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 euros (approximately $944 billion) by 2030 in an ambitious rearmament plan. More than a year following the announcement, it appears that plans are well on their way: EU countries have spent roughly €400 billion (approx. $472 billion) in 2025 alone toward rearmament efforts, actually putting the plan ahead of schedule. Germany and countries in Northern Europe may be leading the way in boosting spending, helping to boost European industry overall, as military spending could climb to as high as 2.5% of European GDP.
For U.S. investors, the plan to beef up European military spending is a complex prospect. Some of the rules of the program limit the use of non-EU components and U.S. procurement, for instance. However, U.S. defense firms and their advanced technologies will still likely play a major role in Europe's rearmament plan in the coming years, and the companies below may be well-positioned to benefit in the process.
A Broad U.S. Defense Name Already Boasting Growing Backlog
Major U.S. defense firm General Dynamics (NYSE: GD) is one of the domestic companies that could benefit from European rearmament spending. In particular, the company's broad activity in land systems like tanks and armored vehicles, IT and communications, and marine systems, including submarines, means that essentially any U.S.-linked spending as part of the rearmament project is likely to touch on GD's business in some way.
GD is closely linked with existing NATO platforms, and if European militaries continue to use those systems because they are already in place, GD may see a boost in demand.
Backlog has already been rising—the company reported record backlog of $118 billion as of the end of 2025, on top of a book-to-bill ratio of 1.5x. This should help to drive continued revenue growth, while the firm already posted more than 10% year-over-year (YOY) improvement in this area for full-year 2025.
Two-thirds of Wall Street analysts reviewing GD shares have rated them a Buy or equivalent.
Additionally, the company has about 20% in projected upside potential even as shares have already climbed by about 20% in the last 12 months.
Focus on Intelligence, IT, and Logistics Gives Leidos an Advantage in Europe
Much smaller than General Dynamics, Leidos (NYSE: LDOS) has a more niche focus that could actually make it even better positioned than its larger rival. Leidos focuses on IT systems, infrastructure, intelligence, and logistics, rather than weaponry. As Europe builds up its network defense and prepares for a shift toward digitized warfare, Leidos' tools may be even more appealing.
The company's focus on communications, data, and intelligence over hardware also positions it favorably at a time when many EU nations are looking to buy European for their defense needs. There has been a particular focus on sovereign weapons production, but intangibles like software and services are not necessarily subject to the same restrictions. This is a potential win for Leidos over other (larger) U.S. defense names.
Despite a slight YOY drop in revenue for the latest quarter, Leidos' bottom line was still at the top of guidance, and its adjusted EBITDA margin improved by 120 bps YOY as well.
Earnings per share and free cash flow are also rising, driven by growth in both bookings and backlog. This may be why analysts see 37% in upside potential for LDOS shares.
Components Maker Karman Could Still Reap Rewards, If Only Indirectly
As a maker of precision components and subsystems, Karman (NYSE: KRMN) is in a different position from Leidos—indeed, it may find that European nations avoid buying its products directly in an effort to stay domestic.
However, there may still be upside for this company if the boost in Europe's activity places demand pressure on the supply chain overall. Even if Karman does not directly do business in Europe as part of the rearmament efforts, the scaling of U.S. production and these supply chain constraints could still mean a win.
The best chance Karman has to see a boost is with its highly specialized, proprietary tech, which is much harder to replace and may therefore make the company stickier.
Even so, the overall defense spending trend is so strong that analysts are broadly optimistic about KRMN shares, and Wall Street anticipates the stock could climb as much as 50% based on a consensus price target of $117.10.
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