HII's Strategic Expansion into AI-Enabled Autonomy and Outsourced Production: A New Era for Naval Dominance

Huntington Ingalls Industries (HII) is redefining its role in the global defense sector through a dual strategy of advancing AI-enabled autonomy and expanding international partnerships. These initiatives, centered on the ROMULUS program and the Virginia-class submarine supply chain, position HII to capitalize on the U.S. Navy's modernization priorities while enhancing its long-term earnings resilience. By integrating cutting-edge technology with strategic subcontracting, HII is not only addressing immediate operational needs but also securing a dominant position in the evolving maritime and submarine markets.

AI-Enabled Autonomy: The ROMULUS Program as a Catalyst

HII's ROMULUS (Rapid Open Mission-Limited Unmanned Surface Vessel) program represents a paradigm shift in naval operations. As of late 2025, the prototype of its AI-enabled unmanned surface vessels (USVs) is 30% complete, with sea trials slated for Q4 2026. This progress underscores HII's ability to deliver high-endurance, open-ocean platforms capable of speeds exceeding 25 knots and ranges of 2,500 nautical miles. The vessels are designed for intelligence, surveillance, reconnaissance, counter-drone missions, and mine countermeasures, while also supporting strike operations and the launch of unmanned underwater and aerial vehicles designed for intelligence, surveillance, reconnaissance.

Central to ROMULUS's success is HII's Odyssey Autonomous Control System (ACS), an architecture deployed across 35+ USV platforms and 750+ REMUS underwater vehicles globally according to HII's latest update. In November 2025, HII and Shield AI conducted a landmark test integrating Shield AI's Hivemind software with Odyssey, enhancing autonomous performance and lifecycle sustainment. This collaboration exemplifies HII's commitment to open-access, government-aligned systems that enable rapid integration of third-party technologies-a critical advantage in an era where adaptability determines operational superiority.

The program's international reach further strengthens its strategic value. ROMULUS USVs are now integral to Babcock International's ARMOR (Autonomous and Remote, Maritime Operational Response) Force, supporting the U.K. Royal Navy's next-generation autonomous fleet. This partnership not only diversifies HII's revenue streams but also aligns with the AUKUS trilateral security framework, ensuring sustained demand for its platforms.

Outsourced Production: Strengthening Submarine Supply Chains

HII's expansion into outsourced production is equally transformative, particularly in the Virginia-class submarine program. In December 2025, HII and Babcock International Group inked a contract allowing Babcock to construct complex submarine assemblies for Virginia-class Block VI submarines at its Rosyth, Scotland facility. This marks the first time Babcock has been authorized to participate in U.S. submarine production, a move that diversifies HII's supplier base and mitigates risks associated with domestic labor constraints.

The Virginia-class program remains a cornerstone of HII's growth. Despite FY2025 budget adjustments reducing procurement from two to one submarine, the Navy plans to return to a two-per-year production rate from FY2026 to FY2029, supported by a $22 billion contract awarded to HII and General Dynamics Electric Boat (GD) in 2019. HII's Newport News Shipbuilding division recently delivered the Massachusetts (SSN 798), the 41st Virginia-class submarine, demonstrating its operational efficiency.

By leveraging Babcock's expertise, HII is also reinforcing its competitive positioning in a market projected to grow at a 4.17% compound annual rate from 2025 to 2030. This expansion is critical as HII and GD work to finalize contracts for 15 submarines including 10 Block VI Virginia-class and five Columbia-class by year-end 2025. The partnership ensures HII maintains its dominance in nuclear submarine construction, a domain where it and GD are the sole U.S. shipyards authorized to operate.

Competitive Positioning and Earnings Resilience

HII's dual focus on AI-enabled autonomy and outsourced production creates a robust foundation for earnings resilience. The ROMULUS program's emphasis on modular, scalable platforms aligns with the Navy's push for distributed maritime operations, while the Virginia-class supply chain diversification reduces production bottlenecks. These strategies are particularly valuable in a defense landscape where geopolitical tensions and technological obsolescence drive demand for agile, interoperable systems.

Moreover, HII's partnerships with Babcock and Shield AI illustrate its ability to scale capabilities without overextending internal resources. For instance, the collaboration with Babcock on the Australian Submarine Supplier Qualification (AUSSQ) program and the integration of REMUS vehicles with Babcock's Weapon Handling Systems highlight HII's ecosystem-building approach. Such alliances not only lower R&D costs but also accelerate time-to-market for next-generation solutions.

Conclusion

HII's strategic expansion into AI-enabled autonomy and outsourced production is a masterstroke in navigating the complexities of modern defense contracting. The ROMULUS program's technological advancements and international partnerships, coupled with the Virginia-class submarine supply chain's resilience, position HII to outperform peers in both growth and stability. As the submarine market expands and autonomy becomes a naval imperative, HII's ability to innovate while leveraging global partnerships will be a key driver of long-term shareholder value.