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| By Michael A. Robinson |
Modern warfare is changing fast.
The U.S. has shown us this dozens of times in recent days.
Air power and advanced battlefield electronics matter more than ever.
Drones scout targets before troops move.
Missile defense systems intercept rockets in midair.
Armored vehicles are being upgraded with smarter weapons and precision targeting systems.
Governments Around the World Are Responding
According to the Stockholm International Peace Research Institute, more than 100 countries increased their defense budgets in 2024.
That pushes global military spending to roughly $2.7 trillion.
That was a record high.
That was also before President Trump asked for an additional $500 billion in defense spending for FY 2026-’27.
Which would bring the defense budget to $1.5 trillion.
And that’s just the U.S.!
This spending surge is creating big demand for the companies that supply the electronics, sensors, weapons systems, and armored vehicle upgrades modern militaries depend on.
And the contracts keep rolling in.
Consider one defense tech firm that just announced more than $700 million in new international orders in a matter of days.
The buy includes advanced systems to upgrade armored vehicles for modern combat.
Let me show you why that company is on pace to double its earnings in as little as 18 months.
The Ukrainian Epiphany
There’s a saying in defense that big militaries prepare for the next war by fighting the last one.
Basically, that means militaries use the last generation of combat to buy and prepare for the next.
Yet that next-generation war is usually very different from the last one fought.
That shouldn’t be too surprising. We’ve seen technology sweep across every major industry in our economy already — banking, healthcare, retail, media, communications, etc.
And what we’re seeing is that even the underdogs can build tech to fight superpowers. Ukraine’s ability to resist Russian efforts is a case in point.
Now, smaller armies can get cheap drones, missile defense systems, and tech for soldiers to leverage their forces.
The Ukrainians have become successful at incorporating tech into their efforts.
So successful that the U.S. is now consulting with them on how to fight the Iranian drones Russia is using.
Israeli Ingenuity
If any nation already knew this, it’s Israel. This young nation has been continually fighting for its existence since 1948.
And as tech became more involved in the arms race, Israel created its own unique defense sector.
It has also been able to sell that equipment to other allies. Who, in turn, have come to rely on much of Israel’s battle-tested equipment.
Israel has been very close with the U.S. defense sector as well. It was a pioneer in deploying the U.S.-built Patriot missile system.
But those missiles now cost about $4 million each.
So, Israel’s defense sector decided to build its own system that could do it all for much less.
It succeeded.
Its anti-missile systems now cost $50,000 to $100,000 each.
And military leaders in the West are getting the message, finally.
Cheaper systems that can scale quickly are better than big-ticket programs that may be obsolete before they’re even fielded.
The Shining Star of David
A 60-year-old Israeli electronics firm is positioned to take advantage of this new paradigm.
Elbit Systems (ESLT) started as a non-defense computer company.
Today, it’s one of the top C3ISR (command, control, communications, intelligence, surveillance, reconnaissance) companies in the world.
Right now, Elbit’s drone and laser programs are getting a significant amount of attention.
Elbit calls itself “Israel’s Laser House.”
It adopted that name because its lasers are at the heart of Israel’s newest version of the Iron Dome.
The company also just announced that it will be outfitting helicopters and fighters with lasers to hunt for incoming air attacks.
An Iron Dome is great. But ground and weather conditions can make ground-based lasers less effective.
Mounting them on aircraft gets them above much of the sighting challenges.
Elbit landed a $2.3 billion contract last November to make this happen over the next eight years.
But that’s just the latest example of the kind of equipment Elbit builds.
And demand is growing rapidly in all its markets.
IRL Testing
Israel also built its unique defense sector for Israel’s needs first.
The benefit is its conditions are great testing grounds for weapons systems in hot, dry, sandy climates.
For example, the Uzi machine gun was built so it could be buried in sand, recovered and fired without concern for jamming.
U.S. weapons usually fit broader needs. But many of those can be less reliable in real-world conditions.
Case in point, the U.S. deployed brand-new Black Hawk helicopters into Iraq decades ago.
Initially, we needed to repair them after almost every mission.
That’s because the sand was finer than in U.S. testing environments.
Recently, the West Bank has been a proving ground for tech-driven equipment.
It’s no surprise then that Elbit won $120 million in February to create a new “smart” monitoring system for U.S. soldiers.
But Elbit isn’t a niche defense firm. It’s No. 21 of the top 100 defense companies in the world.
And the company is reinvesting a higher percentage of its revenues than Northrop, Raytheon, Boeing, BAE Systems, Lockheed, L3 Harris and more.
Plenty of Headroom
Growth at Elbit has been anything but ordinary.
The company has now beaten earnings expectations for three straight quarters. And according toInvestor’s Business Daily, it’s on track to deliver roughly 49% earnings growth this year.
At that pace, earnings could double in as little as 18 months.
Not only that, but earnings are growing three times faster than sales.
That’s a sign of a very efficient firm that can reward investors for years to come.
And that’s exactly what you want in a stock tied to a long-term trend like the global defense upgrade cycle.
Because it’s not just keeping pace with that trend, the firm is setting the pace — with excellent long-term profits to show for it all.
Now, ESLT shares aren’t cheap. They’re trading just below $950 a share as I write this.
But unlike the S&P 500, which is flat year to date, ESLT ran up 60% in the first 12 weeks of 2026.
And with a growing order backlog along with growing free cash flow, it’s not a stretch to say that this company is laser-focused on serving big-budget militaries for the foreseeable future.
Elbit could serve investors equally well, and for just as long.
Best,
Michael A. Robinson
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