CFM International (GE Aerospace and Safran joint venture) increased LEAP engine deliveries by 41% in the first half of 2026, which is critical for Boeing and Airbus to ramp up production and clear their massive aircraft backlogs. While the increased engine supply relieves supply-chain bottlenecks and benefits aircraft manufacturers' revenues and margins, it creates near-term margin pressure for GE Aerospace as new engine sales are typically lower-margin compared to lucrative long-term aftermarket service agreements.

GE Aerospace reported Q2 2026 operating profit of $2.75B, up 18% year-over-year, but operating margins declined 130 basis points to 21.7% due to growth investments and cost inflation. The company raised its 2026 operating profit guidance to $10.55-$10.75B, implying 17% growth at midpoint, driven by strong commercial and defense aerospace demand and higher LEAP engine deliveries.

The article compares two aerospace ETFs: iShares U.S. Aerospace & Defense ETF (ITA) and U.S. Global Jets ETF (JETS). ITA focuses on defense contractors and aerospace manufacturers with a lower 0.37% expense ratio, higher 1-year return of 22.9%, and lower volatility (beta 0.74). JETS concentrates on commercial airlines with a higher 0.6% expense ratio and 16.9% 1-year return but greater volatility (beta 1.18). The article recommends ITA as the better long-term investment due to superior historical performance and stability.

RTX's growing $289 billion backlog, driven by surging orders in both commercial aerospace and defense sectors, is a key indicator of future revenue and earnings growth. The backlog provides earnings visibility, de-risks the business from economic weakness, and drives long-term growth through profitable aftermarket services and recurring revenue. Management projects 2026 adjusted sales of $95-96 billion, with backlog growth dependent on orders exceeding sales growth.

The iShares U.S. Aerospace & Defense ETF (ITA) offers lower costs (0.37% expense ratio) and stronger 1-year returns (27.2%), but is highly concentrated with top three holdings representing 47% of the portfolio. The Invesco Aerospace & Defense ETF (PPA) provides broader diversification across 62 holdings with tech exposure, delivering superior 5-year growth but at a higher expense ratio (0.58%). The choice depends on whether investors prefer concentrated exposure to major defense contractors or diversified sector exposure.

ARK Space & Defense Innovation ETF (ARKX) delivers higher returns (28.8% over 1 year) but with significantly higher volatility and a 0.75% expense ratio, while First Trust Indxx Aerospace & Defense ETF (MISL) offers steadier performance (22.6% returns) with lower costs (0.6% expense ratio) and reduced risk. ARKX is suited for aggressive investors backing Cathie Wood's innovation thesis, while MISL appeals to those seeking stable aerospace and defense exposure.

Ondas, a military drone company, has surged 110% over the past year as demand for military drones accelerates due to ongoing conflicts. Despite a $4.3 billion market cap, the company has secured major contracts from the U.S. military and Israel, competing effectively against larger defense contractors. With projected revenue growth exceeding tenfold in 2026 and a forward P/S ratio of 8, analysts suggest the stock has significant upside potential despite its current valuation.

Voyager Technologies stock surged 70% this week following strong Q2 results with record bookings of $113 million and a backlog of $335.5 million. The aerospace company is benefiting from the Trump Administration's Golden Dome missile defense project ($84 million in awards), its Astrobotic acquisition strengthening NASA ties, and a new RTX contract for propulsion technology. Despite current losses, Voyager projects 66-84% revenue growth for 2026, positioning itself well amid expanding defense budgets and accelerating space investment.

Frontline, RTX, and ExxonMobil are benefiting from the Strait of Hormuz crisis through scarce tankers, depleted missile inventories, and higher oil prices. However, these opportunities carry different risk profiles, and a ceasefire could reveal which stocks have durable demand versus those riding a temporary war premium.

The global military drone market is projected to grow from USD 16.50 billion in 2025 to USD 42.80 billion by 2035, with a CAGR of 10.0%. Growth is driven by AI-powered autonomous systems, defense modernization, increased demand for ISR capabilities, and border security investments. The U.S. market is expected to expand from USD 6.31 billion to USD 16.22 billion, while Europe grows from USD 4.19 billion to USD 10.14 billion.

State Street's XAR and First Trust's MISL offer different approaches to aerospace and defense sector exposure. XAR uses an equal-weighted strategy with lower fees (0.35% expense ratio) and broader mid-cap/small-cap exposure, delivering stronger 1-year returns of 20.6%. MISL employs market-cap weighting with higher concentration in defense giants and tech companies, offering lower volatility but higher fees (0.6%) and lower returns (9.6%). For most long-term investors, XAR's lower costs and stronger performance make it the more practical choice.

Iran tensions have prompted the U.S. Defense Department to announce seven-year agreements with defense contractors to expand missile defense production capacity. Lockheed Martin, L3Harris Technologies, and RTX are positioned to benefit from record order backlogs and increased global demand for Patriot and THAAD interceptor systems, with all three companies showing strong financial performance and consistent dividend growth.