Quarterly earnings results are a good time to check in on a company’s progress, especially compared to its peers in the same sector. Today we are looking at Kratos (NASDAQ: KTOS) and the best and worst performers in the defense contractors industry.

Defense contractors typically require technical expertise and government clearance. Companies in this sector can also enjoy long-term contracts with government bodies, leading to more predictable revenues. Combined, these factors create high barriers to entry and can lead to limited competition. Lately, geopolitical tensions–whether it be Russia’s invasion of Ukraine or China’s aggression towards Taiwan–highlight the need for defense spending. On the other hand, demand for these products can ebb and flow with defense budgets and even who is president, as different administrations can have vastly different ideas of how to allocate federal funds.

The 14 defense contractors stocks we track reported a satisfactory Q4. As a group, revenues beat analysts’ consensus estimates by 2.1% while next quarter’s revenue guidance was 0.8% below.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6.2% since the latest earnings results.

Kratos (NASDAQ: KTOS)

Established with a commitment to supporting national security, Kratos (NASDAQ: KTOS) is a provider of advanced engineering, technology, and security solutions tailored for critical national security applications.

Kratos reported revenues of $345.1 million, up 21.9% year on year. This print exceeded analysts’ expectations by 6.3%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ organic revenue estimates.

Eric DeMarco, Kratos’ President and CEO, said, “We finished 2025 exceeding our financial objectives for the fourth quarter, generating approximately 20 percent Q4 year- over-year organic Revenue growth, generating a 1.3 to 1.0 book to bill ratio on top of this 20 percent organic growth, having a record backlog of $1.573 billion, and a record opportunity pipeline of $13.7 billion, with the opportunity set for Kratos having never been stronger and continuing to increase. Kratos is positioned to achieve our previously communicated 2026 and 2027 financial targets, and similar to 2025, for 2026 we expect our business to accelerate throughout the year, with increasing Revenue volume and Adjusted EBITDA margins, as several new programs, contracts and initiatives begin, ramp and expand.”

The stock is down 25.5% since reporting and currently trades at $70.29.

Is now the time to buy Kratos? Access our full analysis of the earnings results here, it’s free.

Best Q4: Leonardo DRS (NASDAQ: DRS)

Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ: DRS) is a provider of defense systems, electronics, and military support services.

Leonardo DRS reported revenues of $1.06 billion, up 8.1% year on year, outperforming analysts’ expectations by 7%. The business had an exceptional quarter with an impressive beat of analysts’ revenue and EBITDA estimates.

The market seems happy with the results as the stock is up 21.2% since reporting. It currently trades at $46.24.

Is now the time to buy Leonardo DRS? Access our full analysis of the earnings results here, it’s free.

Weakest Q4: AeroVironment (NASDAQ: AVAV)

Focused on the future of autonomous military combat, AeroVironment (NASDAQ: AVAV) specializes in advanced unmanned aircraft systems and electric vehicle charging solutions.

AeroVironment reported revenues of $408 million, up 143% year on year, falling short of analysts’ expectations by 14.6%. It was a softer quarter as it posted full-year revenue and EBITDA guidance missing analysts’ expectations significantly.

AeroVironment delivered the fastest revenue growth but had the weakest performance against analyst estimates in the group. As expected, the stock is down 19.3% since the results and currently trades at $178.73.

Read our full analysis of AeroVironment’s results here.

Mercury Systems (NASDAQ: MRCY)

Founded in 1981, Mercury Systems (NASDAQ: MRCY) specializes in providing processing subsystems and components for primarily defense applications.

Mercury Systems reported revenues of $232.9 million, up 4.4% year on year. This print surpassed analysts’ expectations by 10.4%. It was a very strong quarter as it also produced a beat of analysts’ EPS estimates and an impressive beat of analysts’ EBITDA estimates.

The stock is down 18.4% since reporting and currently trades at $81.00.

Read our full, actionable report on Mercury Systems here, it’s free.

Huntington Ingalls (NYSE: HII)

Building Nimitz-class aircraft carriers used in active service, Huntington Ingalls (NYSE: HII) develops marine vessels and their mission systems and maintenance services.

Huntington Ingalls reported revenues of $3.48 billion, up 15.7% year on year. This result beat analysts’ expectations by 12.7%. More broadly, it was a mixed quarter as it also recorded a solid beat of analysts’ revenue estimates but a significant miss of analysts’ adjusted operating income estimates.

Huntington Ingalls delivered the biggest analyst estimates beat among its peers. The stock is down 3.8% since reporting and currently trades at $397.29.

Read our full, actionable report on Huntington Ingalls here, it’s free.

Market Update

Late in 2025 into early 2026, there was hand wringing around artificial intelligence. For software companies, the fear was that AI would erode pricing power and compress margins as new tools made it easier to replicate what once required expensive enterprise platforms. Crypto investors had their own version of the same anxiety: if AI agents could trade, allocate capital, and manage wallets autonomously, what exactly was the long-term value of today’s crypto infrastructure?

These concerns triggered a noticeable rotation away from these sectors and into safer havens. But markets rarely dwell on one narrative for long. Spring 2026 came, and the focus shifted abruptly from technological disruption to geopolitical risk. The US’ conflict with Iran became the dominant driver of market psychology, and when geopolitics takes center stage, the script changes quickly. Investors stop debating growth rates and start worrying about oil supply, inflation, and global stability.

Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.