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Special Report
3 Stocks Poised to Grow on European Rearmament SpendingAuthor: Nathan Reiff. Posted: 4/26/2026. 
Key Points
- European Union members are aiming to mobilize €800 billion toward rearmament efforts by 2030, a major shift in defense spending.
- While some U.S. companies will be less likely to see a direct benefit as a result of rules regarding domestic purchasing, others are already well-positioned.
- GD and LDOS could win outright amid increased EU defense spending, while KRMN may be an indirect beneficiary.
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Amid the ongoing war in Ukraine, member states of the European Union committed in March 2025 to invest €800 billion (approximately $944 billion) by 2030 in an ambitious rearmament plan. More than a year after the announcement, the program appears to be progressing quickly: EU countries spent roughly €400 billion (approx. $472 billion) in 2025 alone toward rearmament efforts, putting the plan ahead of schedule. Germany and several Northern European countries are among those leading the spending increase, helping European industry overall as military spending could climb to as high as 2.5% of GDP. For U.S. investors, Europe’s rearmament drive is a nuanced opportunity. Some program rules limit the use of non-EU components and restrict certain U.S. procurement, but U.S. defense firms and their advanced technologies are still likely to play a major role. The companies below may be particularly well-positioned to benefit. A Broad U.S. Defense Name Already Boasting Growing Backlog
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Major U.S. defense firm General Dynamics (NYSE: GD) is one domestic company that could benefit from increased European defense spending. Its broad portfolio — land systems like tanks and armored vehicles, IT and communications, and marine systems including submarines — means much U.S.-linked spending tied to the rearmament plan could touch GD's business. GD is closely integrated with existing NATO platforms. If European militaries continue to rely on those systems, GD may see increased demand. The company’s backlog has been rising: GD reported a record backlog of $118 billion as of the end of 2025, and it posted a book-to-bill ratio of 1.5. That should help drive continued revenue growth, and GD delivered more than a 10% year-over-year improvement for full-year 2025. About two-thirds of Wall Street analysts covering GD rate the stock a Buy or equivalent. The company also has roughly 20% projected upside, even after shares climbed about 20% over the past 12 months. Focus on Intelligence, IT, and Logistics Gives Leidos an Advantage in EuropeSmaller than General Dynamics, Leidos (NYSE: LDOS) has a niche focus that could make it well-suited for European demand. Leidos specializes in IT systems, infrastructure, intelligence and logistics rather than weapons. As Europe strengthens network defense and shifts toward more digitized warfare, Leidos' capabilities in communications, data and intelligence could be especially attractive. The company’s emphasis on software, services and systems — rather than hardware — also helps, since many EU nations are prioritizing European-made equipment for sovereign weapons production but are less likely to restrict intangible products like software and services. That creates potential opportunities for Leidos that larger hardware-focused U.S. defense firms might face limits on. Despite a slight year-over-year revenue decline in the most recent quarter, Leidos reported results at the high end of guidance and saw its adjusted EBITDA margin improve by 120 basis points year over year. Earnings per share and free cash flow are also rising, driven by growth in bookings and backlog. Analysts see about 37% upside potential for LDOS shares. Components Maker Karman Could Still Reap Rewards, If Only IndirectlyPrecision components and subsystem maker Karman (NYSE: KRMN) occupies a different position. European nations’ desire to buy domestically could mean they avoid purchasing Karman’s products directly. Still, Karman may benefit indirectly if increased European activity puts pressure on the global supply chain. Even if Karman doesn’t sell directly into European rearmament programs, the scaling of U.S. production and related supply constraints could work in its favor. Karman’s best chance to gain is through its highly specialized, proprietary technologies, which are harder to replace and can create stickier customer relationships. Overall defense spending trends remain strong, and analysts are broadly optimistic about KRMN shares. Wall Street’s consensus price target implies the stock could climb as much as 50%, to about $117.10. |
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