Earnings season has delivered a fresh batch of results from some of the most closely watched names in industrial America, and the defense and aerospace complex stood out for the strength of its underlying numbers. RTX Corporation and GE Aerospace both cleared analyst expectations, yet both stocks moved lower on the day of their reports. The market reaction looks more like a pause for valuation reassessment than a verdict on the underlying business, and it does little to dent what has become one of the most compelling long-term investment themes available today.
A Decade of Defense Spending Ahead
The structural case for aerospace and defense rests on the sheer volume of capital that has been committed to military modernization. NATO member countries have pledged to spend as much as 5% of their respective GDPs on upgrading defense capabilities by the end of 2035. In the United States, the administration is pushing to increase the military component of the federal budget to $1.5 trillion in the coming year. Money on that scale does not get absorbed quickly, and it tends to flow through a relatively narrow set of established prime contractors and their supply chains.
That dynamic positions aerospace and defense as one of the dominant investment themes not just for the balance of 2026 but for the rest of the decade. Replenishment alone is a meaningful tailwind. Munitions consumed in the Iran conflict and supplied to allies during recent years need to be replaced, and the proposed Iron Dome project — should it move from concept to production — represents another large pool of demand for missiles and missile defense systems.
RTX: A Beat-and-Raise With Multiple Levers
RTX delivered a clean beat-and-raise quarter. Earnings came in at $1.78 per share against expectations of roughly $1.52, while revenue of more than $22 billion topped the consensus forecast of about $21.5 billion. Management raised full-year guidance for both earnings and sales, which is exactly the kind of confirmation investors look for in a name positioned at the center of a multi-year spending cycle.
The forward price-to-earnings multiple sits near 29, which is not cheap in absolute terms but looks reasonable given the duration and visibility of the demand backdrop. RTX is a federation of three businesses: Raytheon, Collins Aerospace, and Pratt & Whitney. Raytheon in particular is the part of the franchise most directly leveraged to the missile and missile defense story, including any future Iron Dome work. That mix of commercial aerospace exposure through Pratt & Whitney and Collins, combined with deep defense content through Raytheon, makes RTX one of the better-positioned plays in the entire complex.
GE Aerospace: Strong Quarter, More Cautious Outlook
GE Aerospace also reported a strong quarter, beating on both earnings and revenue, with the top line coming in nearly a billion dollars ahead of expectations. The pullback in the stock appears to be driven by guidance: the company offered an in-line outlook, perhaps slightly below where the street had been positioned, citing the broader macro uncertainty. After a run that has seen the shares climb more than 60% over the past year, even a modestly cautious tone is enough to invite some profit-taking.
GE is a more focused business than RTX, concentrated on commercial and military turbine engines for aircraft. The forward multiple is richer at roughly 41 times earnings, which sets a higher bar for the company to clear with future quarters. Between the two names, RTX screens as the more attractive on valuation while still offering equally durable exposure to the defense spending wave.
Looking Beyond the Primes
The opportunity in defense extends well past the largest prime contractors. Drone manufacturers, including smaller-capitalization names such as Kratos, stand to benefit as unmanned systems take an ever-larger share of the modern battlefield. Northrop Grumman also reported the same morning and saw its shares fall about 5.5%, the steepest decline among the group, but the long-term setup for that business remains tied to the same spending tailwinds. The pattern across the entire group — strong fundamentals being met with a muted or negative tape reaction — is a reminder that even high-conviction themes go through periods of digestion.
Using Options to Express a Constructive View on a High-Priced Name
For investors who want exposure to GE without paying full price for the shares, the options market offers a way to take a directional view with defined risk. One approach is a neutral-to-bullish short put vertical in the May monthly cycle, with about 24 days to expiration. The trade involves selling the out-of-the-money 280 strike put and buying the 260 strike put as protection — a $20-wide spread.
The credit collected is roughly $4, which translates to a maximum profit of about $400 against $1,600 of risk. The break-even sits at $276, nearly 5% below the current share price, providing a meaningful cushion before the position starts to lose money. The probability that the short 280 strike will finish out of the money is above 60%, giving the trade a higher probability of success than a simple long position. The structure is more passive than buying shares outright, but it still allows participation in a constructive view on a high-priced stock without committing the capital required for a direct equity position.
The Bigger Picture
The single-day reaction to these earnings reports is noise against a much louder signal. Trillion-dollar budgets, multi-decade NATO commitments, ongoing munitions replenishment, and the prospect of new homeland missile defense architecture all point in the same direction. The companies best equipped to convert that spending into earnings — those with established contracts, broad product portfolios, and the manufacturing capacity to scale — should continue to compound shareholder value through the back half of this decade. RTX leads the pack on the combination of valuation and breadth of exposure, but the wider universe of defense names, from prime contractors to drone specialists, offers a deep bench for investors looking to participate in what may prove to be one of the defining capital cycles of the coming years.