Looking back on defense contractors stocks’ Q1 earnings, we examine this quarter’s best and worst performers, including Mercury Systems (NASDAQ: MRCY) and its peers.
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 very strong Q1. As a group, revenues beat analysts’ consensus estimates by 4.2% while next quarter’s revenue guidance was 2.3% below.
While some defense contractors stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.5% since the latest earnings results.
Best Q1: 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 $235.8 million, up 11.5% year on year. This print exceeded analysts’ expectations by 14.2%. Overall, it was an incredible quarter for the company with a beat of analysts’ EPS and EBITDA estimates.
“We delivered third quarter fiscal 2026 results that were ahead of our expectations, with significant year-over-year growth in backlog, revenue, and adjusted EBITDA,” said Bill Ballhaus, Mercury’s Chairman and CEO.
Interestingly, the stock is up 38.6% since reporting and currently trades at $114.97.
Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.
General Dynamics (NYSE: GD)
Creator of the famous M1 Abrahms tank, General Dynamics (NYSE: GD) develops aerospace, marine systems, combat systems, and information technology products.
General Dynamics reported revenues of $13.48 billion, up 10.3% year on year, outperforming analysts’ expectations by 5.9%. The business had a stunning quarter with a solid beat of analysts’ adjusted operating income and EPS estimates.
The market seems happy with the results as the stock is up 19.3% since reporting. It currently trades at $374.08.
Is now the time to buy General Dynamics? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: Lockheed Martin (NYSE: LMT)
Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.
Lockheed Martin reported revenues of $18.02 billion, flat year on year, falling short of analysts’ expectations by 0.9%. It was a softer quarter as it posted a significant miss of analysts’ adjusted operating income and EPS estimates.
Lockheed Martin delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 6.7% since the results and currently trades at $518.26.
Read our full analysis of Lockheed Martin’s results here.
Parsons (NYSE: PSN)
Delivering aerospace technology during the Cold War-era, Parsons (NYSE: PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.
Parsons reported revenues of $1.49 billion, down 4.1% year on year. This result came in 0.5% below analysts’ expectations. More broadly, it was actually a strong quarter as it put up an impressive beat of analysts’ adjusted operating income estimates.
The stock is up 7.7% since reporting and currently trades at $55.86.
Read our full, actionable report on Parsons here, it’s free.
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 $846 million, up 5.9% year on year. This number surpassed analysts’ expectations by 3.3%. It was an exceptional quarter as it also logged a beat of analysts’ EPS and EBITDA estimates.
The stock is up 11.9% since reporting and currently trades at $44.77.
Read our full, actionable report on Leonardo DRS 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.
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