Graham Corporation’s Strategic Radiographic Testing Investment: A Pivotal Move for Naval Defense Contracts

Graham Corporation (NYSE: GHM) has taken a bold step in bolstering its position as a critical supplier to U.S. naval defense programs with a $3.6 million radiographic testing (RT) facility upgrade in Batavia, New York. The project, announced in May 2025, combines a $2.2 million customer investment with $1.4 million from Graham itself, marking a significant escalation in the company’s commitment to meeting rising demand for high-quality submarine components.

The RT equipment will be instrumental in evaluating critical welds for the U.S. Navy’s Columbia and Virginia class submarine programs, which are central to modernizing America’s undersea fleet. These programs, valued in the tens of billions, rely on precision manufacturing to ensure the structural integrity of nuclear-powered submarines. For Graham, the upgrade positions it to secure multi-year contracts, with revenue gains potentially materializing as early as 2026.

This investment builds on a pattern of strategic moves by Graham to capitalize on defense spending. In 2023, the company invested $13.5 million in facility upgrades, followed by a $2.1 million contribution from the BlueForge Alliance in 2024 to expand its welder training program. Together, these efforts align with the Navy’s Submarine Industrial Base initiatives, which aim to strengthen domestic supply chains for critical infrastructure.

The project’s timing is no accident. The U.S. defense budget has prioritized modernization of its submarine fleet, with the Columbia class—a new generation of ballistic missile submarines—projected to cost over $100 billion. As a key supplier of vacuum, heat transfer, and cryogenic systems, Graham’s role in these programs is indispensable. CEO Daniel J. Thoren emphasized the move’s strategic value: “This investment underscores our dedication to delivering mission-critical components for high-priority defense initiatives.”

Yet risks remain. As outlined in Graham’s SEC filings, delays in naval procurement timelines, cost overruns, or shifts in defense spending could undermine projected returns. The company’s reliance on a single customer for the $2.2 million infusion also introduces concentration risk. Investors must weigh these factors against Graham’s proven track record in defense contracting and its growing expertise in advanced manufacturing.

The payoff, however, could be substantial. The RT upgrade is not just a capital expenditure but a gateway to long-term contracts. The Navy’s submarine programs are expected to generate tens of thousands of parts orders over the next decade, with Graham’s upgraded facility poised to handle the most technically demanding components.

In conclusion, Graham’s radiographic testing investment is a shrewd play to secure its place in the naval defense supply chain. With prior investments totaling over $16 million since 2023 and a clear focus on high-margin submarine projects, the company is strategically positioned to capitalize on a sector with bipartisan political support. While execution risks linger, the alignment of Graham’s capabilities with the Navy’s multi-decade modernization roadmap suggests this could be a pivotal move for sustained growth. For investors, the bet is less about short-term gains and more about locking in a supplier role in a program that will shape the defense landscape for decades.

The numbers tell the story: a $3.6 million investment today could translate to hundreds of millions in revenue over the life of the Columbia and Virginia programs. For Graham, this is not just an upgrade—it’s a down payment on the future.