This Defense Stock Has a $57B Backlog and New AI TailwindsWritten by Gabriel Osorio-Mazilli. Published 10/24/2025.
Key Points- Huntington Ingalls' stock now trades near a 52-week high, although its market capitalization is significantly below the sector average.
- Government defense spending has led to an increase in the company's backlog, boosting EPS forecasts.
- AI implementation could raise margins to new highs, justifying the continuation of its bullish price action.
In the world of defense investing, some of the best opportunities come not from discovering new names, but from re-evaluating essential companies that Wall Street may be underpricing relative to their strategic value.
One such case is Huntington Ingalls Industries (NYSE: HII), a major player in the U.S. defense sector with a market cap of $11.5 billion.
The Top 10 AI Stocks You Need to Know (Ad)Discover the 10 Best AI Stocks to Buy Now!
The AI revolution is reshaping the investment landscape, and knowing where to place your bets is crucial. Our free report reveals the 10 top AI stocks that should be on your radar right now. Don't miss your chance to get in on these high-potential tech plays.
Download your free report today.
With geopolitical tensions rising between the United States, China, and the Middle East, Huntington Ingalls stands to benefit from expanding government defense budgets.
Huntington Ingalls' record backlogs, adoption of artificial intelligence (AI), and strong defense spending create a rare setup for long-term earnings growth and valuation expansion, even though the stock is trading near its highs.
Huntington Ingalls Is at the Center of Naval PowerThe United States Navy is one of the most extensive and well-equipped in the world.
The 2025 defense budget stands just under $850 billion, with roughly $40 billion dedicated to aircraft and carrier-related programs across the services. These allocations translate to direct revenue opportunities for contractors that supply critical military infrastructure, like Huntington Ingalls.
Despite being the largest military shipbuilder in the United States and a major supplier of aircraft carriers, destroyers, and submarines, the company trades at a modest valuation relative to its strategic importance.
In its most recent quarter, Huntington Ingalls secured $11.9 billion in new contract awards, boosting its backlog to a record $56.9 billion. Those backlog levels provide a long runway of predictable revenue.
And there's a factor that could significantly accelerate value realization: AI integration.
How Artificial Intelligence Is Changing the GameAccording to management, Huntington Ingalls' AI implementation is set “to accelerate shipbuilding throughout,” which translates to faster production cycles, lower costs, and expanded margins.
It could also shift long-lead government contracts into more immediate earnings drivers. This transformation helps explain why HII stock is up 48.1% year-to-date and trading near its 52-week high, despite the long timelines typically associated with defense contracts.
Analysts May Still Be Behind the CurveIt's understandable that some investors hesitate to buy a stock near its 52-week high, especially when analysts haven't aggressively raised ratings or targets.
Investors will soon learn whether the company hits—or beats—the Q3 analyst consensus forecast of $3.40 when the report is expected on Oct. 30.
The MarketBeat consensus Q4 earnings per share (EPS) forecast for HII is $4.24, roughly 10% higher than the Q2 reported EPS of $3.86. Notably, the company's Q2 EPS beat the consensus estimate of $3.23 by a wide margin.
This pattern of underestimation suggests that analysts may still be too conservative, particularly if AI continues to compress production timelines and improve margins. If these trends persist, Huntington Ingalls could see upside EPS revisions in future quarters—a key catalyst for further stock gains.
Institutional investors appear to be taking notice. In August 2025, Bank of America boosted its stake in Huntington Ingalls by 4%, increasing its position to $160.9 million, equal to about 1.7% ownership. That move signals conviction in HII’s long-term trajectory, given a business model that combines national importance with expanding financial returns.
Huntington Ingalls: A Strategic Play on Defense and AIHuntington Ingalls is uniquely positioned at the intersection of national defense urgency and technological transformation. A $56.9 billion backlog, a proven record as the Navy’s shipbuilder of choice, and AI-driven efficiency gains make the company a rare blend of stability, growth, and upside surprise potential.
For investors willing to look beyond short-term noise, HII stock remains a compelling opportunity, even at its current price. |
