Global military budgets surged to $2.9 trillion in 2025, with NATO members pledging 5% GDP spending, boosting defense contractors.
Global military spending climbed to a record $2.9 trillion in 2025, driven by NATO members exceeding $1.5 trillion in combined defense budgets for the first time. Nations have committed to allocating 5% of GDP to defense, with Europe posting double-digit growth, the fastest since the Cold War.
General Dynamics (GD) stands out with a diversified portfolio, including nuclear submarines, combat vehicles, and IT services. The company reduced net debt to $4.4 billion from $5.7 billion in 2025 while maintaining a $3.7 billion cash reserve. Its order backlog reached $131 billion, with potential contract value nearing $188 billion, and Marine Systems revenue rose 21% as submarine demand surged.
The defense sector’s expansion is underpinned by rising geopolitical tensions and sustained budget increases, positioning contractors with strong balance sheets for long-term growth.