The 2025 National Security Strategy and 2026 National Defense Strategy have fundamentally reoriented U.S. planning toward a "homeland-first" posture centered on hemispheric security and aggressive burden-shifting to allies. Rooted in a broader foreign policy framework of peace through strength, economic revitalization, and a recalibration of America’s global role, these documents prioritize sovereign control and deterrence over broad global integration. They elevate missions like maritime domain awareness and border security to the core of the defense enterprise. For industry, this shift moves beyond traditional power competition to focus on securing strategic terrain and revitalizing domestic industrial resilience. As the Pentagon operationalizes this orientation, the mandate for the private sector is clear: align with these new geographic and mission priorities or risk obsolescence. This strategic pivot is now driving a generational transformation in the Pentagon’s new playbook.
The Pentagon’s new playbook
Against this backdrop, the Department of War is undergoing a generational shift in how it approaches acquisition, innovation, and capital. For companies, the imperative has become ‘speed’. Not just speed of delivery, but speed of relevance as industry endeavors to field new technologies for the warfighter on timetables that keep pace with evolving battlefield realties. To address the speed imperative, the Pentagon is embracing new acquisition pathways, alternative contracting mechanisms, and innovative organizations the combined effect of which may lower some of the traditional barriers to market entry.
Though the system aims to be more open, companies navigating the defense sector still must face certain processes and that are deeply political and institutionally risk-averse. Early engagement, credibility shaping, and narrative positioning before formal requirements are written have become as important as technical performance. Requirements are increasingly influenced by experimentation communities, operational users, congressional staff, and cross-functional mission offices—long before a program of record even exists.
The stress test on the defense industrial base
Recent conflicts have exposed structural weaknesses across the defense industrial base:
Munitions and critical component shortfalls
Fragile and opaque supply chains
Skilled labor and manufacturing workforce gaps
Limited surge capacity in key sectors
These challenges are no longer tactical but have become key forces shaping congressional oversight, allied coordination, and Pentagon investment decisions. The Trump Administration’s 2025 National Security Strategy and 2026 National Defense Strategy, in addition to recalibrating the U.S. focus on the Western Hemisphere and Indo Pacific regions, acknowledges these shortcomings and explicitly prioritizes remedying these deficiencies. Companies that can credibly demonstrate scalable production, resilient sourcing, and workforce sustainability will enjoy strategic advantage. Investors are increasingly evaluating defense opportunities not just through growth multiples, but through durability, policy alignment, and industrial relevance.
Congressional dynamics as a market force
Whereas the President sets the strategy for national defense, Congress' role is funding and oversight—ensuring alignment with homeland-first priorities, monitoring foreign ownership risks, and enforcing procurement, export control, and industrial base safeguards.
For companies, the Hill is a key stakeholder group as it can accelerate, delay, or redirect strategic defense priorities via the appropriations process. This is especially critical when Congress and the Presidency are held by different parties—a distinct possibility heading into the 2026 midterm elections. Firms aligned with homeland defense, industrial resilience, and Western Hemisphere missions should engage Congress by focusing on domestic production, delivery credibility, and supply chain transparency to best position themselves to navigate hearings, inquiries, and budget cycles in a contested policy environment.
Allied and partner momentum
Europe’s rapid defense reindustrialization has become an important parallel demand signal for U.S. defense companies. As more responsibility falls onto allies, nations in Europe and the Indo-Pacific are accelerating procurement, modernization, and industrial expansion to meet higher burdensharing expectations. While the United States still accounts for roughly $850–900 billion in annual defense spending—nearly 40 percent of global military expenditure—growth rates in Europe and parts of the Indo-Pacific are currently outpacing U.S. topline expansion.1
This creates new opportunities for U.S. firms that provide interoperable systems, scalable production, and trusted industrial partnerships.Companies that align with transatlantic industrial policies and partner-driven modernization pathways will be better positioned to compete in an increasingly multipolar, partnership driven defense market.‑polar, partnership‑driven defense market.
The capital stack is changing
Defense and dual-use investment have diversified dramatically. Equity funding for defense technology startups hit approximately $49.1 billion in 2025, reflecting a surge of capital into dual-use innovation ecosystems.2 Dedicated venture funds, mission-driven private capital, and hybrid public-private financing mechanisms now coexist with traditional private equity and strategic corporate investment. Pentagon-capital bridging entities seek to accelerate commercialization of national-security-relevant technologies.
With this evolution comes heightened investor scrutiny of export controls, dual-use ambiguity, regulatory exposure, and geopolitical risk. Companies must be able to articulate not only how they grow, but how they remain compliant, resilient, and aligned under geopolitical stress.
Information as a domain of competition
Information is a core instrument of national power. Adversaries actively shape narratives about technology ethics, corporate behavior, and Western industrial legitimacy. Simultaneously, defense companies face unprecedented scrutiny from media, lawmakers, advocacy groups, and employees.
Strategic communications has moved beyond simply “reputational hygiene” and is a core operational capability embedded across the deal cycle. Sustaining narrative coherence across procurement engagement, investor relations, public affairs, and crisis response directly affects growth trajectories and market outcomes.
A defense-sector playbook for companies and investors
In this environment, successful firms must focus on doing five things well:
Anchor to mission and market simultaneously
Clearly articulate how commercial strategy advances national-security objectives.Fully map the defense stakeholder ecosystem
Understand how Pentagon offices, Congress, allies, regulators, investors, and media intersect and align your playbook to the ground truth realities of this ecosystem.Engage early and shape the narrative
Influence problem definition before requirements are formalized.Demonstrate industrial credibility
Show pathways to domestic production scale, workforce depth, and supply-chain resilience that directly speak to the Pentagon’s focus on revitalizing the national industrial base.Build strategic communications into core operations
Treat narrative management as a growth enabler, not a defensive or reactionary function. Find and elevate your position within the themes that are driving the defense conversation.
Conclusion
For companies and investors, these shifts materially reshape the defense landscape. A Western Hemisphere-centric posture increases demand for border security, counternarcotics, maritime domain awareness, missile defense, and infrastructure protection capabilities. Greater burden sharing will affect international growth strategies as allies face pressure to raise defense spending. At the same time, renewed focus on industrial base revitalization—expanded production capacity, resilient supply chains, and faster acquisition—creates opportunity alongside higher expectations for performance. Firms positioned for rapid scaling, domestic production, and hemispheric security missions will be best placed to compete in this new strategic environment.
1 - https://www.sipri.org/media/press-release/2025/unprecedented-rise-global-military-expenditure-european-and-middle-east-spending-surges
2 - https://www.defensenews.com/industry/2026/01/20/defense-tech-startups-had-their-best-funding-year-ever-in-2025
