Who they all sell to
Five companies build most of what the US military buys. All five sell to the same customer, and there is no second one.
The Pentagon obligated about $521B in unclassified contracts in fiscal 2025, a record. Most of the big-ticket work goes to five companies: Lockheed Martin, RTX, Northrop Grumman, Boeing and General Dynamics.
This is a monopsony - one buyer, many sellers - and it is the mirror image of the monopoly people usually worry about. The buyer sets the terms. The sellers have nowhere else to take an F-35 or a nuclear submarine.
How dependent each one is varies more than the picture suggests, and that is worth saying plainly. In their 2025 10-Ks, Lockheed reports 72% of revenue from the US government and General Dynamics 68%. RTX reports $33.3B, or 38% - because half of RTX is Pratt & Whitney jet engines and Collins cabin systems sold to airlines. Boeing is similar: its defence unit booked $27.2B of the company's $89.5B. Northrop is the most concentrated of the five.
So the funnel is real, but the rows are not equally thick in life. The two with big commercial businesses have somewhere else to sell. The pure-play defence companies do not.
This also explains something people find strange about defence stocks: order backlogs run two to three years of revenue, because the customer signs multi-year contracts, and margins sit near 10%, because the customer knows exactly what everything costs.
A structure is not an accusation. Not financial advice.
