2026 Defense Sector Breakout: Why Kratos and Drone Innovators Like Amprius Are Poised for Explosive Growth

The 2026 defense sector is shaping up to be a pivotal year for investors, driven by a confluence of geopolitical tensions and technological innovation. As global defense budgets surge to address emerging security threats, companies at the forefront of unmanned systems and advanced battery technology are positioning themselves for explosive growth. Two standout names-Kratos Defense & Security Solutions and Amprius Technologies-exemplify this trend, leveraging geopolitical-driven demand and cutting-edge R&D to secure their roles in the next phase of military modernization.

Geopolitical Tensions Fuel Defense Spending Surge

Global defense spending is projected to exceed $3.6 trillion by 2030, with a 5% growth rate in 2026 alone. This acceleration is fueled by escalating geopolitical rivalries, particularly in Europe and Asia. NATO's push to raise defense budgets to 5% of GDP by 2035 has already driven European spending to 2.1% of GDP in 2025. The U.S. is similarly prioritizing modernization, with a sharp focus on closing capability gaps in AI, drones, and autonomous systems. For instance, the U.S. Navy's Sea Archer unmanned surface vessel and the Air Force's Decision Advantage Sprint initiative highlight how AI is revolutionizing command and control systems. These developments underscore a sector where innovation is no longer optional-it's a strategic imperative.

Kratos: A Case Study in Unmanned Systems Leadership

Kratos Defense & Security Solutions has emerged as a key player in the unmanned systems race. In January 2025, the company secured a $34.8 million contract for Valkyrie Mission System Integration, a testament to its expertise in advanced drone development. Kratos' 2024 financial performance further validates its growth trajectory: full-year revenues reached $1.136 billion, reflecting 9.6% year-over-year growth. The company's strategic joint venture with RAFAEL, Prometheus Energetics, also positions it to dominate the U.S. market for solid rocket motors. According to company reports, Kratos is well-positioned to capitalize on its technical capabilities and strong contract pipeline.

Amprius: Powering the Future of Unmanned Systems

While Kratos leads in drone design, Amprius Technologies is redefining the energy infrastructure that powers these systems. The company's SiCore® silicon anode batteries have been selected by Empirical Systems Aerospace (ESAero) to extend UAV flight times and payload capacity-critical advantages in defense and security operations. In 2025, Amprius expanded its Korea Battery Alliance, adding three new contract manufacturers to boost production capacity beyond 2 GWh. This expansion ensures NDAA-compliant supply chains, a critical requirement for U.S. defense contracts. Notably, Amprius secured a $35 million purchase order from a leading UAS manufacturer, following a prior $15 million order. These partnerships, including collaborations with Nokia and Airbus subsidiary AALTO, highlight Amprius' role in enabling high-altitude, long-endurance missions. As drone systems become more integral to military operations, Amprius' battery technology is a foundational enabler of this transformation.

The Investment Thesis: Innovation Meets Geopolitical Necessity

The 2026 defense sector breakout is not a speculative bet-it's a response to urgent geopolitical realities. With defense spending in 2024 already hitting $2.718 trillion (a 9.4% annual increase), the sector is entering a phase of sustained growth. Kratos and Amprius represent two sides of the same coin: one excels in platform development, while the other powers the energy revolution enabling these systems. For investors, the combination of geopolitical tailwinds, technological differentiation, and robust financial performance makes these companies compelling long-term plays.

As the world grapples with an increasingly volatile security landscape, the defense sector's reliance on innovation will only deepen. Companies like Kratos and Amprius are not just beneficiaries of this trend-they are architects of the future of warfare.