Markets & Warfare (2022 - 2026): Part I - Tier Lens

2022 - 2026 Conflict effects on Macroeconomic & Market Structures and A&D Industry Holistics: Through Three Lenses

Section I: 2022 - 2026 Conflict effects on Macroeconomic & Market Structures and A&D Industry Holistics: Through Three Lenses 

This piece will detail the general responses, shocks, and outcomes across Aerospace & Defense Sector Holistics, macroeconomic sentiments, and general market dynamics in relation to global conflict across the periods 2022 - 2026. Markets don't price “war” as a single undifferentiated risk. They analyze it through at least three separate lenses, in which each lens explains a return dispersion that a simple “war is good / bad for markets” story cannot. Lens One, the specific tier of warfare and or conflicts themselves, pertains to answering what defense capabilities will dominate a conflict, what type of war is this? Are programs skewing to “exquisite” technology or crewed vehicles, with decades-long development and small volume output. Or are capabilities skewed towards “attritable” defense, or autonomous, software-heavy, mass produced and meant to be lost technologies. Lens two, is the channel, or where warfare disrupts and reaches the broader economy, which is almost always oil from 2022 - 2026. A pattern has presented itself: Geopolitical events → disrupted crude supply → inflation / gasoline price → Fed Policy → Consumer Sentiment / Demand. Lens three, regime, will examine how these conflicts and policy shocks move fear-based positioning across assets like gold and the 10-year yield, separate from the real-economy channels in lens two. Where channel measures confirmed, lagging effects on inputs and prices, regime captures the faster, anticipatory repricing of risk itself, and asks how that positioning resolves once the underlying macro backdrop, whether a Fed hiking cycle, a shift in inflation expectations, or a change in fiscal credibility, reasserts itself over the shock.

Section II: The Conflicts and what militaries actually learned 2022 - 2026: Four Anchor Points

On February 24th, 2022 Russia invaded mainland Ukraine. On paper Russia fields roughly 1.32 million active-duty troops compared to Ukraine's estimated 900,000 personnel, giving Moscow a clear manpower advantage. In terms of heavy hardware, Russia's fleet of over 4,200 military aircraft and 5,600 main battle tanks vastly outnumbers Ukraine’s inventory of roughly 350 aircraft and 1,100 tanks. However, Ukraine’s response would exemplify a decisive shift in military comparative advantage of the 2020s, through the rise of “attritable” drone warfare. Unlike trooped hot wars of decades past, a first-person-view attack drone produced in mass, across a week-long production cycle, could now utilize a few hundred dollars of commercial electronics into weapons capable of killing multi-million dollar tanks. These facts are not meant to convey a sentiment of “attritable vs exquisite”, it is not meant to suggest a dissolution or lacking necessity of “exquisite” technology on the battlefield, rather a complicated fork in Aerospace & Defense and general warfare. Now, two forces with underlyingly dissimilar tactics of warfare, dominate the battlefield, depending on the type of conflict one side of the coin may be increasingly favored. 

Moreover, from just evolving warfare technological dynamics, the Russia -Ukraine conflict highlighted an apparent factor of modern conflict, “Conflict Shock → Policy Conversion.” The onset of conflict on the granular world-stage, reinvigorated the necessity of large-scale defense based spending. This was first exemplified by Germany, three days post-Ukraine-invasion, their “Zeitenwende” or translated, “historic turning point” outlined by Chancellor Olaf Scholtz, introduced a defense policy reformation in the form of a €100 billion defense fund, breaking decades long post-war defense spending austerity. Ukraine's own  defense budget increased +640% to $44B in 2022, in SIPRI's (Stockholm International Peace Research Institute) own words: "[it was] the largest single-year increase any country has ever recorded.” Furthermore in August 2023, the Pentagon formalized the Russo-Ukraine lesson, through the Replicator Initiative, a DoD push to field thousands of low-cost autonomous systems across multiple domains within roughly two years. This initiative codified U.S. procurement policy publicly justified by direct reference to what the Ukrainian defense had proven. 

New conflict arose in 2023, as a result of the October 7th Hamas attacks on Israel. Israel's defense budget increased +65% to $46.5B in 2024, 8.8% of GDP, the steepest increase since 1967. This again reinforced a new lesson, one layered and different in its composite. Software-orchestrated air defense (Iron Dome, David’s Sling, allied interceptions coordinating against a “saturation attack”) is now a baseline requirement, not necessarily an obscure niche capability. Israel’s use of air defense systems such as the iron dome comes at an intersection of two points outlined earlier. On one hand the direct interceptors are “attritable,” at a cost point of around $40,000 - $50,000 per interceptor (Important to note combat surge prices affect these estimates), not as cheap on a dollar-per-dollar basis as Ukraine’s mere few-hundred dollar FPV drones, but still attritable in kind. The battle-management software behind the mechanism however, the radar, sensor fusion, the intelligence to disengage non-lethal missile strikes, is exclusive, expensive, and effectively irreplaceable. The interceptors may be mass-produced, but the battle-management technological system is not, presenting a real exquisite / attritable split inside a single defense program, and moreover highlighting the incrementally important usage and domination of advanced technological softwares in conflict.

NATO’s Hague Summit, June 24 - 25, 2025, further outlined a necessary policy response to the incurred lessons of ongoing conflict. It converted the lessons of Russia’s invasion of Ukraine and the October 7th attacks and subsequent conflicts into a decade-long budget commitment with 3.5% GDP dedicated to core military spending, 1.5% on security/resilience spending by 2035. Of course, the decision faced implementation friction from some member nations mainly Spain, who negotiated an explicit exemption capping itself at 2.1%. Justified when on September 10, 2025, roughly 19–20 Russian drones crossed into Polish airspace from Belarus and Ukraine, the incident that triggered NATO's Operation Eastern Sentry two days later, surging allied fighter patrols (French Rafales, German and UK Eurofighters, Danish F-16s) and integrating national air-defense systems along the eastern flank under SACEUR. The European Union’s SAFE (Security Action for Europe) as a response also partially helped fund Poland's €3.4B counter UAS system, or colloquially a “anti-drone wall” along its eastern flank, beginning in December 2025 as a direct response to the Russian aggression and reconnaissance. The path forward is clear in regards to the extent geopolitical escalation from 2022 onward has influenced western defense budgets, global military spending hit $2.89T, an eleventh consecutive annual increase, with military spending at 2.5% of global GDP (its highest since 2009). The global increase was mainly driven by Europe increasing +14% over previous years to $864B. Later we will explore the companies and products behind said escalated military contracts, and the sector’s winners and losers.

Lastly, in terms of ongoing warfare, the U.S.-Iran conflict beginning with Operation Midnight Hammer June 22, 2025, and culminating in Operation Epic Fury February 28 - March 1, 2026. In 2026, the U.S. military in conjunction with the Israeli defense force launched a coordinated campaign against Iranian nuclear and military infrastructure, utilizing exquisite B-2 bombers, F-35s, and Tomahawk missiles, further tensions and strikes have recurred into the summer. This campaign has been cornerstoned in exquisite technologies headlined by U.S. military superiority, where stealth, penetrating strike capability have had no substitute for attritable mass-produced weaponry.

Figure 1: Exquisite vs Attritable Comparison

Figure 2: Shocks & Policy Conversion

Figure 3: Global Defense Spending of note

Figure 4: 2025 Defense Spending Percentage Changes

Figure 5: NATO Defense Spending Policy

Lens One: Tier

Section III: Two Tiers, No Verdict

As previously noted, the Russo-Ukrainian conflict highlighted a notable shift in the capabilities of attritable weaponry to balance the modern battlefield. Attritable and exquisite technologies now compete in the broader defense sector where companies of ranging size and institutional pedigree meet the ever-changing demand horizon. Attritable capabilities have been exemplified through continuing the drone war on Russian positions and Black Sea fleet, as well as opposingly Russia’s nightly Shahed barrages on Ukrainian cities. The unit economics of the FPV drone of $600, or even that of Israel's Iron Dome Tamir interceptors $20,000 - $60,000 (depending on estimates) have helped equalize the battlefield against exquisite technologies, which have dominated fields prior. Furthermore, their design-to-be-destroyed mantra outlines their value proposition through short production cycles ranging from days-to-weeks, cheaper per unit economics, accessible technology, and vast output. Conversely, aerial weaponry vehicles such as the F-35 ($82.5M per unit), B-2 Spirit Bomber ($2.1B per unit) have production cycles of years. This comes notably with extended allocation both financially and timely for research and development, as well as specialized tools, assembly lines, and supply chains. But to say attritable technologies are outcompeting exquisite technologies would be incorrect and deplete in actuality their true necessity. Frankly it depends on a myriad of factors pertaining to the type of conflict unfolding: defense or aggression, close range or long range, fielded troops or aerial superiority, or civilian presence to highlight a few. Midnight Hammer, June 21 - 22, 2025 exemplified pure exquisite tiered excellence, where in 7 B-2 Spirit bombers and 125 total aircraft (F-35s, F-22s, fourth-gen escorts) utilized 14 GBU-57 massive ordnance penetrators or “bunker busters” on subterranean nuclear development centers in Fordow, Iran, alongside 30 Tomahawk cruise missile strikes in Isfahan, Iran. Often these technologies are used in conjunction, as already discussed in the case of Israel, whose Iron Dome itself embodies exquisite-precision yet attributable consumption, a hybrid. This comes in addition to their own use of F-35 strikes during Operation Epic Fury. Operation Epic Fury on its own, which was dominated by the exquisite technological tier, cost an estimated $3.7 billion in its first 100 hours and roughly $25 billion after two months, according to Pentagon testimony.

In FY2020 for example, the Pentagon's $143.8 billion procurement budget (within a $746.0 billion total defense budget) had no identifiable "attritable" category at all, the closest analog, a roughly $8.3 billion "unmanned systems" line, was dominated by large, sophisticated, expensive drones like the Navy's MQ-4C Triton and MQ-25 Stingray, not the cheap, mass-produced systems the term now describes; Replicator, the Pentagon's first explicitly "attritable" program, wasn't announced until August 2023. By FY2026, a comparable attritable slice such as small aerial drones, Future UAS, and the "Family of Affordable Mass Missile" now totals roughly $6.0 billion against $84.4 billion in identifiable exquisite-tier procurement (submarines, fighters, and traditional platforms) within the $205 billion total procurement budget. While the Pentagon's dedicated Defense Autonomous Warfare Group office is requesting $55 billion for FY2027, up from $225 million the year before, roughly a 24,000% single-year jump. 

Lastly, “Warfare Software” is a broad umbrella term, which teeters between both classes and lacks a hardware tier in itself. Palantir’s Maven Smart System contract raised $1.275B in May 2025, in addition to the software company’s $10B Army software / data contract in August 2025, demonstrating a third lateral to the attritable vs exquisite lens. Anduril, which didn’t exist before 2017, beat out companies of institutional Aerospace & Defense sector pedigree (Lockheed Martin, Northrop Grumman, and Boeing) for a $30B marquee Air Force drone competition in 2024. Most recently, the Army awarded Anduril a $20 billion enterprise agreement in March 2026, a procurement ceiling, not committed spending; only $87 million has been task-ordered so far. Anduril’s attritable-by-design hardware (Barracuda, Roadrunner, Ghost drones) are sold alongside a complex exquisite autonomous software system (Lattice OS), marking a clear capitalization on changing warfare dynamics and moreover the combination of attritable tiered hardware / exquisite technological software.

Section IV: What the Market Priced

Per sections two and three, rising global defense budgets have diverted funds across “tier” positioning on paper; this section will detail how the market actually rewards the sector pertaining to a company's specific reaction to policy / conflict shocks. The three exquisite oriented primes; Raytheon (RTX), Northrop Grumman Corp (NOC), and Lockheed Martin (LMT) and two attritable smaller market cap AeroVironment and Kratos Defense and Security Solutions Inc. (KTOS), were chosen to span the tier split this section tests. They were not chosen to represent ITA’s own weights. The index's two biggest holdings (as of 2026), GE Aerospace (20.89%) and Boeing (7.71%), sit outside this analysis entirely; between them they carry more weight in ITA than Raytheon, Lockheed, and Northrop combined (25.03%). 

These five companies range from large, highly liquid primes to smaller, thinly-traded attritable names with very different volatility profiles, a disparity this piece will quantify directly later in the section. Therefore a raw percentage move can overstate how much of a reaction is company-specific versus simply the stock riding the sector's own swing. To correct for this, each company is measured against its own historical beta to ITA, with the gap reported as an abnormal return. For this analysis, daily close data across January 3rd 2022 through September 14th 2026 were pulled, 1,172 trading days.

The Russian invasion of Ukraine (February 24th, 2022) saw the S&P 500 rally to close positive post-invasion day, after previously trading falling amidst the intra-day, ITA closed higher still beating its own beta-implied relationship to the market, a gap that widened within the week (Post Zeitenwende), before settling by month end. By the end of March, ITA beat the market in raw percentage appreciation. In the same timeframe Lockheed and Northrop, standout primes notable for their "exquisite tiered" technology, ran ahead of the sector-wide diversified ETF. Attritable-tier names told a starker version of the same story: Kratos rallied strongly +1 Day post invasion, though its starting point sits just two trading days after a weak February 22nd earnings report and cautious 2022 guidance had already pushed the stock lower, so some of its early apparent outperformance is a bounce off that depressed base rather than a clean invasion reaction. AeroVironment, whose Switchblade loitering munitions were part of the Pentagon's early Ukraine aid packages, ran further ahead of the exquisite tier's gains than any other name in the group +1 week, a direct, conflict-linked catalyst rather than a diluted, index-wide move. February's monthly percentage increase for all indexes and companies of note is quite diluted given there were only three trading days post invasion. The divergence shows up the following month of March; both markets rallied hard in the month after the invasion, ITA slightly ahead of SPY. Though in April 2022, amidst a broad market sell off (Fed rate-hike repricing), the market witnessed a sharp reversal for both. ITA held up slightly better than the broader market during a difficult month for markets, but didn’t beat its market-beta expectation, simply fell in line with the broader selloff, close to flat on an abnormal basis.

The Hamas attacks on Israel (October 7, 2023) saw an immediate rally in Lockheed and Northrop the very next trading session, October 9th, widely reported as the sector's best single days in years. Attritable-tier names moved in step: AeroVironment and Kratos both rallied alongside the primes, with Kratos's Day-1 move landing in the same range as Northrop's. AeroVironment was the weakest of all five names, still gaining almost 4% +1 Day post attack, its abnormal return was negative and lagged its own beta-implied expectation. ITA closed higher than SPY subsequently on October 9th. October monthly close data saw ITA rise while SPY fell, clean sustained outperformance post conflict inception. ITA’s outperformance wasn’t just a raw gap over SPY, it ran well ahead of what the sector’s own beta to the market would predict, sustained at each time interval into +1 month.

Operation Midnight Hammer, the U.S. strikes on Iran's nuclear sites (June 21-22, 2025) and the NATO Hague Summit (June 25th, 2025), both saw muted reactions from the primes as opposed to the Russo-Ukrainian invasion and Hamas-Israel conflict outbreak. After Midnight Hammer’s immediate following trading day and subsequent week, none of the major primes moved meaningfully, LMT and NOC were essentially flat and RTX slightly negative +1 day. The early moves showed up on the attritable side, AVAV and KTOS both posted +1 day gains against the primes. Hague reads as low drama at +1 day, both ITA and SPY moving fractions of a percentage on the declaration date, consistent with the 5% spending pledge that had been for the most part pre-negotiated rather than something sprung on the market. Both events show the same shape at a smaller scale with modest abnormal outperformance building over the month. The data becomes diluted through the onset of earnings releases, AVAV’s own landing the same day as the summit’s baseline, making it for the most part an unreadable statistical correlation across the period. Furthermore, RTX, NOC, LMT all reported Q2 earnings on the same day, July 22nd one day before Midnight Hammer’s +1 month mark and two days before Hague’s. Lockheed’s report included a $1.6B pre-tax charge tied to a classified Aeronautics program and missed on EPS; the stock fell subsequently, not correlated to the conflict / policy days of note. Northrop's report translated into a clear beat wherein its one-month gains ran past what its beta to the sector would predict. Raytheon's quarter held up too, but the stock's reaction didn't show the same independent lift; once the sector's own move is backed out, there's little gain left to attribute to earnings specifically.

Operation Eastern Sentry, on September 12, 2025 is perhaps the strongest catalyst favoring a tier split. The announcement in its nature is a clean thematic tie to the attritable thesis, being that it is clearly a drone and counter drone initiative rather than a cross tier conflict or broad defense spending story. The sector and company tier specific reactions are particularly relevant, yet still need unpacking. AVAV, which runs on a non-calendar fiscal year, reported its fiscal Q1 2026 earnings on Tuesday, September 2nd, 2025, just nine days before the Eastern Sentry baseline and 10 days before the announcement / Day 1 trading close. This coincided with a strong specific quarter, funded backlog rose 47% QoQ to $1.1B, unfunded backlog from $775M to $3.1B, with both a $499M Air Force contract, and a $240M laser-communications order, wherein EPS guidance raised from $2.80 - 3.00 to $3.60 - 3.70. They were already up 30.5% across September, already in the middle of a powerful earnings / contract driven rally before Eastern Sentry’s announcement, therefore its +15.34 abnormal return at +1 week and +63.62 abnormal return at +1 month, for a staggering +1 month return of 69.46% are simply not clean reads on how the market priced the NATO policy response. It’s an inflated continuation of a run starting elsewhere with different key drivers. The cleaner read is KTOS, whose next earnings didn’t come until November 4th 2025, three weeks after Eastern Sentry’s +1 month mark (Oct 13th). The strong abnormal returns across Day 1 trading close, +1 week, and +1 month present a rather uncontaminated read on a genuine attritable tiered policy reaction.

The primes are another clean read, reporting Q3 2025 earnings of October 21st 2025, eight days after the Eastern Sentry +1 month mark. Post Day 1 trading was mildly negative for two of the three, RTX and NOC, with LMT barely positive. By +1 week, RTX and LMT were close to flat in raw terms and negative on an abnormal basis while NOC was the clearest underperformer. +1 month, LMT and NOC do show some real modest outperformance beyond beta, while RTX’s story remains flat to negative across the period. While a reader may point out, yes the primes of note have counter-drone programs (RTX’s Coyote Interceptor, LMT’s counter UAS system / MORFIUS system, and NOC C-UAS line). That gives them a plausible path from contract win to revenue to stock appreciation, which makes their lack of reaction here worth noting. However, the story is not as simple for these behemoths, compared to the attritable specialized and smaller market caps of KTOS and AVAV. Materiality is the driver, a prime’s counter drone program however real and relevant coupled with a positive-read on NATO positioning is a fraction of what their business and products represent, none of these programs are large enough against a $42 - $90B revenue base to matter to the market on a single policy headline. For AeroVironment and Kratos, where attritable and counter-drone systems sit much closer to the center of the investment case, the same news is read as directly material. 

The sector wide reaction took time to substantially pull away from SPY, on Day 1 itself ITA closed slightly down against the broader market, and did not rally as a whole on the NATO mobilization news. By the +1 week mark, ITA pulls ahead and by the +1 month mark the gap widens further. ITA's Day-1 abnormal return is actually negative, confirming the sector didn't just underperform SPY in raw terms, it underperformed its own beta-implied baseline too. The real outperformance doesn't show up until +1 month, tracking the same delayed pattern as the raw ITA-SPY gap. Important to note however, ITA’s diversified basket is weighted by market cap. It would be incorrect to assume ITA rose because of outperformance by AVAV and KTOS, but then again such is not the point of this section's analysis.

February 28th’s Operation Epic Fury, saw ITA rally by the end of the Day 1 trading day, with an abnormal indicating essentially the whole move was alpha. However, across the period, by the +1 month mark, ITA had a sharp reversal both rawly and a negative abnormal return to what the market would expect. SPY itself fell amidst the reversal, indicating a broad risk off macro event, plausibly tied to the Hormuz closure and subsequent oil shock and resulting inflation / growth fear hitting equities generally. Defense stocks themselves reportedly hit record highs around March 6th, following Trump’s escalated rhetoric. The primes rallied hard on Day 1, amidst the outbreak of the exquisite based conflict, all clean positive reactions as seen in their outpaced abnormal returns. The primes held positive + 1 week, though reversing from their Day 1 gains, but still outperformed the sector on an abnormal basis. By the +1 month mark, their gains had been reversed and all primes fell negative, however with RTX and NOC still holding positive abnormal returns against their ITA relative Beta. LMT slightly drifted below its beta implied path as the sector gave back gains.

From the data, there is a clear split between KTOS and AVAV. AVAV craters across the post Day 1 trading day, a sharp and unexpected reversal for conflict outbreak news, whether the catalyst leaned exquisite tiered or not. The stock remained severely negative both in raw and abnormal terms across the time period of study. Unfortunately it is not a clean read of tier specific reaction, mostly attributed to the Pentagon’s March 2nd (Day 1 itself) announcement that the Space Force would reopen bidding on the $1.4B SCAR satellite-communications contract, held by BlueHalo which AVAV acquired in May of 2025. Though the stop-work order was issued in January 2026, the pre-existing issue surfaced publicly on the same news cycle as Epic Fury’s strikes. Raymond James subsequently issued a triple downgrade from strong buy to underperform, warning of a “revenue cliff” if AVAV were to lose the re-compete contract to Northrop or L3Harris. On March 10th AVAV FQ3 2026 earnings release saw a GAAP loss per share of -$3.15, the stock fell -27% in March, news which came unusually coincidental to our analysis but attributable nonetheless. KTOS is the cleaner read, but reported earnings four trading days before the February 27 baseline. KTOS rallied and held across Day 1 and +1 week before succumbing to April’s broad reversal.

Synthesis:

Across the study (January 3rd 2022 - September 14th, 2026), on a purely raw return scale, attritable stocks outperformed both indexes and all primes. AVAV had the strongest measured return followed by KTOS, RTX, ITA, SPY, LMT, NOC. Two primes saw underperformance to the broad market itself after multiple years of escalating conflict. It is understandable why the attritable based companies outperformed, firstly due to the fact there is a real tiered split. Correlation for the primes averaged 0.587: RTX-LMT 0.53, RTX-NOC 0.58, LMT-NOC 0.65. For attritable, AVAV-KTOS reads 0.540. While cross tier correlation, exquisite vs. attritable, for all 6 pairs averaged 0.305. Statistical validation of the tier framework, where exquisite primes move together and attritable names move together, with the two groups meaningfully less correlated. Therefore, there is a genuine diversification argument to be made, holding across tiers buys something that a basket of just primes or just attritable names does not. 

In terms of volatility, as expected SPY had the lowest annualized volatility of 17.5%, followed by ITA at 20.4%, with the primes trending across the mid twenties range; LMT 24.1%, RTX 24.5%, NOC 26.1%. Attritable companies however, exemplified a much greater annualized volatility, a clear tiered and size split, KTOS 54.2% and AVAV 58.3%. Attritable companies high Beta plus a lower R² to ITA saw more moves as stock-specific rather than purely sector amplification, with greater volatility. These factors produce a greater outsized upside during the periods of escalation news, for example,(AVAV +69.46% Eastern Sentry +1 month) and the outsized downside on reversals (AVAV -27.26% at Epic Fury +1 month). Volatility is a measurable claim to the fact that attritable is a convex, event driven bet. The 54-58% annualized volatility is not free upside, the same number that explains why KTOS and AVAV gave back most of their 2026 peak, the attritable names aren't simply better on broad escalation news, it's the reason a trade needs to be supported by real conviction and a timed exit, the downsides are proportionally as large as the upside returns. Furthermore their smaller-cap less diversified businesses, would presumably run hotter on volatility with more concentrated revenue and thinner liquidity, rather than attritable businesses being inherently more risky per se. In regards to a tradeable objective with position-sizing considerations, KTOS and LMT for example don't carry equal-dollar exposure, for example KTOS contributes roughly 2.25x the risk per dollar. Now in terms of who got rewarded in a risk adjusted return sense, NOC had the highest volatility of the primes and worst full-period return, carrying more risk than both LMT and RTX and compensated the least. RTX and LMT had near identical volatility, but RTX had roughly two and a half times returns comparably. On a return-per-unit-of-risk basis, RTX actually leads the entire company set: a 124.6% full-period return against 24.5% annualized volatility works out to roughly 5.1 points of return for every point of volatility carried, while ITA posts 5.3   (largely a function of diversification rather than any single name), SPY (3.4), and attritable names KTOS at 2.6, and AVAV at 2.5. LMT and NOC trail badly on the same measure (2.1 and 1.4), carrying prime-level volatility without prime-level compensation. The attritable names were rewarded for their volatility; RTX was rewarded better than either of them for less. 

The reactionary timelines (1 Day, + 1 week, + 1 Month) across the seven conflict / policy catalysts of this section's analysis, 2022 - 2026, attritable based companies had stronger abnormal returns relative to their prime competitors. This broad statement does not come without further complication. Both Hamas - Israel and Epic Fury conflicts, were cases of prime companies winning. Midnight Hammer, the same actor and target as Epic Fury, some eight months apart, saw opposite tier winners. The notion of “attritable wins on war news” isn’t the real mechanism. Rather there are a few tangible items that actually separate the prime’s win events Hamas - Israel / Epic Fury (while stripping out AVAV’s SCAR / earnings confound and focusing on KTOS). Firstly, primes win when the event has a direct and legible munitions demand signal, this was exemplified through Hamas - Israel, immediate conventional demand and resupply. Epic Fury furthermore, where in NOC’s missile defense / interceptor product line was particularly relevant, primes succeed across events where procurement officers' next moves are more visible. Primes also hold up better in time of reversals, such as April 2022’s reversal and Epic Fury’s +1 month Hormuz closure flip toward primes performance, consistent with their lower-beta profile. Attritable wins when events are asymmetric, for example Russia - Ukraine: a full invasion with no immediate direct platform order, Eastern Sentry: drone incursion with no direct state on state engagement, or Hague: a budget pledge signal and zero combat. Attritable names perform better on general bullish defense spending headlines. Ironically NOC wins for the most individual shock-event abnormal return comparisons (15 of 19 across the seven events) while also having the worst full period return. RTX wins the fewest (10 of 19) while simultaneously having the best full-period return. NOC’s clear event-driven alpha and RTX’s multi-year compounding tell close to opposite stories for these two stocks.

Anduril: Non-Public Tier exemplification

Another company worth discussing due to its impacts on the sector, Anduril, of which fall out of the scope of this analysis for a few reasons. Most notably, Anduril is still a privately held company, making comparable statistics arbitrary, and with many of its Series fundraising and post-funding valuations falling outside the conflict / policy framework, however its narrative is still particularly compelling for the attritable thesis. Conceptually Anduril is one of the purest embodiments of the attritable tier, defined by their autonomous, software defined, mass producible systems, arguably more that AVAV or KTOS. Anduril, still private, supplied Ukraine with its Lattice-networked Altius loitering munitions around one year post invasion, an early sign of the attritable thesis playing out beyond public markets, though its private status keeps it out of the tables above. Anduril’s founder Palmer Luckey expressed his support for Israel at the WSJ Tech Live conference October 16 - 18th, their earlier Series E funding round in December of 2022 saw the company valued at $8.5B, up from their $4.6B valuation as of June 2021 Series D. Anduril’s Series F,G,H respectively raised $1.5B, $2.5B, $5B bringing the companies total valuation across the three rounds from $14B, $30.5B, to most recently $61B. Series E - H saw a 7.2x increase, well ahead of AVAV’s +144.5% or KTOS +142.1% full period public market returns (of course, a private sector markup vs. realized public return, is not an apples-to-apples comparison). 

A few notable milestones of note are as follows. January 2025, they announced their Arsenal 1 factory in Columbus, Ohio. With reported spending of around $1B and 4,000 jobs potentially created, the factory's product output was targeted for mid 2026, which has been hit. September 2025, Australia awarded roughly US$1.12B, for a fleet of autonomous underwater vehicles for the Royal Australian Navy (undersea drones). On February 11th, 2025 Anduril replaced Microsoft as the prime contractor for the Army’s IVAS combat-headset program, whose program budget is $21.9B (*Transfer pending final DOD approval.) March 13th, 2026 they entered a $20B Army enterprise contract tied to counter drone defense which consolidates their Lattice software, data infrastructure, and hardware. Furthermore an Air Force-based Collaborative Combat Aircraft production contract, split with General Atomics, was awarded in June of 2026, public announcement in July, not official figure released.

These major wins for the privately held company are the same bet AVAV / KTOS represent in public markets, the fact that attritable technology is fundamentally reshaping the defense industry. However, it is not simply riding the coattails of the thesis, they are taking a clean cut in the attritable category’s framework and displacing incumbents. On one hand however, they are benefitting from the aggressive pricing from private capital at an astounding scale and speed, as opposed to what public markets are pricing for AVAV and KTOS. If their next round closes at $100B valuation or higher, it's a clear sign of the market pricing in the attritable facet, independently arriving at the same conclusion as the tables above.

Sources: (MLA Format)

Section I:

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"Federal Reserve Approves First Interest Rate Hike in More than Three Years, Sees Six More Ahead." CNBC, 16 Mar. 2022, www.cnbc.com/2022/03/16/federal-reserve-meeting.html.

"Gold at Near 2-Week Low after Trump Announces Israel-Iran Ceasefire." CNBC, 24 June 2025, www.cnbc.com/2025/06/24/gold-at-near-2-week-low-after-trump-announces-israel-iran-ceasefire.html.

"Gold Falls as US-Iran Tensions Boost Oil, Crush Rate-Cut Hopes." Trading Economics, 26 Mar. 2026, tradingeconomics.com/commodity/gold/news/536751.

"Gold Price Lags Oil So Far as 'Epic Fury' Unleashes Middle East War." BullionVault, 2 Mar. 2026, www.bullionvault.com/gold-news/gold-price-news/gold-iran-us-israel-war-030220261.

"Gold Price on 30 December 2022." GoldPrice.org, 30 Dec. 2022, goldprice.org/gold-price-today/2022-12-30-0.

"Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity, Quoted on an Investment Basis (DGS10)." FRED, Federal Reserve Bank of St. Louis, fred.stlouisfed.org/series/DGS10.

"Oil Falls, Stocks Jump, Trump on Iran-Israel Ceasefire." Fox Business, 23 June 2025, www.foxbusiness.com/live-news/oil-stocks-gold-in-play-after-trump-strikes-iran-nuclear-sites-live-updates.

"10-Year Treasury Yield Cuts Losses but Still below 2% as Investors Monitor Russian Invasion." CNBC, 24 Feb. 2022, www.cnbc.com/2022/02/24/us-bonds-treasury-yields-fall-sharply-as-russia-invades-ukraine.html.

"Treasury Yields Rise Slightly on Final Day of 2022, 10-Year Yield Ends Year below 4%." CNBC, 30 Dec. 2022, www.cnbc.com/2022/12/30/treasury-yields-as-investors-look-ahead-to-2023-.html.

"U.S. Treasury Yields Rise after Trump Announces Israel-Iran Ceasefire." NBC10 Philadelphia, 24 June 2025, www.nbcphiladelphia.com/news/business/money-report/u-s-treasury-yields-rise-after-trump-announces-israel-iran-ceasefire/4217490/.

"United States Treasury Yields Read Iran Strikes as Inflation." FXStreet, 1 Sept. 2026, www.fxstreet.com/news/united-states-treasury-yields-read-iran-strikes-as-inflation-202609011824.

"Volatile Gold Breaks US$1,970 as Russia Begins Assault on Ukraine." Investing News Network, 24 Feb. 2022, investingnews.com/gold-breaks-1970-russia-assault-ukraine/.

Section II:

North Atlantic Treaty Organization. The Hague Summit Declaration. NATO, 25 June 2025, www.nato.int/en/about-us/official-texts-and-resources/official-texts/2025/06/25/the-hague-summit-declaration. Accessed 2 Sept. 2026.

United States, Department of War, Office of the Chairman of the Joint Chiefs of Staff. Midnight Hammer Briefing. Department of War, 22 June 2025, www.war.gov/Multimedia/Photos/igphoto/2003743981/. Accessed 2 Sept. 2026.

Center for Security and Emerging Technology. Replicator: A Bold New Path for DoD. Georgetown University. Accessed 2 Sept. 2026.

Stockholm International Peace Research Institute. Global Military Spending Rise Continues... SIPRI. Accessed 2 Sept. 2026.

Statista. "Russia-Ukraine Military Comparison." Statista. Accessed 2 Sept. 2026.

Scholz, Olaf. "Zeitenwende" Speech. German History in Documents and Images. Accessed 2 Sept. 2026.

"How Much Does The Iron Dome Cost?" The Pricer. Accessed 2 Sept. 2026.

Tian, Nan, et al. "Trends in World Military Expenditure, 2022." SIPRI Fact Sheet, Stockholm International Peace Research Institute, Apr. 2023, www.sipri.org/publications/2023/sipri-fact-sheets/trends-world-military-expenditure-2022.

Stockholm International Peace Research Institute. "Trends in World Military Expenditure, 2024." SIPRI Fact Sheet, Apr. 2025, www.sipri.org/publications/2025/sipri-fact-sheets/trends-world-military-expenditure-2024.

Section III.

Adamowski, Jaroslaw. "Poland Picks Kongsberg-PGZ Consortium to Build Anti-Drone 'Wall.'" Defense News, 2 Feb. 2026, www.defensenews.com/global/europe/2026/02/02/poland-picks-kongsberg-pgz-consortium-to-build-anti-drone-wall/.

Cancian, Mark F., and Chris H. Park. "$3.7 Billion: Estimated Cost of Epic Fury's First 100 Hours." CSIS, 5 Mar. 2026, www.csis.org/analysis/37-billion-estimated-cost-epic-furys-first-100-hours.

Congressional Research Service. DOD Replicator Initiative: Background and Issues for Congress. IF12611, Congressional Research Service, congress.gov/crs-product/IF12611.

Congressional Research Service. FY2027 Defense Budget: Funding for Selected Weapon Systems. R49023, Congressional Research Service, congress.gov/crs-product/R49023.

Decker, Audrey. "Here Are the Two Companies Creating Drone Wingmen for the US Air Force." Defense News, 24 Apr. 2024, www.defensenews.com/unmanned/2024/04/24/here-are-the-two-companies-creating-drone-wingmen-for-the-us-air-force/.

"DoD Palantir Maven Smart System Contract Increase." DefenseScoop, 23 May 2025, defensescoop.com/2025/05/23/dod-palantir-maven-smart-system-contract-increase/.

Harper, Jon. "Army Awards Anduril $20B Contract with an Eye Toward Counter-Drone Capabilities." DefenseScoop, 14 Mar. 2026, defensescoop.com/2026/03/14/anduril-20-billion-dollar-army-contract/.

Hicks, Kathleen. "Keynote Address on Emerging Military Innovation Tech and the Replicator Initiative." NDIA Emerging Technologies for Defense Conference, 28 Aug. 2023, americanrhetoric.com/speeches/kathleenhicksreplicatorinitiative.htm.

"Iron Dome." Air & Space Forces Magazine, www.airandspaceforces.com/article/iron-dome/.

Kancelaria Prezesa Rady Ministrów. "System antydronowy SAN – kluczowe umowy podpisane." Gov.pl, 30 Jan. 2026, www.gov.pl/web/premier/system-antydronowy-san--kluczowe-umowy-podpisane.

North Atlantic Treaty Organization. "NATO Allies Invest 40 Billion Dollars in Counter-Drone Capabilities and Drone Training." NATO News, 7 July 2026, www.nato.int/en/news-and-events/articles/news/2026/07/07/nato-allies-invest-40-billion-dollars-in-counter-drone-capabilities-and-drone-training.

North Atlantic Treaty Organization. "NATO Launches 'Eastern Sentry' to Bolster Posture Along Eastern Flank." NATO News, 12 Sept. 2025, www.nato.int/cps/en/natohq/news_237601.htm.

Office of the Under Secretary of Defense (Comptroller). FY2026 Weapons Procurement Programs. U.S. Department of Defense, June 2025, comptroller.war.gov/Portals/45/Documents/defbudget/FY2026/FY2026_Weapons.pdf.

"Palantir Lands $10 Billion Army Software and Data Contract." CNBC, 1 Aug. 2025, www.cnbc.com/2025/08/01/palantir-lands-10-billion-army-software-and-data-contract.html.

"Pentagon Reveals How B-2 Bombers Struck Iran Nuclear Sites." CBS News, www.cbsnews.com/news/pentagon-briefing-us-strikes-iran-nuclear-sites/.

Roque, Ashley. "Pentagon Officials Broadly Detail $55 Billion Drone Plan Under DAWG." Breaking Defense, 21 Apr. 2026, breakingdefense.com/2026/04/pentagon-officials-broadly-detail-55-billion-drone-plan-under-dawg/.

"Anduril: The Software-First Prime Defense Contractor." Syntax, www.syntaxdata.com/research/anduril-the-software-first-prime-defense-contractor-defining-the-modern-frontline.

"U.S. Army Awards Enterprise Contract for IT Commercial Solutions." Army.mil, U.S. Army, 13 Mar. 2026, www.army.mil/article/291074/.

United States, Congress, Senate, Committee on Armed Services. Hearing transcript. 30 Apr. 2026, www.armed-services.senate.gov/imo/media/doc/04-30-2026_transcript-full.pdf.

United States, Department of Defense Comptroller. FY 2020 Budget Rollout Brief. 12 Mar. 2019, media.defense.gov/2019/Mar/12/2002099931/-1/-1/1/FY-2020-BUDGET-ROLLOUT-BRIEF.PDF.

"WORLD: Operation Midnight Hammer." Air & Space Forces Magazine, www.airandspaceforces.com/article/world-operation-midnight-hammer/.

"B-2 Strikes On Iran: What We Know About Operation Midnight Hammer." TWZ, www.twz.com/air/b-2-strikes-on-iran-what-we-know-about-operation-midnight-hammer.

Section IV

“Anduril Takes Control of Microsoft’s $22B VR Military Headset Program.” TechCrunch, 11 Feb. 2025, techcrunch.com/2025/02/11/anduril-takes-control-of-microsofts-22b-vr-military-headset-program/.

“Anduril Picks Ohio Site for ‘Arsenal’ Plant to Build CCAs and More.” Air & Space Forces Magazine, Jan. 2025, www.airandspaceforces.com/anduril-ohio-arsenal-plant-ccas/.

“Anduril $20 Billion Dollar Army Contract.” DefenseScoop, 14 Mar. 2026, defensescoop.com/2026/03/14/anduril-20-billion-dollar-army-contract/.

“Australia Awards $1.12 Billion Contract to Anduril for Ghost Shark Submarines.” OvertDefense, 22 Sept. 2025, www.overtdefense.com/2025/09/22/australia-awards-1-12-billion-contract-to-anduril-for-ghost-shark-submarines.

“U.S. Air Force Awards Anduril Contract for Fury Drone Production.” COTS Journal, cotsjournalonline.com/?p=25389. Accessed 13 Oct. 2026.

“Anduril’s $5 Billion Air Force Contract Finally Has a Name.” Webull, 26 Sept. 2026, www.webull.com/news/15643959709352960.

“Anduril in Talks to Raise Funding at About $100 Billion Valuation.” Defense News, 24 July 2026, www.defensenews.com/industry/techwatch/2026/07/24/anduril-in-talks-to-raise-funding-at-about-100-billion-valuation/.

“Air Force Picks Anduril and General Atomics to Build and Test Collaborative Combat Aircraft.” The Aviationist, 25 Apr. 2024, theaviationist.com/2024/04/25/usaf-selects-anduril-and-ga-for-cca/.

“United States Delivers Altius-600M Loitering Munitions to Ukraine.” Army Recognition, 24 Feb. 2023, www.armyrecognition.com/archives/archives-land-defense/land-defense-2023/united-states-delivers-altius-600m-loitering-munitions-to-ukraine.

“US Vows to Send More Drones, Aid to Ukraine on War’s Anniversary.” Defense News, 24 Feb. 2023, www.defensenews.com/pentagon/2023/02/24/us-vows-to-send-more-drones-aid-to-ukraine-on-wars-anniversary/.

AeroVironment, Inc. “AeroVironment Reports Fiscal 2026 Third Quarter Results.” U.S. Securities and Exchange Commission, EDGAR, 10 Mar. 2026, www.sec.gov/Archives/edgar/data/1368622/000110465926025841/avav-20260310xex99d1.htm. [Primary source for the FQ3 2026 GAAP loss figure.]

“AeroVironment Stock Crashes After $1.4B Contract Setback and Triple Downgrade.” Financial Content, 2 Mar. 2026, markets.financialcontent.com/stocks/article/marketminute-2026-3-2-aerovironment-avav-stock-crashes-after-14b-contract-setback-and-triple-downgrade.

“Why AeroVironment Stock Crashed 27% in March.” The Motley Fool, 3 Apr. 2026, www.fool.com/investing/2026/04/03/why-aerovironment-stock-crashed-27-in-march/.

“Lockheed Martin Fell 6% in the Last 30 Days — Here’s What’s Driving the Stock Lower and What Comes Next.” TIKR, www.tikr.com/blog/lockheed-martin-fell-6-in-the-last-30-days-heres-whats-driving-the-stock-lower-and-what-comes-next. Accessed 13 Sept. 2026.

“JP Morgan Downgrades Lockheed Martin.” Yahoo Finance, finance.yahoo.com/news/jp-morgan-downgrades-lockheed-martin-215309737.html. Accessed 13 Sept. 2026.

“Lockheed Martin First-Quarter Results Miss Street Views, Shares Fall.” Placera, 23 Apr. 2026, www.placera.se/telegram/lockheed-martin-first-quarter-results-miss-street-views-shares-fall-20260423.

“Defense Sector Rallies to Record Highs as US-Iran Tensions Hit Boiling Point Following Operation Epic Fury.” Wedbush Securities, Market Minute, 6 Mar. 2026, investor.wedbush.com/wedbush/article/marketminute-2026-3-6-defense-sector-rallies-to-record-highs-as-us-iran-tensions-hit-boiling-point-following-operation-epic-fury.