War spending is back in the headlines, with the White House requesting $87.6b in supplemental funding tied to the Iran conflict, including $21b aimed at Defense Department capabilities and munitions procurement. That kind of policy move can quickly reshape expectations for companies exposed to US defense budgets, while political pushback and deficit concerns add extra policy and market risk. This article breaks down three stocks that are closely tied to this news, explaining how the proposed war budget could affect their demand outlook, contract pipelines, and risk profile so you can decide whether they belong on your watchlist.

General Dynamics (GD)

Overview: General Dynamics is a large aerospace and defense company that builds Gulfstream business jets, nuclear submarines, surface ships, armored vehicles, munitions, and provides IT, cyber, and mission support services to military, intelligence, and government customers worldwide.

Operations: General Dynamics generates most of its revenue from Marine Systems at US$17.5b, Technologies at US$13.6b, Aerospace at US$13.4b, and Combat Systems at US$9.4b, with the majority of sales tied to US customers.

Market Cap: US$94.6b

General Dynamics sits at the intersection of higher US defense spending and long-cycle naval and munitions programs. Its Marine Systems and Combat Systems segments are closely aligned to potential supplemental war funding for submarines, ground vehicles, and artillery shells. The company reports a record backlog supported by US Navy submarine programs and is investing US$200m to restart a Texas munitions facility, which directly links to the recent focus on artillery demand. At the same time, modest forecast revenue and earnings growth, reliance on external borrowing, and exposure to budget delays or sequestration keep policy and balance sheet risk on the table. The key issue is how these opposing forces compare for General Dynamics as defense spending headlines gather pace.

General Dynamics has a record backlog, fresh munitions investment, and exposure to new funding for submarines and artillery, but the real story sits in the detailed General Dynamics financial health report, where balance sheet pressure and policy risk intersect in ways the headlines miss.

Lockheed Martin (LMT)

Overview: Lockheed Martin is a global aerospace and defense company that supplies advanced fighter jets like the F-35, missile and air defense systems, military helicopters and ships, and national security space systems primarily to the U.S. government and allied nations.

Operations: Lockheed Martin generates most of its revenue from Aeronautics at US$30.5b, Rotary and Mission Systems at US$19.4b, Missiles and Fire Control at US$15.7b, and Space at US$13.6b, with the United States accounting for US$53.0b of sales.

Market Cap: US$116.1b

Lockheed Martin sits at the center of the proposed US$21b boost to Defense Department capabilities, with its missile, interceptor, and air defense programs directly aligned to higher munitions spending and resupply efforts tied to the Iran conflict and other flashpoints. The stock combines this policy exposure with a large and growing backlog in systems like THAAD, Patriot related interceptors, PrSM, and NGI, supported by more than US$9b of planned munitions capacity investments through 2030 and new facilities in Alabama. At the same time, high debt, recent margin pressure, program charges, and reliance on big U.S. budget decisions mean investors are trading off attractive valuation signals, a 2.81% dividend yield, and analyst growth expectations against execution, regulatory, and policy risks that are spelled out in far greater detail in the full Lockheed Martin story.

Lockheed Martin’s war budget exposure, dividend income, and valuation signals look appealing, but the real tension sits inside the 5 key rewards and 1 important warning sign where one specific risk could completely change how this story plays out.

Northrop Grumman (NOC)

Overview: Northrop Grumman is a large aerospace and defense technology company that supplies aircraft, unmanned systems, missiles, space systems, and command and control networks to the United States and allied governments.

Operations: Northrop Grumman generates most of its revenue from Aeronautics Systems at US$13.5b, Mission Systems at US$12.6b, Space Systems at US$10.7b, and Defense Systems at US$8.1b, with the United States contributing US$36.4b of sales alongside smaller contributions from Europe, Asia/Pacific, and other regions.

Market Cap: US$72.9b

Northrop Grumman gives you direct exposure to programs at the heart of higher war spending, from missile defense and solid rocket motors to space based interceptors, while also offering ROE of 26.7%, a 1.84% dividend, and a recent Q1 2026 earnings base of US$875m net income. The stock screens as comparatively low on P/E versus many defense peers and is involved in programs that could be affected if supplemental Iran related funding and larger future defense budgets flow into B-21, Sentinel, IBCS, and next generation munitions. The trade off is a balance sheet that leans on debt and big capital projects, plus heavy reliance on a few large U.S. contracts. That tension is where the real Northrop Grumman story starts to get interesting.

Northrop Grumman’s mix of 26.7% ROE, a 1.84% dividend, and a comparatively low P/E hints that the market may be missing something. Get the full story in the 4 key rewards and 1 important warning sign

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.