WASHINGTON — Defense primes have been attempting to soothe Wall Street’s anxieties surrounding the Pentagon’s uncertain outlook for a $1.5 trillion budget in fiscal 2027, with executives pointing to sustained weapons demand as proof that a meaty defense budget will ultimately materialize.
Over the last two weeks, major defense firms declared their second-quarter earnings, with executives repeatedly pointing to bipartisan support for a boost in weapons production and increased orders from both the Defense Department and international customers.
The Pentagon’s request totals $1.15 trillion in base budget spending and $350 billion in reconciliation spending. But it remains unclear whether there are enough votes to get the reconciliation funds through Congress, potentially throwing a wrench into defense priorities like munitions procurement and the Golden Dome missile shield.
“I know there’s lots of discussions on budget amounts and mechanics, but what I can tell you, as we engage with Congress, is there’s a bipartisan support for increased munitions and ramping in those areas, which are pretty core to our capabilities,” RTX CEO Chris Calio said during a July 23 earnings call.
The fact that the Pentagon’s base budget request has crossed the $1 trillion mark “is significant,” especially coupled with the department’s work to generate multi-year deals with industry for munitions, Calio said.
He added that although RTX has signed off on initial “framework” deals for munitions like Tomahawk and AMRAAM, those deals are not yet built into the company’s backlog and financial expectations.
“We continue to engage with the department on turning our framework agreements into definitive agreements, and that process is ongoing,” Calio said. “I won’t get too into the weeds on that, but they’ve been very, very productive and constructive conversations.”
“And then behind the scenes, we’re continuing to work all the things that we’ll need to do in order to execute on those framework agreements once they get signed,” Calio added, such as shoring up RTX’s existing supply chain and finding new sources for components that are currently only made by a single company.
The defense budget hit the $1 trillion mark for the first time in FY26, as the result of congressional Republicans passing the party-line “One Big Beautiful Bill” with an additional $150 billion for the Pentagon.
But although congressional authorizers and House appropriators have backed a $1.15 trillion base budget in FY27, the prospect of $350 billion in reconciliation spending is much shakier. The “Reconciliation 3.0” resolution passed in the House contains only $60 billion for defense, and it’s unclear whether the Senate has the GOP votes necessary to push the measure forward, or whether the upper chamber will even vote on it before leaving for August recess.
If reconciliation funding fails to materialize or is much smaller than anticipated, it could impede the Pentagon’s ability to move forward on multi-year munitions deals — which make up $47 billion of the reconciliation request.
It could also impact Golden Dome, where the Pentagon requested $17.1 billion in reconciliation dollars with only $400 million for the program included in the base budget. The Pentagon also requested billions in reconciliation dollars for other key programs, like the Navy’s Landing Ship Medium and the F-35 Joint Strike Fighter.
In a note to investors, analyst Byron Callan of Capital Alpha Partners said that executives’ positive outlook on defense demand was to be expected, but added that they did not discuss budget assumptions for FY 27-30 in detail.
Callan also pointed to a disclosure in Lockheed Martin’s quarterly regulatory report, which he said painted a “starker” picture of the budget issues.
That report said that although the administration wants a “significant increase” in defense spending in FY27, Lockheed believes the budget and regulatory environment will ultimately be influenced by a wide array of factors, including Congress, the US political landscape, macroeconomic factors and global threats.
“The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs,” Lockheed said in the regulatory report.
“Additionally, the Administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments,” the company stated in the report. “Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.”
Several defense executives told investors that a smaller reconciliation pot would have little effect on their companies.
The uncertainty surrounding reconciliation funding is less of a problem for General Dynamics, its CEO Phebe Novakovic said, as “a lot” of its programs are funded through the base budget. However, she underscored that the money is still much needed across defense industrial base as a whole.
“If you stop and think about it, weapons production has been on very low rate production or fairly minimally sustaining production for quite some time, and in order to gear up production to meet the current threat environment, we need additional funds, and the entire industry does,” she said. “And so this is — I think from a national security perspective — meritorious.”
Northrop CEO Kathy Warden also assured investors that its programs are “well supported” in the base budget.
“We’re not dependent on significant supplemental or incremental funding above the base budget to drive that growth into 2027,” she said.
L3Harris CEO Chris Kubasik said he anticipates “the highest defense budget in our country’s history” and a supplemental budget that would fund multi-year munitions contracts, but did not comment specifically on whether defense spending would reach the $1.5 trillion benchmark.
“Irrespective of where the budget ultimately ends up, our outlook is positive,” he said.
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