Secretary of Defense Pete Hegseth plans to request that Congress approve $200 billion to fund the war against Iran, on top of the Pentagon's roughly $1 trillion budget for the current fiscal year. Both Axon (AXON) and L3Harris (LHX) are well-positioned to benefit from this extraordinary defense spending, and both names have other compelling, positive catalysts. Also importantly, AXON and LHX are two top-rated defense stocks, according to Barchart.
Given all of these points, Axon and L3Harris are worth buying at this point.
About Axon
Axon provides various products for law enforcement agencies, including Tasers, cameras, sensors, and AI-driven systems.
In the fourth quarter, the company's revenue jumped 39% versus the same period a year earlier to $797 million. Its EBITDA, excluding certain items, soared 46% compared to the year-ago period, reaching $206 million.
Axon has a market capitalization of $39.9 billion and a price-book ratio of 12.2 times.
Analysts on average predict that its earnings per share will rise 13% this year and soar 115% in 2027.
About L3Harris
The defense contractor markets various products to militaries, including missiles and missile-defense systems, satellites, and communications products.
Last quarter, its revenue rose 6% versus the same period a year earlier, excluding acquisitions and divestments, to $5.6 billion, while its cash from operations soared 74% year-over-year (YoY) to $1.96 billion.
LHX has a market capitalization of $65.9 billion and a forward price-earnings ratio of 31.6 times.
Axon's Strong, Positive Catalysts
Since the Iran war started, there have been suspected terrorist attacks in Austin, Texas; Virginia; and Michigan, all of which may have been due to the events in the Middle East.
In this environment, Axon has a number of tools that should be very valuable for law enforcement agencies. According to the firm, its AI-powered Axon Fusus offering allows law-enforcement personnel to obtain “faster, better intelligence” and make superior instantaneous decisions. Similarly, Axon 911, which also utilizes AI, can allow agencies to respond more quickly and effectively to 911 calls, the firm stated. The company's Drone as First Responder system (DFR) provides agencies with enhanced “real-time” intelligence, and together Fusus and DFR enable a more effective “real time response,” Axon reported.
Finally, Axon Fleet 3 can scan license plates very rapidly, automatically discovering dangerous individuals, and Axon AI, along with Dedrone, can detect “and, in some cases, mitigate…unauthorized drones.”
With the Pentagon very eager to find new ways to combat enemy drones, Axon's anti-drone capabilities could very well enable it to get a small but significant slice of the Pentagon's huge budgets.
Finally, there is strong evidence that the demand for the company's “AI-powered products” is already growing rapidly, as its bookings from such systems “nearly tripled” in 2025 to over $1 billion.
L3Harris's Strong, Positive Catalysts
The giant defense contractor plans to execute an IPO of its Missile Solutions unit in the third quarter or the fourth quarter of 2026. Given the Pentagon's strong demand for missiles and missile-defense systems, along with the fact that several such spinoffs, such as those of General Electric (GE) and Western Digital (WDC), have generated tremendous gains for investors in recent years, buying LHX stock at this point is likely to be very profitable. Further, the federal government intends to invest $1 billion in L3Harris's spun-off entity, signaling that Washington intends to spend a great deal of money on the entity's products. L3Harris plans to retain a majority stake in the spun-off firm.
Despite the fact that the missile-defense systems in the Mideast have been relatively successful in the war so far (with interception rates around 90%), the Department of Defense is likely to use a sizeable amount of the additional funds sought by Hegseth to improve (and rearm) this vital capability.
What's more, CEO Chris Kubasik reported on the firm's Q4 earnings call that it “ended the year with a record order book and strong demand signals from (its) customers.” He also stated that “capacity is now the most important capability.” These declarations indicate that the company is likely to generate impressive overall growth in 2026.
The Bottom Line on LHX and AXON
Both companies' valuations are low, given their positive catalysts and powerful, expected growth. Therefore, both names are good stocks to buy for medium-to-long-term investors.
On the date of publication, Larry Ramer did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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