Defense contractors are private companies that provide governments with products, services, technology, and expertise for national security and military missions. They range from major aerospace manufacturers to small cybersecurity, engineering, software, and logistics firms.
In the United States, many compete for contracts issued by the Department of Defense (DoD) and other federal agencies. The industry operates under detailed procurement rules, including the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS).
In this article, you will learn what defense contractors are, what they do, how they make money and how to become a defense contractor.
What Are Defense Contractors?
Defense contractors are private-sector businesses that sell products or services to government organizations involved in defense and national security. A contractor can be a prime contractor that holds a contract directly with the government or a subcontractor that performs part of a larger prime contract.
The term covers a much wider range of businesses than companies that manufacture weapons. Defense contractors can provide aircraft, ships, satellites, missiles, vehicles, radar, communications equipment, software, cybersecurity, cloud computing, engineering, logistics, maintenance, intelligence support, and professional services.
In the United States, the DoD is a major customer, but defense-related work can also come from intelligence agencies, the Department of Homeland Security, the Department of Energy, federal law-enforcement organizations, and foreign governments.
The industry is governed primarily by the FAR, while DoD acquisitions are also subject to the DFARS. These rules establish requirements covering competition, contract types, pricing, cybersecurity, subcontracting, reporting, and contractor responsibilities.
What Do Defense Contractors Do?
So, what do defense contractors do? Their work depends on the government’s requirements and the company’s specialization.
An aerospace contractor may design an aircraft or manufacture components for a military platform. A cybersecurity company may protect government networks or assess vulnerabilities. An engineering firm may design a communications system, while a logistics company may manage transportation, warehousing, or equipment maintenance.
Technology companies are becoming increasingly important as military organizations invest in artificial intelligence, autonomous systems, robotics, cloud computing, data analytics, electronic warfare, and cyber capabilities.
Defense contractors also support programs after delivery. Long-term contracts can cover maintenance, modernization, software updates, spare parts, training, and technical support.
This means a defense contractor can make money from both the initial delivery of a product or service and years of follow-on support.
How Do Defense Contractors Make Money?
Defense contractors make money primarily by performing government contracts and earning revenue under the contract’s pricing terms.
The FAR divides contracts into broad categories including fixed-price and cost-reimbursement contracts. Under a firm-fixed-price contract, the contractor generally accepts responsibility for performance costs and the resulting profit or loss. Under a cost-reimbursement contract, the government reimburses allowable incurred costs according to the contract and applicable rules. FAR Part 16 Types of Contracts
Contractors can also generate recurring revenue from task orders, maintenance, upgrades, technical support, software licenses, training, and logistics.
For example, a company might win a $20 million fixed-price contract to deliver equipment. If it spends $16 million performing the work, its remaining margin before other expenses contributes to profitability. Under a different contract structure, the government’s payment and the contractor’s financial risk may work differently.
For investors and businesses, the distinction between contract value, revenue, obligations, and profit is important. A $100 million contract award does not necessarily mean a company receives $100 million in cash immediately or earns $100 million in profit.
Major Types of Defense Contractors
Defense contractors operate across multiple industries. Understanding the company’s underlying NAICS code can help explain what type of work it performs.
Aerospace and Defense Manufacturers
These companies manufacture aircraft, spacecraft, military vehicles, weapons systems, engines, radar, sensors, and other hardware.
Large programs often involve a prime contractor coordinating hundreds or thousands of suppliers.
Technology and Cybersecurity Contractors
Technology contractors provide software development, systems integration, cloud services, cybersecurity, data analytics, artificial intelligence, and communications capabilities.
For example, NAICS 541512 Computer Systems Design Services covers establishments primarily engaged in planning and designing integrated computer systems. The U.S. Census Bureau also identifies robotics engineering and integration as an activity under NAICS 541330 Engineering Services.
A company pursuing federal work should therefore identify the NAICS codes that accurately describe its primary business activities rather than assuming that every defense-related opportunity uses the same classification.
Professional Services Contractors
Professional services contractors provide engineering, consulting, program management, research, financial, technical, and administrative expertise.
These businesses may not manufacture anything. Instead, they provide the workforce and expertise required to operate or manage government programs.
Intelligence and Surveillance Contractors
These companies provide systems and services for surveillance, intelligence collection, satellite imagery, data analysis, sensors, secure communications, and information processing.
Small and Specialized Contractors
The defense industrial base also includes thousands of small companies. A small cybersecurity firm, component manufacturer, engineering company, or software developer can participate as either a prime contractor or subcontractor.
In fact, subcontracting can provide a practical entry point for companies that lack the scale or past performance needed to compete for major prime contracts.
Can Anyone Be a Defense Contractor?
Can anyone be a defense contractor? Businesses of many sizes and types can compete for federal opportunities if they meet the applicable requirements.
A company seeking to become a federal prime contractor generally needs to register in SAM.gov, the federal government’s System for Award Management. SAM.gov states that organizations seeking to bid directly on federal contracts need an active registration, and registration provides a Unique Entity ID (UEI).
For defense work, a company also receives a Commercial and Government Entity (CAGE) code when applicable. The Defense Logistics Agency’s CAGE code guidance explains that CAGE codes uniquely identify suppliers and can be created through SAM.gov registration.
Companies should also determine their relevant NAICS codes, understand the size standard applicable to the opportunity, and review the cybersecurity and other compliance requirements in each solicitation.
Is It Hard to Become a Defense Contractor?
Is it hard to become a defense contractor? The difficulty depends on the type and size of opportunity.
A small company pursuing a straightforward commercial service contract faces fewer barriers than a company attempting to become a prime contractor on a major weapons program.
A practical starting checklist includes:
- Register the business in SAM.gov and obtain a UEI.
- Complete entity validation and obtain a CAGE code when required.
- Identify appropriate NAICS codes.
- Search SAM.gov for relevant solicitations and award data.
- Review the solicitation’s contract type and evaluation criteria.
- Determine whether CMMC or other cybersecurity requirements apply.
- Build relevant past performance.
- Explore subcontracting opportunities with established prime contractors.
- Budget roughly 4–8 weeks from starting registration and preparation to being realistically ready for a first solicitation response, although complex registrations, cybersecurity requirements, certifications, or clearances can extend that timeline.
SAM.gov states that entity registration can take up to 10 business days to become active, so companies should not wait until the day before a solicitation deadline to begin registration.
Small businesses can also benefit from federal contracting assistance through APEX Accelerators, which SAM.gov’s contracting assistance resources identify as an official resource providing free assistance to businesses getting started with government contracting.
What Are the Top 3 Defense Contractors?
The answer depends on the metric. To avoid an arbitrary ranking, one useful benchmark is SIPRI’s 2024 arms-revenue ranking, published in December 2025.
According to SIPRI’s Top 100 Arms-Producing and Military Services Companies for 2024, the three largest arms-producing and military services companies by 2024 arms revenue were:
1. Lockheed Martin
Lockheed Martin ranked No. 1, with approximately $64.65 billion in arms revenue in 2024. SIPRI classified 91% of the company’s total 2024 revenue as arms revenue.
2. RTX
RTX ranked No. 2, with approximately $43.60 billion in arms revenue in 2024. Because RTX also has substantial commercial aerospace operations, arms revenue represented 54% of its total 2024 revenue.
3. Northrop Grumman
Northrop Grumman ranked No. 3, with approximately $37.85 billion in arms revenue in 2024. Arms revenue represented 92% of its total 2024 revenue.
SIPRI reported that the combined arms revenues of the world’s 100 largest arms-producing and military services companies reached $679 billion in 2024, the highest level in its series. U.S. companies accounted for $334 billion of that total.
This ranking measures arms revenue, not total federal contract obligations. A ranking based on DoD obligations or total government contract awards could produce a different result, which is why the metric should always be stated.
Conclusion
Defense contractors are more than companies that manufacture weapons. They form a broad ecosystem of aerospace manufacturers, technology companies, cybersecurity firms, engineers, logistics providers, and specialized small businesses that support government missions.
For companies seeking to enter the market, practical steps include registering in SAM.gov, obtaining a UEI and CAGE code, identifying appropriate NAICS codes, monitoring solicitations, understanding contract vehicles, and meeting applicable cybersecurity requirements such as CMMC. With defense spending and technology modernization driving demand, the sector offers significant opportunities for established contractors and new entrants alike.
