Introducing the Defense Industry’s ‘Titan 5’

In Greek, the word titan signifies great strength. It comes from mythology, as the Titans were the pre-Olympian gods and revered for their vigor and power.

Against a backdrop of heightened geopolitical uncertainty, strength in the form of military power is back at the top of the agenda. Look no further than June’s NATO summit, where several members of the alliance signed up to more than double defense and security spending from 2% to 5% of economic output, or gross domestic product, by 2035. No formal treaty obligation exists yet¹. While being overall a positive milestone for defense companies, there is still a risk that the political situation can change, and promises will not materialize. Please refer to the main risk factors section in the fund prospectus, website as well as below in this article. Key risks include sudden reductions in government defense budgets, export-license suspensions, currency fluctuations, sector concentration, and equity-market volatility. These factors could lead to a full loss of the invested capital.

It’s little wonder that defense stocks have been standout performers over the last 12 months. We have identified five of the industry’s leaders – what we call the ‘Titan 5’ – each of them generating triple-digit share price returns in 2024² and continuing to perform in 2025. Between them, they represent almost a third of the VanEck Defense UCITS ETF (DFNS) and give an insight into what’s driving its appreciation³.

These are the Titan 5, please note that these companies are currently a part of the portfolio as of June 2025 and represent only a small part of the invested capital:

1. Palantir Technologies, a US data intelligence company, supplies software to governments and their militaries. It reported revenues of $884 million for the first quarter of 2025, up by 39% on the same period in 2024^4,5. While being a pioneer in its area, new technologies bring a lot of uncertainty and projected growth might not materialize, strongly affecting the share price.
   

   Feature	Details
   Founded	2003
   Headquarters	Denver, Colorado, USA
   Key Products	Palantir Gotham, Palantir Foundry
   Focus Areas	Big Data, AI, Government, Defense, Healthcare
   Notable Clients	US Department of Defense, NHS, Airbus
   Specialty	Secure and scalable data analysis platforms

   
   
    
2. Like other Asian defense companies, shares in Hanwha Aerospace, South Korea’s largest defense group, have soared in anticipation of orders as Europe rearms. Its sales rose by 278% in the first quarter of 2025 compared with the previous year^6,7. Order growth may stall if European defense spending softens, export licenses are restricted or currency moves turn adverse, which could cause significant share price declines and potential capital loss.
   

   Feature	Details
   Founded	1977 (as Samsung Precision)
   Headquarters	Changwon, South Korea
   Key Products	Aircraft engines, K9 Thunder, space launch systems
   Focus Areas	Aerospace, Defense Systems, Powertrain
   Notable Clients	Korean military, global defense exports
   Specialty	Precision defense manufacturing

   
   
    
3. Italian defense stock Leonardo, one of Europe’s defense champions, saw its order book rise by more than 15% to €20.9 bn in 2024⁸, and the company gears up to meet further growth in orders. It is reasonable to keep in mind that the current environment could still lead to a fall in government aerospace budgets, project delays or cost overruns could reverse recent share gains and lead to heavy investor losses.
   

   Feature	Details
   Founded	1948 (as Finmeccanica)
   Headquarters	Rome, Italy
   Key Products	AW helicopters, Eurofighter Typhoon, electronics
   Focus Areas	Aerospace, Defense, Cybersecurity, Electronics
   Notable Clients	Italian Ministry of Defense, NATO, EU countries
   Specialty	Integrated defense and aerospace systems

   
   
    
4. Germany’s Hensoldt, a manufacturer of air defense radars, recently offered to take on laid off car workers as it sought to meet a record order backlog standing at €6.6 bn at the end of 2024^9,10. With all recent tailwinds for the company, it is worth keeping in mind that contract cancellations, tighter defense budgets or supply-chain shortages could sharply reduce earnings and erode the share price.
   

   Feature	Details
   Founded	2017 (spin-off from Airbus)
   Headquarters	Taufkirchen, Germany
   Key Products	Radars, electro-optics, electronic warfare systems
   Focus Areas	Defense Electronics, Surveillance, AI
   Notable Clients	German Ministry of Defense, NATO, international partners
   Specialty	Sensor fusion and radar tech

   
   
    
5. The final member of the Titan 5 is the UK’s Babcock International, which makes submarines and warships. The group’s operating profit surged by 51% to £364 million in the 12 months to March 31, 2025¹¹. As with many other defense companies, reduced naval procurement, cost inflation or schedule slippage on key programs could hurt profitability and drive the share price lower.
   

   Feature	Details
   Founded	1891
   Headquarters	London, UK
   Key Products	Naval platforms, submarine maintenance, engineering
   Focus Areas	Defense, Nuclear, Infrastructure support
   Notable Clients	UK Ministry of Defense, Australian Navy, international navies
   Specialty	Maritime and complex asset management

   
   
    

As Europe’s militaries undergo a once-in-a-generation rearming, these companies’ order books are surging, as are their share prices. Taken together with the other shares held by the VanEck Defense UCITS ETF (DFNS), they have lifted it to a gain of 56.49%.

Source: VanEck. Past performance is not a reliable indicator of future results. The fund was launched on 31 May 2023.

Performance History: Average Annual Total Returns* (%)

*Periods greater than one year are annualised. Reference periods indicate cumulative performance, not annualized.

The rise in NATO spending, especially in Europe, is widely agreed to have transformed the outlook for the defense sector. As order books rise there’s a greater likelihood of companies benefiting from long-term contracts and sustained demand for their products and services.

It’s also important to note that defense expenditure has historically been agnostic of the economic climate. US defense spending rose in the last three recessions¹⁴.

The ETF’s underlying index focuses on:

• Investments in defense companies: Constituents must derive 50% (25% for current components) of their revenues from the military or defense industries.
• Exclusion criteria: Companies involved in controversial weapons such as anti-personnel landmines are excluded, as well as companies violating established norms. It is worth noting that the fund neither has a sustainable investment objective nor promotes environmental and/or social (E/S) characteristics¹⁵.

Given the rally in the Titan 5 and other defense stocks, it’s natural for investors to wonder if they have missed the opportunity. Geopolitical uncertainty, military spending pledges and bulging order books would suggest otherwise.

At the same time, investors should bear in mind that investing in equities is risky. You may lose money up to the total loss of your investment due to the Main Risk Factors such as Equity Market Risk, Liquidity Risks and Industry or Sector Concentration Risk described in the KID and in the sales prospectus. Market evolution is not guaranteed.