Major U.S. defense contractors are planning a material increase in capital expenditure in response to pressure from the White House to expedite weapons deliveries and curb shareholder payouts. Company disclosures and industry analysis indicate a clear shift away from buybacks toward reinvestment in production capacity and related areas.
Aggregate projections from Melius Research show that five large U.S. defense companies are expected to spend $10.08 billion in capital expenditures in 2026, a nearly 38% rise from $7.31 billion in 2025.
Analysts say the administration's approach, which pairs multi-year production commitments with restrictions on payouts, is prompting the change. "The Trump administration’s carrot-and-stick approach seems to be working," said Scott Mikus, an analyst at Melius Research. He described multi-year missile production deals as the carrot and the White House order linking executive pay and shareholder returns as the stick, creating incentives for contractors to expand capacity.
Industry advisers point to several specific uses for redirected capital. "Payout restrictions can be a forcing function for reinvestment, supply-chain financing and execution discipline," said Meghan Welch, managing director at BGL Aerospace and Defense Advisory. She said funds that previously might have gone to buybacks are likely to be rerouted toward strengthening supply chains, expanding the workforce, increasing domestic manufacturing and supporting internal investment.
Some companies have already signaled changes to their shareholder-return programs. Northrop Grumman said it would pause buybacks beyond January. L3Harris indicated it expects its share count in 2026 to remain broadly in line with 2025, a stance that suggests limited scope for repurchases. L3Harris also announced plans to increase capital expenditure by more than 40% in 2026.
Lockheed Martin said it was still evaluating its approach and declined to comment. Analysts interpret that stance as a potential tilt toward reinvestment. "While LMT did not make any direct comments on shareholder returns, we believe there is a clear lean towards capex and research and development," said Ken Herbert, an analyst at RBC Capital Markets. He added, "Our model now assumes no buybacks through 2028, but continued dividend payments."
The move toward higher capital spending marks a reversal from the slower capex growth seen since 2022, even as demand for arms has expanded amid rising geopolitical tensions. According to the compiled projections, defense firms expect capital reinvestments to rise by more than a third this year, reflecting a notable policy-driven shift in how cash is being allocated.
Impacted sectors: defense manufacturing, industrial suppliers, domestic manufacturing and labor markets tied to defense production.