No matter if the war in Iran ends tomorrow, the world of warfare has fundamentally changed. Like with airborne drones in the Ukraine and Russian conflict, the United States and its allies are realizing the importance of missile defense systems and subsea capabilities due to this conflict.
Many defense contractors will benefit from these urgent needs, as well as the long-term Golden Dome project in the United States, which has a proposed budget of $185 billion. Among these defense contractors, two are poised to benefit from these trends in defense spending: Kraken Robotics(OTC: KRKNF) and Lockheed Martin(NYSE: LMT).
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Here’s why both these stocks could be solid defense bets over the next decade.
Image source: Getty Images.
Start-up Anduril has transformed the pace of innovation in U.S. defense technologies. Over the last decade, it has built capabilities in air drones for various applications. Now, it is heavily investing in these capabilities for underwater robotics systems, utilized for weapons or monitoring various assets.
Kraken Robotics is the lead supplier of subsea batteries to Anduril for these new underwater drones. The Canadian outfit is the leader in batteries built to operate in fierce conditions under the ocean, with lighter builds that make it much easier for its customers, like Anduril, to build drones for militaries.
Last quarter, Kraken Robotics’ revenue grew 60% year over year to $31 million, driven by its battery business. It also has an underwater imaging and 3D mapping business that remains steady but does not have nearly the growth potential of subsea batteries.
Future growth looks promising. Anduril is placing massive orders for subsea batteries, along with other defense contractors competing in the underwater drone space. Just a few weeks ago, the company announced a new order of $24 million across more than 10 customers and five different countries. In January, it announced $35 million in subsea battery sales.
Management is not resting on its laurels and should see huge growth from its battery business in the years ahead. Earlier this year, it announced an acquisition of Covelya Group, which sells sensors and navigation equipment for underwater vehicles, a perfect addition to Kraken’s product arsenal. With a market cap of just $1.5 billion, investors who buy today are still getting in early on Kraken Robotics’ growth journey.
More storied in the defense space and one of the largest defense contractors in the world, Lockheed Martin has been a supplier of aerospace-focused systems to the United States military and its allies for decades. These include recent programs such as the F-35 fighter jet and the PAC-3 missile interceptor, which have been crucial in the Iran War, as well as various space and advanced technology projects.
Missile defense is a priority for the future, which is why Lockheed Martin is one of the contractors for the Golden Dome system in the United States being built over the coming years. Its large budget should be a boost to Lockheed Martin, which has already promised to increase the manufacturing capacity of its existing missile defense products. The F-35 has a long shelf life and will be serviced for decades, providing stable cash flow to Lockheed Martin shareholders.
Across all its segments, Lockheed Martin generated $75 billion in revenue last year and is projecting growth for 2026. Its backlog reached a record $194 billion at the end of 2025, reflecting increased budgets from militaries worldwide and Lockheed’s strong position in aerospace and missile defense.
The stock currently trades at a market cap of $139 billion, or a forward price-to-earnings ratio (P/E) of 20 based on 2026 earnings estimates. This is not dirt cheap, but Lockheed Martin is as steady a business as it gets. Along with its growing backlog, the company should deliver solid returns for anyone who buys now.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Kraken Robotics. The Motley Fool recommends Lockheed Martin. The Motley Fool has a disclosure policy.
