Palantir Technologies (PLTR +0.79%) may be one of the biggest names in defense tech, but the biggest concern about it among investors doesn't relate to the business itself, but to the price they are paying for the stock. The company's growth is heavily concentrated in the U.S., while many of its software contracts provide less revenue visibility than the long-term contracts held by other defense stocks. RTX (RTX +0.24%) and Northrop Grumman (NOC +0.65%) offer more direct ways to benefit from the massive defense spending cycle that's underway.
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RTX offers a direct bet on advanced military systems
Palantir is a bet on the software side of defense and AI, while RTX is a bet on the physical systems governments need to defend their airspace and modernize their militaries.
Defense demand has entered what looks to be an extended multiyear hot phase. The U.S. and its allies are strengthening their defense systems to better respond to military threats and replenishing the supplies expended in recent conflicts. This creates demand not just for new systems, but also for larger production capacity, replacement missiles, and upgrades. RTX is positioned across these areas, allowing it to benefit significantly from rising defense spending.
NYSE: RTX
Key Data Points
The aerospace and defense giant has products already widely adopted across military infrastructure. Through its Raytheon business, RTX develops air and missile defense systems, radars, and precision weapons.
In the second quarter of 2026, Raytheon reported sales of $8.3 billion, up 18% year over year, driven by air and space defense systems, naval programs, and land and air defense systems.
These aren't discretionary software subscriptions. These systems perform essential military functions, and they require ongoing maintenance, replenishment, and upgrades. That creates a more durable business model with significant follow-on revenue opportunities.
In fact, RTX already has a massive $289 billion backlog, including $119 billion for its defense business. That gives the company better visibility into its future revenues, with years of contracted demand. Compared to Palantir's relatively new AI platform, these are mission-critical products essential to defense, giving RTX a steady source of demand.
But RTX isn't the only defense name benefiting from this spending cycle. Another major player is taking the opportunity further.
Northrop Grumman is modernizing defense with major programs
Defense is becoming more software-driven, but the physical systems still matter. Northrop Grumman builds stealth aircraft, intercontinental ballistic missile systems, and advanced sensors.
For Northrop, the B-21 is a major long-term opportunity. The company is building the Air Force's next-generation bomber, and production is already accelerating. The program could provide years of production and upgrades as the B-21 becomes a core part of the U.S. bomber fleet.
NYSE: NOC
Key Data Points
Northrop is also the prime contractor for the Sentinel intercontinental ballistic missile program. That hardware, which will replace the U.S. Air Force's aging Minuteman III intercontinental ballistic missiles, will be deployed in a multidecade program.
With that contract, Northrop's backlog reached $104.7 billion after the company recorded net awards of $20 billion in the second quarter. The backlog includes awards for F-35, Glide Phase Interceptor, and other strategic programs. But unlike Palantir's software-focused approach, Northrop's advantage lies in its exposure to physical systems the military has already committed to buying.
What also sets it apart is its exposure to long-duration defense programs. Building a stealth bomber, nuclear missile system, or advanced radar requires years of close collaboration with the government. So, once a contractor becomes part of these programs, it can generate follow-on cash flow for decades.
Why RTX and Northrop fit the defense spending boom
RTX and Northrop Grumman are shaping the next generation of defense, offering more direct exposure to defense hardware than Palantir's software-first approach. Palantir may be growing fast, but its lofty valuation also leaves it with little margin for error.
Meanwhile, RTX and Northrop offer exposure to the same defense spending boom. But instead of focusing on software and AI platforms, these defense companies offer a more proven route through long-term programs and mission-critical hardware, which, for investors, could make for more attractive investments than Palantir.
