.
In other related news, on September 17, Jefferies analyst Sheila Kahyaoglu also highlighted that TransDigm Group Incorporated (NYSE:TDG) has $6 billion of capacity for acquisitions, which could be 3% accretive to earnings at a 14x transaction multiple.
However, the analyst lowered the stock’s price target to $1,490 from $1,650, while maintaining a Buy rating for its shares. The firm also removed the company from its Franchise Picks list. Kahyaoglu told investors in a research note that TransDigm Group Incorporated (NYSE:TDG)’s EBITDA multiple had declined 4% since the end of 2023, amid lower after-market volumes.
That said, the overall sentiment around TDG remains bullish, with Wall Street analysts having a consensus Buy rating for the stock and an average share price upside potential of over 23%.
TransDigm Group Incorporated (NYSE:TDG) manufactures engineered aircraft components for commercial and military aircraft.
8. Axon Enterprise Inc. (NASDAQ:AXON)
Share Price Upside Potential: 24.71%
Number of Hedge Fund Holders: 62
Axon Enterprise Inc. (NASDAQ:AXON) is among the 9 Defense Stocks That Will Skyrocket. On September 29, JMP Securities analyst Trevor Walsh reiterated his Market Outperform rating for the stock and maintained a share price target of $825.
The adjustment followed investor meetings with the company’s Senior Director of Investor Relations on September 25 that focused on key areas like emerging products, financial dynamics, sales strategies, and the recent acquisition of emergency response company Prepared.
Walsh described Axon Enterprise Inc. (NASDAQ:AXON)’s buyout of the emergency response startup as ‘a perfect complement’ to its earlier acquisitions of Fusus and Dedrone.
The stock has had impressive returns in 2025, gaining nearly 20% year-to-date. It has earned a consensus Buy rating from Wall Street analysts, who anticipate a further 24.71% upside potential in its share price.
Axon Enterprise Inc. (NASDAQ:AXON) manufactures weapons and technology for law enforcement agencies, the military, and civilian use. The company integrates cloud software solutions and hardware devices to help enable modern policing, defense, and security.
7. Loar Holdings Inc. (NYSE:LOAR)
Share Price Upside Potential: 25.37%
Number of Hedge Fund Holders: 45
Loar Holdings Inc. (NYSE:LOAR) is among the 9 Defense Stocks That Will Skyrocket. The company designs and manufactures niche aerospace and defense components for aircraft and aerospace and defense systems.
In July this year, Loar acquired Beadlight Ltd., a leading provider of illumination solutions, human-machine interface products, and air filtration systems. The firm is noted in the industry for its expertise in delivering bespoke lighting solutions for the premium cabin. This marked Loar Holdings Inc. (NYSE:LOAR)’s 18th acquisition since its inception in 2012.
Moreover, on August 13, the company reported strong financial results for the second quarter of fiscal 2025, with net sales growing 26.9% year-over-year to $123.1 million. Net income surged 118.7% from the prior year’s quarter to total $16.7 million.
Following the results, Loar Holdings Inc. (NYSE:LOAR) revised its guidance upwards for the full year for most metrics, citing increasing demand for its products, successful execution of value drivers, and the impact of Beadlight’s acquisition.
Wall Street analysts maintain a bullish outlook for the stock, with a consensus Buy rating and a one-year share price target of $97.19, representing an upside potential of over 25%, as of the close on October 6.
6. Voyager Technologies Inc. (NYSE:VOYG)
Share Price Upside Potential: 32.87%
Number of Hedge Fund Holders: 34
Voyager Technologies Inc. (NYSE:VOYG) is among the 9 Defense Stocks That Will Skyrocket. Late last month, the company announced that it had selected Vivace Corporation to build the primary structure for Starlab, an AI-enabled, next-gen commercial space station that aims to maintain continued human presence in low Earth orbit (LEO).
The station is expected to be among the largest single spaceflight structures ever built for space and will aid in enhancing the commercial industry’s ability to deliver technology and innovation.
Under the agreement, Vivace will use its expertise in advanced aerospace engineering and collaborate with Starlab and its global partners to finalize the design and initiate the manufacturing process of the primary structure.
Dylan Taylor, chairman and CEO of Voyager Technologies Inc. (NYSE:VOYG) stated the following on the Vivace partnership:
“Starlab offers unmatched capability amongst NASA’s Commercial LEO Destination (CLD) concepts and fine tunes the American workforce to realize a state-of-the-art orbiting marketplace to build on our strategic leadership in space. As a majority shareholder, Voyager is driving this program forward with our global partners, ensuring a seamless transition from the ISS and establishing infrastructure that will serve government and commercial customers for decades to come.”
NASA has awarded over $217.5 million to the Starlab program to date, according to Voyager’s press release dated September 24.
Voyager Technologies Inc. (NYSE:VOYG) is a defense technology and space solutions company that is committed to advancing and delivering transformative, mission-critical solutions.
5. StandardAero, Inc. (NYSE:SARO)
Share Price Upside Potential: 33.04%
Number of Hedge Fund Holders: 48
StandardAero, Inc. (NYSE:SARO) is among the 9 Defense Stocks That Will Skyrocket. On September 29, the company announced the appointment of Michael L. Kaplan as its Chief Legal Officer, effective October 6, 2025.
Kaplan had previously served as SVP, General Counsel, Chief Security Officer, and Secretary at the firm, and is returning to succeed Steve Sinquefield, who is retiring after four decades in aviation and had held the position for more than 10 years.
He will be based out of StandardAero, Inc. (NYSE:SARO)’s headquarters in Scottsdale, Arizona, and will report to the company’s Chairman and CEO, Russell Ford. Kaplan brings over 25 years of legal and executive leadership experience, having most recently worked as Senior Counsel at Norton Rose Fulbright, a global law firm.
Chairman and CEO Russell Ford shared the following remarks on Kaplan’s return to the company:
“We are delighted to welcome Michael back to StandardAero. He brings deep legal and compliance expertise across a variety of industries, including knowledge of both our business and aviation, and he has a track record of delivering substantial value in his roles – all of which will help fuel StandardAero as we continue to execute on our strategic growth plan.”
StandardAero, Inc. (NYSE:SARO) is a leading provider of aerospace engine aftermarket services for fixed and rotary wing aircraft. It serves the commercial, business aviation, and military end markets.
4. AIRO Group Holdings, Inc. (NASDAQ:AIRO)
Share Price Upside Potential: 55.92%
Number of Hedge Fund Holders: 7
AIRO Group Holdings, Inc. (NASDAQ:AIRO) is among the 9 Defense Stocks That Will Skyrocket. On September 22, the company announced its inclusion in the Russell 2000 and Russell 3000 Indexes, underscoring its growth trajectory and reflecting its significance as an aerospace and defense innovator.
Dr. Chirinjeev Kathuria, Executive Chairman at AIRO Group Holdings, Inc. (NASDAQ:AIRO) was quoted as saying the following in a press release:
“AIRO’s addition to the Russell 2000 and 3000 Indexes highlights the strength of our strategy and the confidence investors are placing in our company. It expands our visibility within the global investment community and creates a strong foundation to drive disciplined growth, broaden our shareholder base, and enhance long-term market value.”
The Russell 2000 index is a subset of the broader Russell 3000 index and a widely used benchmark for small-cap stocks in the U.S. AIRO Group Holdings, Inc. (NASDAQ:AIRO)’s membership in the index is likely to open access to a broader base of investors, ETFs, and index funds that track such benchmarks, which could potentially improve liquidity and drive long-term shareholder value.
AIRO Group Holdings Inc. (NASDAQ:AIRO) is a multi-faceted aerospace and defense company. The stock has had impressive returns in 2025, surging nearly 55% YTD as of the close on October 7.
3. Redwire Corporation (NYSE:RDW)
Share Price Upside Potential: 60.96%
Number of Hedge Fund Holders: 22
Redwire Corporation (NYSE:RDW) is among the 9 Defense Stocks That Will Skyrocket. On October 7, the company announced a planned refreshment of its Board of Directors.
The Board has appointed Dorothy D. Hayes and General (Ret.) James McConville as new independent directors. John S. Bolton and Jonathan Baliff, who joined the Board under Redwire Corporation (NYSE:RDW)’s combination with Genesis Park Acquisition Corp. have stepped down from their positions. The changes were effective immediately.
Dorothy D. Hayes has extensive experience as a board member and financial executive. She was formerly an executive at Agilent Technologies, Apollo Computer, Hewlett-Packard, and Intuit. Moreover, Hayes also currently serves on the board of BigBear.ai, heading the Audit Committee.
General (Ret.) McConville served as the 40th Chief of Staff of the U.S. Army. He also had the honor of being the longest-serving commander of the 101st Airborne Division (AASLT). Currently, he is a Senior Fellow at the Belfer Center at Harvard University and an operating partner at AE Industrial Partners.
Redwire Corporation (NYSE:RDW) is a global space and defense technology company that provides critical space infrastructure and advanced technologies for government and commercial users.
2. Byrna Technologies Inc. (NASDAQ:BYRN)
Share Price Upside Potential: 66.45%
Number of Hedge Fund Holders: 14
Byrna Technologies Inc. (NASDAQ:BYRN) is among the 9 Defense Stocks That Will Skyrocket. Last month, the company expanded its Board of Directors with the strategic appointments of Adam Roth and TJ Kennedy.
Roth, a former VP of North America Marketing at Nike, and Kennedy, a veteran in public safety technology, bring with them significant experience in go-to-market execution, brand building, and public safety technology leadership to the firm.
It also adds depth to the Board, which should aid in expanding consumer reach and further consolidating Byrna Technologies Inc. (NASDAQ:BYRN)’s position in the market.
Herbert Hughes, Chairman of the Board, stated the following on the appointments:
“Byrna has reached an inflection point where brand scale and public safety expertise can rapidly accelerate our growth. Adam’s unmatched record shaping Nike into a global cultural powerhouse and TJ’s proven leadership creating FirstNet and scaling mission-critical public safety technologies bring world-class expertise to Byrna. Their appointments reflect our ability to attract board members of the highest caliber and will be invaluable as we continue expanding Byrna’s presence across consumer, private security, and law enforcement markets.”
The stock is up 15% since the appointments on September 9. Byrna Technologies Inc. (NASDAQ:BYRN) manufactures less-lethal equipment and munitions for personal security, private security firms, and law enforcement agencies.
1. Firefly Aerospace Inc. (NASDAQ:FLY)
Share Price Upside Potential: 79.75%
Number of Hedge Fund Holders: N/A
Firefly Aerospace Inc. (NASDAQ:FLY) is among the 9 Defense Stocks That Will Skyrocket. On October 5, the space tech firm further strengthened its portfolio, with the announcement to acquire national security technology company, SciTec Inc., for about $855 million.
The transaction will be funded through a combination of $555 million in Firefly shares and $300 million in cash. The acquisition is expected to close at the end of 2025.
The takeover comes just months after Firefly Aerospace Inc.’s (NASDAQ:FLY) Nasdaq debut in August, in which its shares surged 55.6% to achieve a valuation of $9.84 billion and marked the largest U.S. listing in 2025 by a space tech company.
The acquisition of SciTec is set to bolster Firefly Aerospace Inc.’s (NASDAQ:FLY) space services through the integration of the former’s defense software analytics into its systems. The move is also expected to enhance its existing launch, lunar, and in-space offerings, given SciTec’s core capabilities in missile warning, ISR, tracking and defense, space domain awareness, and other elements.
Firefly Aerospace Inc. (NASDAQ:FLY) is a space and defense technology company, providing mission solutions for government and commercial customers.
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