The end of the earnings season is always a good time to take a step back and see who shined (and who didn’t). Let’s take a look at how defense contractors stocks fared in Q1, starting with Leidos (NYSE: LDOS).

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 13 defense contractors stocks we track reported a very strong Q1. As a group, revenues beat analysts’ consensus estimates by 3.4% while next quarter’s revenue guidance was 2.3% below.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6.5% since the latest earnings results.

Leidos (NYSE: LDOS)

Formed through the split of IT services company SAIC, Leidos (NYSE: LDOS) offers technology and engineering solutions such as military training systems for the defense, civil, and health markets.

Leidos reported revenues of $4.4 billion, up 3.7% year on year. This print exceeded analysts’ expectations by 2.8%. Overall, it was a strong quarter for the company with a solid beat of analysts’ EBITDA and EPS estimates.

Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 29.3% since reporting and currently trades at $105.16.

We think Leidos is a good business, but is it a buy today? Read our full report here, it’s free.

Best Q1: 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 $235.8 million, up 11.5% year on year, outperforming analysts’ expectations by 14.2%. The business had an incredible quarter with a beat of analysts’ EPS and EBITDA estimates.

Mercury Systems achieved the biggest analyst estimate beat among its peers. The market seems happy with the results as the stock is up 35.7% since reporting. It currently trades at $112.55.

Is now the time to buy Mercury Systems? Access our full analysis of the earnings results here, it’s free.

Weakest Q1: Lockheed Martin (NYSE: LMT)

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE: LMT) specializes in defense, space, homeland security, and information technology products.

Lockheed Martin reported revenues of $18.02 billion, flat year on year, falling short of analysts’ expectations by 0.9%. It was a softer quarter as it posted a significant miss of analysts’ adjusted operating income and EPS estimates.

Lockheed Martin delivered the weakest performance against analyst estimates and weakest full-year guidance update in the group. As expected, the stock is down 11.1% since the results and currently trades at $493.50.

Read our full analysis of Lockheed Martin’s results here.

Parsons (NYSE: PSN)

Delivering aerospace technology during the Cold War-era, Parsons (NYSE: PSN) offers engineering, construction, and cybersecurity solutions for the infrastructure and defense sectors.

Parsons reported revenues of $1.49 billion, down 4.1% year on year. This print came in 0.5% below analysts’ expectations. More broadly, it was actually a strong quarter as it put up a solid beat of analysts’ adjusted operating income estimates.

The stock is down 5.8% since reporting and currently trades at $48.83.

Read our full, actionable report on Parsons here, it’s free.

KBR (NYSE: KBR)

Known for projects like the construction of Guantanamo Bay, KBR provides professional services and technologies, specializing in engineering, construction, and government services sectors.

KBR reported revenues of $1.92 billion, down 4.7% year on year. This number beat analysts’ expectations by 2.8%. Overall, it was an exceptional quarter as it also recorded a solid beat of analysts’ EBITDA estimates.

KBR delivered the highest full-year guidance raise but had the slowest revenue growth among its peers. The stock is down 15.7% since reporting and currently trades at $32.58.

Read our full, actionable report on KBR 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.

Want to invest in winners with rock-solid fundamentals? Check out our Strong Momentum Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.