The DIB is strong and profitable now- the US isn’t falling behind

Michael E. O’Hanlon; Director of Research - Foreign Policy, Director - Strobe Talbott Center for Security, Strategy, and Technology, Co-Director - Africa Security Initiative, Senior Fellow - Foreign Policy, Strobe Talbott Center for Security, Strategy, and Technology, Philip H. Knight Chair in Defense and Strategy

Alejandra Rocha; Senior Research Assistant - Strobe Talbott Center for Security, Strategy, and Technology

Strengthening America’s defense industrial base; Brookings; https://www.brookings.edu/articles/strengthening-americas-defense-industrial-base/

For perspective, it bears noting that, contrary to popular thinking, there is no general crisis in the American defense industrial base today. New technologies are making their way into warfighters’ hands. America has dramatically ramped up artillery production in response to the war in Ukraine, a case in point of how it might do so in other areas as well. Defense companies do not always make big profits, but major American and allied defense firms are certainly not going out of business. In fact, the University of Virginia’s Darden School of Business conducted a study on the financial health of the defense industry and found that overall, the industry is financially healthy and has shown improvement over time. The study examined 124 publicly traded U.S. firms, categorized into defense, hybrid, and commercial firms. Defense firms were defined as those that derived 75% or more of their annual revenue from U.S. defense or foreign military sales customers; hybrid firms as those that derived 25% to 75% of their revenue from U.S. defense or foreign military sales customers; and commercial firms as those that derived less than 25% of their revenue from U.S. defense or foreign military sales customers. The graph below compares the defense firms’ performance against that of hybrid and commercial firms and market indexes over five-year periods. All in all, defense corporations outperform hybrid and commercial companies as well as the S&P 500, Dow Jones Industrial Average, and NASDAQ stock indices.