The Pentagon has officially cleared a massive $8.6 billion contract for Boeing BA to provide the Israeli Air Force with advanced F-15IA fighter jets. While this multi-billion-dollar deal reinforces Boeing’s status as a critical defense titan, savvy investors might look past the individual stock.
In particular, investors who seek to capitalize on such high-stakes military expansions without being exposed to the volatility of Boeing-specific headwinds may consider defense exchange-traded funds (ETFs), which hold this jet giant alongside other prime contractors and thus offer a diversified gateway to the sector’s tailwinds.
A Detailed Snapshot of the Deal
The recently won contract by Boeing, managed through the Foreign Military Sales (FMS) program, involves the production and delivery of 25 new F-15IA aircraft, with an option for 25 more. These "Eagle II" variants are tailored for Israel, featuring long-range strike capabilities and the ability to carry up to 14 tons of munitions.
The timing is highly strategic; the contract was finalized shortly after a high-profile meeting between President Trump and Prime Minister Benjamin Netanyahu in Florida. Geopolitically, the sale underscores the U.S. commitment to Israel's air superiority amid ongoing regional tensions with Iran and its proxies. With the project slated for completion by Dec. 31, 2035, Boeing’s St. Louis facility is secured with a decade-long production runway.
Financially, this contract should bolster the Boeing Defense, Space & Security (“BDS”) segment, which engages in the research, development, production, and modification of manned and unmanned military aircraft. Notably, the BDS unit registered a solid year-over-year revenue increase of nearly 25% in the last reported quarter and is expected to continue delivering such robust performance, supported by contract wins like the $8 billion deal mentioned above.
Defense ETFs Outshine Boeing Stock
While the $8.6 billion F-15IA contract is a massive win for Boeing’s backlog, it comes amid a persistent dilemma for investors. Notably, despite reporting a 25% revenue surge, the BDS unit’s operating profit margin remained razor-thin at just 1.7% during the third quarter of 2025. This follows a brutal 2024, where the segment lost nearly $5 billion due to cost overruns on older fixed-price contracts like the KC-46 tanker and Air Force One.
Amid this backdrop, some investors might still categorize Boeing as a high-risk bet.
In contrast, Defense ETFs offer a more strategic and "profitable" alternative. These funds will allow you to capture the upside of the recent F-15 contract win through exposure to Boeing while also balancing it with industry peers like RTX Corp. RTX or Lockheed Martin LMT who currently boast much healthier margins. It’s a way to bet on the "Trillion-Dollar Shield" of global defense spending without being weighed down by Boeing-specific hurdles.
Defense ETFs for Your Watchlist
Given the discussion above, the following defense ETFs may be worth adding to your watchlist if you’re looking to benefit from the global defense sector’s steady tailwinds, along with Boeing’s latest contract win.
State Street SPDR S&P Aerospace & Defense ETF XAR
This fund, with assets under management (AUM) worth $4.72 billion, provides exposure to 40 large, mid and small cap aerospace and defense stocks. Its top four holdings include prominent defense contractors Rocket Lab RKLB (4.07%), Karman Holdings KRMN (3.69%), ATI Inc. (ATI) (3.69%) and BA (3.66%).
XAR has surged 43% over the past year. The fund charges 35 basis points (bps) as fees.
iShares U.S. Aerospace & Defense ETF ITA
This fund, with assets worth $12.83 billion, offers exposure to 41 U.S. companies that manufacture commercial and military aircraft and other defense equipment. Its top four holdings include prominent defense contractors: GE Aerospace GE (21.50%), RTX (16.27%), Boeing (8.20%) and Howmet Aerospace HWM (4.56%).
ITA has soared 47.8% over the past year. The fund charges 38 bps as fees.
Invesco Aerospace & Defense ETF PPA
This fund, with a market value worth $6.85 billion, offers exposure to 60 companies involved in the development, manufacturing, operations and support of U.S. defense, homeland security and aerospace operations. Its top four holdings include renowned defense contractors, BA (9.00%), RTX (8.88%), GE (8.81%) and LMT (7.71%).
PPA has surged 38.6% year to date. The fund charges 58 bps as fees.
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Free: See Our Top Stock And 4 Runners UpThe Boeing Company (BA) : Free Stock Analysis Report
Lockheed Martin Corporation (LMT) : Free Stock Analysis Report
GE Aerospace (GE) : Free Stock Analysis Report
iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports
Invesco Aerospace & Defense ETF (PPA): ETF Research Reports
State Street SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
Howmet Aerospace Inc. (HWM) : Free Stock Analysis Report
RTX Corporation (RTX) : Free Stock Analysis Report
Rocket Lab Corporation (RKLB) : Free Stock Analysis Report
Karman Holdings Inc. (KRMN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
