Looking back on defense contractors stocks’ Q4 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 satisfactory Q4. As a group, revenues beat analysts’ consensus estimates by 2.1% while next quarter’s revenue guidance was in line.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6.3% since the latest earnings results.

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 exceeded analysts’ expectations by 10.4%. Overall, it was a very strong quarter for the company with a beat of analysts’ EPS and EBITDA estimates.

“We delivered second quarter fiscal 2026 results that were ahead of our expectations, with solid year-over-year growth in backlog, revenue, and adjusted EBITDA, and robust free cash flow,” said Bill Ballhaus, Mercury’s Chairman and CEO.

Unsurprisingly, the stock is down 25% since reporting and currently trades at $74.48.

Is now the time to buy Mercury Systems? 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 15.9% since reporting. It currently trades at $44.21.

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 guidance missing analysts’ expectations significantly and full-year 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 10.8% since the results and currently trades at $197.70.

Read our full analysis of AeroVironment’s results here.

Northrop Grumman (NYSE: NOC)

Responsible for the development of the first stealth bomber, Northrop Grumman (NYSE: NOC) specializes in providing aerospace, defense, and security solutions for various industry applications.

Northrop Grumman reported revenues of $11.71 billion, up 9.6% year on year. This result beat analysts’ expectations by 0.7%. Taking a step back, it was a mixed quarter as it also produced an impressive beat of analysts’ adjusted operating income estimates but full-year EPS guidance missing analysts’ expectations significantly.

The stock is up 3% since reporting and currently trades at $681.10.

Read our full, actionable report on Northrop Grumman 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 print topped analysts’ expectations by 12.7%. Aside from that, 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 pulled off the biggest analyst estimates beat among its peers. The stock is down 2.9% since reporting and currently trades at $401.31.

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.

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