This post serves as a follow-up to our May 2025 blog on the overall FY2026 budget proposal. We’re utilizing the FY26 Defense Budget Briefing from June 26, 2025, and offering some opinions on the implications of some budget items.
No matter your political views, U.S. defense spending is a major economic driver across the country. There will continue to be attractive government contracting opportunities with the single biggest buyer – the U.S. Department of Defense (DoD).
Please note that while we appreciate the expanding role of technology in our space, this blog was not written using ChatGPT, Gemini, Perplexity, etc. We prefer to read, interpret, and explore areas of interest in order to better understand the material. 😊
Top Level Highlights
The U.S. Department of Defense enjoys a significant increase in its overall budget to $1.01 trillion, which is 13 percent above FY2025. That’s a positively massive increase by any measure. Note that as we wrote this blog, it is going through to the White House for signature so we may update the blog.
Looking back to the original FY2026 high-level budget proposal and our previous blog, the DoD priorities, which focus on:
- Building out the “Golden Dome” missile defense shield
- Expanding shipbuilding capacity and volume
- Supporting U.S. space dominance to strengthen U.S. national security and strategic advantage
- The F-47 Next Generation Air Dominance platform
- Enhancing border security
- Modernizing nuclear deterrent
Those…don’t change. In fact, they are expanded upon.
Further, and not surprisingly, there is an emphasis on the U.S. INDOPACOM AOR.
Let’s explore each one and our “grab bag.”
Building Out the “Golden Dome” Missile Defense Shield
The FY2026 budget includes a $25 billion initial investment in this ambitious missile defense initiative, drawing inspiration from both the Reagan-era Strategic Defense Initiative (SDI) and Israel’s Golden Dome. This start of funding is only the proverbial tip of the iceberg if this initiative stays on track. Contract opportunities such as the SHIELD IDIQ will be a significant factor in the path forward.
FedSavvy take: Those who already have strong connections in MDA and USSF are likely poised to do well, especially when/if the SHIELD contract comes out. We should expect unconventional competitors to carve out a strong position, too.
Expand Shipbuilding Capacity and Volume
Nineteen new ships are funded, including two Virginia-class submarines and one Columbia-class submarine at $11 billion.
Shipyards, often overlooked but enjoying some renewed interest over the last few years, will get $2.5 billion for improvements, specifically for nuclear shipyard (Newport News) improvements.
FedSavvy Take: Contractors essential to engineering, facilities, and production may do very well as a result of this budgetary change.
Supports U.S. Space Dominance to Strengthen U.S. National Security and Strategic Advantage
Across space and cyber domains, we can expect $40 billion to go to the U.S. Space Force (USSF), which is an enormous increase in budget. This ties into Golden Dome space control systems and systems architectures and bleeds over the Golden Dome investment to an extent.
FedSavvy Take: Similar to our comment above on Golden Dome, those prime contractors with a strong understanding of the current USSF/MDA systems in place could thrive as this evolves.
The F-47 Next Generation Air Dominance Platform AND Other Air Power
There are both winners and losers here. The planned F-47 aircraft program signals a shift away from the F-35, reducing orders for Lockheed Martin. Meanwhile, Boeing – traditionally not having any meaningful new fighter aircraft wins for years – stands to enjoy a resurgence.
The F-47 enjoys $3.5 billion in funding to start. The F-35 will get $1 billion for sustainment, and the F-15EX (also Boeing) enjoys $3.1 billion for production.
The Boeing E-7 Wedgetail will be cancelled, while the E-2D Hawkeye will be funded further.
FedSavvy Take: New aircraft with new capabilities spell opportunities for any contractor involved in the life cycle from concept all the way through to delivery.
Enhanced Border Security
This is simple by comparison to other major items in the defense budget and will cover DoD operations to augment border security with military personnel and equipment. This is a relatively small spend at only $5 billion.
FedSavvy Take: Logistics and maintenance support may have some opportunities.
Modernize Nuclear Deterrents
This is underscored by a $60 billion investment across the entire nuclear triad—covering sea-based (SSBN fleet), air-based (strategic bombers), and land-based (ICBM) capabilities. Highlights include:
- $11 billion for the new Columbia class SSBN, which replaces the Ohio class SSBNs
- $10.3 billion for the new B-21 bomber
- $4.2 billion for the Sentinel ICBM
FedSavvy Take: It’s worth noting there are MANY programs that sustain current strategic nuclear deterrents tied in here to the significant investment. Contracts like the soon-to-be recompeted ICBM ISC—now referred to as ICBM IDOS—highlight the essential support roles in nuclear modernization that go beyond just OEMs building weapons and technology.
What Other Key Investments Bear Consideration?
- $20.3 billion focused on R&D to further develop capabilities such as hypersonics and quantum computing
- $6.5 billion in conventional and hypersonic munitions
- $3.9 billion specific to the USAF’s Air Launched Rapid Response Weapon (ARRW) from Lockheed Martin and the U.S. Army’s fielding of Long Range Hypersonic Weapon Battery (LRHW) also from Lockheed Martin
- $15 billion for cybersecurity defense funding as a means to protect DoD networks and weapons systems
- $1.2 billion for the innovative Office of Strategic Capital Loan fosters strategic capital investments through working with unconventional businesses to advance defense technologies
- $1.3 billion for industrial-based supply chain improvements, which tie into contract awards such as the Maritime Acquisition Advancement Contract (MAAC)
- $13.4 billion for autonomy and autonomous systems, with a subset of $9.4 billion for unmanned and remotely operated aerial vehicles…note this will be a part of many other investments (think Golden Dome, for example)
- $3.4 billion for counter UAS (cUAS) investments
There is much to unpack in this expansive budget proposal. One thing we can be certain of is that “advisory services” may be scrutinized very heavily, while other services or technology builds could be “easier” to get through.
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