This article looks at the 10 worst performing defense stocks so far in 2025.
US defense stocks have wobbled this year, amid concerns about government budget cuts. In February, President Trump hinted at significantly reducing future military spending if things settle down with China and Russia. The creation of DOGE has also reshaped investors’ views of the industry.
READ ALSO: 10 Best Performing Defense Stocks So Far in 2025 and 13 Best Defense Stocks to Buy According to Billionaires.
Elsewhere, particularly in Europe, stocks have soared this year, with governments unlocking billions to supercharge their militaries. EU leaders met in Brussels in March to discuss the ‘ReArm Europe Plan’, which will allow the bloc to mobilize funds up to $860 million through bonds and relaxed rules on borrowing and spending.
Despite a shaky start to 2025, analysts at UBS are hopeful about America’s defense sector and believe the downside is shrinking and the FY26 budget request would present a better visibility into long-term expenditure plans. Here is what the firm recently stated:
“Consensus estimates have moved higher since the election despite the 40% sell-off. The downside potential seems increasingly smaller. We believe that the current environment is markedly different from Sequestration and do not believe a similar outcome is likely.”
Citi analyst Jason Gursky is also urging investors that this is the right time to buy American defense stocks.
“We recognize the world order is evolving under the current President, perhaps to a multi-polar one in which three countries control spheres of influence over the Americas, Europe and Asia. However, we don’t view that world to be any less dangerous or one that decreases the need to acquire the tools of deterrence.”
Gursky argues that as long as the global threat environment remains and the United States maintains its leadership role, regardless of whether it is as a sole superpower or as a power in a multipolar world order, defense spending is expected to remain robust, which would benefit stocks in the sector.
Two recent developments have reinvigorated investor sentiment. On March 21, Trump unveiled a new next-generation fighter jet, the F-47, to replace the F-22 Raptor. The jet will have stealth and penetration capabilities that exceed those of the current fleet. The initial contract to proceed with the production is expected to cost approximately $20 billion.
Earlier in the month, the US President also announced to resurrect America’s military and commercial shipbuilding industry, which he sees as vital to national security, given the strategic competition with China.
With that said, let’s now head over to the list of the worst performing defense stocks in 2025.
A shot of a prototype aircraft taking to the skies, the symbol of the companies innovation in aerospace & defense.
Methodology
For this article, we went through screeners to identify stocks in the aerospace and defense industry. From there, we picked the top 10 stocks with the worst year-to-date negative returns in share price, as of the close of business on March 26, 2025. Pure-play aerospace stocks that do not deal in defense contracts have been excluded from the list. The stocks are ranked according to their share price decline.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Worst Performing Defense Stocks So Far in 2025
10. Draganfly Inc. (NASDAQ:DPRO)
YTD Decline in Share Price: -23.69%
Draganfly Inc. (NASDAQ:DPRO) develops cutting-edge unmanned and remote data collection and analysis platforms and systems. It is one of the worst performing stocks in 2025, with a 23.69% decline in its share price this year.
During its Q4 2024 earnings call, Draganfly Inc. (NASDAQ:DPRO) reported a modest increase of 0.1% in its revenue for FY24 as its capacity to meet military and public safety demand did not come to full stream until late Q3. Gross profit also decreased by 32.3% from the prior year. The gross margin stood at 21.3%, compared to 31.5% in 2023.
Draganfly Inc. (NASDAQ:DPRO) recorded a net loss of $14.06 million for the full year. While this was an improvement from last year, the company is not expected to achieve profitability until 2026. Cash used in operating activities was down 37% year over year. It ended the year with a cash balance of a little over $6.25 million.
The company has recently appointed former Acting U.S. Secretary of Defense, Chris Miller, to its Board of Directors. As a seasoned national security expert, Miller is expected to guide Draganfly Inc. (NASDAQ:DPRO)’s strategic initiatives in the government and defense sectors.
In March, the company also announced the opening of its new facility in Tampa, Florida, to strengthen national security and defense partnerships. It is strategically located close to major government and military clients and includes a live fire testing facility.
9. Safe Pro Group Inc. (NASDAQ:SPAI)
YTD Decline in Share Price: -24.07%
Safe Pro Group Inc. (NASDAQ:SPAI) is a leading provider of security and protection solutions, with expertise in advanced AI/ML software technology for small object threat detection.
On March 3, the company appointed Young J. Bang, former Principal Deputy Assistant Secretary of the Army, as Chairman of the Strategic Advisory Board. The decision is in line with Safe Pro Group Inc. (NASDAQ:SPAI)’s commitment to spearhead advanced AI technology into US military systems.
In February, Safe Pro Group Inc. (NASDAQ:SPAI) signed a multi-year agreement with a leading technical university in Ukraine, under which the two organizations will collaborate on utilizing SPAI’s AI-powered drone image processing technology to develop training programs and build enhanced demining methodologies.
Despite these positive developments, shares are down by over 24% year-to-date, landing it a place among the worst performing stocks this year. Safe Pro Group Inc. (NASDAQ:SPAI) has had volatile returns since its IPO in August 2024, likely due to sharp market reactions to news related to the stock.
Another reason behind the stock’s volatility could be a lack of analyst coverage, which is resulting in low investor recognition. The general uncertainty in the aerospace and defense industry is also adversely impacting the returns of several companies in the sector.
8. Nauticus Robotics, Inc. (NASDAQ:KITT)
YTD Decline in Share Price: -31.61%
Nauticus Robotics, Inc. (NASDAQ:KITT) develops autonomous robots for the ocean industry. The company is also a key player in the defense sector. With a year-to-date dip of nearly 32% in its share price, KITT is among the worst performing stocks in 2025.
In January this year, Nauticus Robotics, Inc. (NASDAQ:KITT) forged a strategic alliance with Leidos to advance subsea autonomy solutions. This builds on a successful past collaboration between the two organizations, which was well-received by their mutual customer. The partnership aims to combine the expertise of the two to build next-gen autonomous underwater systems for tackling complex missions.
On March 20, Nauticus Robotics, Inc. (NASDAQ:KITT) announced an earlier-than-scheduled closure of its acquisition of SeaTrepid International, LLC, a company that provides subsea robotic services. The strategic acquisition is likely to result in significant revenue growth for the company in the fiscal 2025.
Nauticus Robotics, Inc. (NASDAQ:KITT) has been under pressure over the last several months to comply with NASDAQ’s listing requirements, which it regained in late February. However, the stock price has been declining over the past week and risks falling below the $1 mark again.
The company is also facing significant financial challenges. During the third quarter of fiscal year 2024, Nauticus Robotics, Inc. (NASDAQ:KITT) reported a revenue of $0.4 million, down from $1.6 million during the prior year’s period. Net loss was recorded at $11.4 million, up by $6 million sequentially.
7. Redwire Corporation (NYSE:RDW)
YTD Decline in Share Price: -32.87%
Redwire Corporation (NYSE:RDW) is a global space company, providing critical space infrastructure for government and commercial users. It is among the worst performing stocks in 2025, with a 32.87% decline in its share price this year.
In January, the company expanded into defense with a $925 million acquisition of drone maker, Edge Autonomy. On March 21, Redwire Corporation (NYSE:RDW) announced that it had received all regulatory approvals to complete its acquisition. The transaction is expected to expand the company’s portfolio to include combat-proven autonomous airborne platforms for critical national security needs.
However, Redwire Corporation (NYSE:RDW) has been under pressure due to ongoing investigations around the fairness of the Edge Autonomy acquisition to shareholders. According to media reports, a former attorney general of Louisiana and Kahn Swick & Foti, LLC are investigating the terms of the agreement. Halper Sadeh LLC, an investor rights law firm, is also inquiring into the deal.
On March 10, Redwire Corporation (NYSE:RDW) declared financial results for the fourth quarter of FY24. While revenue increased 9.6% year-over-year, the net loss for the quarter was $59 million higher than the prior year’s period. Free cash flow for the quarter stood at $3 million, down from $12.6 million in Q4 2023. The company’s annual loss was recorded at $114.3 million, worsening substantially from a loss of $27.3 million in fiscal 2023.
6. Byrna Technologies Inc. (NASDAQ:BYRN)
YTD Decline in Share Price: -38.22%
Byrna Technologies Inc. (NASDAQ:BYRN) manufactures less-lethal equipment and munitions for personal security, private security firms, military, and law enforcement agencies.
The company enjoys high brand visibility through increased media exposure, which is helping in boosting consumer and law enforcement demand for its products. During the Q4 2024 earnings call on February 7, Byrna Technologies Inc. (NASDAQ:BYRN) reported a 101% increase in net revenue for the fiscal year. Net income also improved to $12.8 million from a net loss of $8.2 million in fiscal 2023.
In March this year, Byrna Technologies Inc. (NASDAQ:BYRN) announced that its first ammunition production facility in the United States was now operational in Fort Wayne, Indiana, with a capacity to produce 8 million rounds of its proprietary less-lethal ammunition per annum.
Despite these recent positive developments, Byrna Technologies Inc. (NASDAQ:BYRN)’s share price has tumbled this year, with a sharp 33% decline over the past month. While there is no conclusive reason behind the slump, its high P/E ratio may have sparked overvaluation concerns among investors.
With shares plunging by over 38% this year, Byrna Technologies Inc. (NASDAQ:BYRN) is one of the worst performing stocks in 2025.
5. Hyperscale Data, Inc. (NYSEAMERICAN:GPUS)
YTD Decline in Share Price: -48.56%
Hyperscale Data, Inc. (NYSEAMERICAN:GPUS) is an advanced data center solutions provider. The company’s services include data center management, colocation, cloud hosting, and managed services solutions. It also provides customized solutions for military markets in different parts of the world.
It is one of the worst performing stocks in 2025, with a year-to-date decline of 48.56% in its share price. The stock has been affected by a general downturn in the industry and also a notice of noncompliance it received from NYSE American in December for no longer meeting listing requirements of having at least $6 million or more in stockholders’ equity.
Hyperscale Data, Inc. (NYSEAMERICAN:GPUS) was given until January 17 to submit a plan on how it intends to regain compliance. The plan was accepted in March this year, with the company being granted a listing extension until June 18, 2026.
On March 3, Hyperscale Data, Inc. (NYSEAMERICAN:GPUS) announced preliminary 2024 results and reaffirmed its commitment to transforming into a pure-play AI data center operator by the end of this year. In August last year, its Giga-tronics defense unit filed a petition for reorganization under Chapter 11 of the bankruptcy laws.
Earlier in the year in February, Hyperscale Data, Inc. (NYSEAMERICAN:GPUS) reached an agreement with Key Utility to expand the data center in Michigan from 30 MW to 300 MW to allow the company to advance its AI infrastructure. On March 28, it marked a significant milestone in the transformation, after completing its first installation of NVIDIA GPUs for a customer.
4. KWESST Micro Systems Inc. (NASDAQ:KWE)
YTD Decline in Share Price: -55.26%
KWESST Micro Systems Inc. (NASDAQ:KWE) is engaged in the development of tactical systems and ammunition for military and security forces. It is among the worst performing stocks in 2025, with its share price plunging by more than 55% this year.
KWESST Micro Systems Inc. (NASDAQ:KWE)’s share price has slumped this year amid pressures to regain compliance with NASDAQ’s listing requirements. In November last year, NASDAQ extended the stock’s listing for another 180 days, giving it until May 12, 2025, to regain compliance with the minimum $1 per share price requirement. As of the close of business on March 26, KWE was trading at $0.313 per share.
On March 18, the company stated that it had filed a notice to convene a special meeting of shareholders on March 31 to seek approval of a resolution to authorize the consolidation of issued and outstanding shares of the company on the basis of 1-for-25 shares. This is a crucial compliance measure as KWESST Micro Systems Inc. (NASDAQ:KWE) faces potential delisting in May.
In the midst of chaos, there was positive news last week for KWESST Micro Systems Inc. (NASDAQ:KWE) as it announced the expansion of its manufacturing facilities into the US through a strategic partnership with Nordon Inc. to commence tooling for the scaled production of components under the ARWEN brand. The two parties will work towards an agreement outlining the terms of a long-term contract manufacturing by June this year.
According to Insider Monkey’s database for Q4 2024, 3 hedge funds held a stake in the company, a meagre improvement from 2 at the end of the third quarter.
3. ParaZero Technologies Ltd. (NASDAQ:PRZO)
YTD Decline in Share Price: -58.16%
ParaZero Technologies Ltd. (NASDAQ:PRZO) is an Israel-based aerospace company that provides safety systems for defense counter-UAS systems and commercial unmanned aircraft.
On March 27, the company announced that it had signed a non-binding letter of intent to acquire Lulav Space Ltd., which specializes in counter-drone systems and autonomous drone technologies. The proposed acquisition is likely to close during the second quarter of the year and would add advanced space technologies and deep-space navigation expertise to ParaZero Technologies Ltd. (NASDAQ:PRZO)’s portfolio.
Earlier in the month, the company declared financial results for the fiscal 2024. ParaZero Technologies Ltd. (NASDAQ:PRZO) reported a 50.2% increase in its sales to $0.93 million, driven by a shift toward OEMs integrations that contributed a higher volume of sales compared to the aftermarket segment.
Cost of sales increased by 83.3% from last year due to an inventory write-off and a surge in the volume of sales during the year. Research and development expenses were up by 237% year-over-year, while sales and marketing expenses grew 121.6% from last year. ParaZero Technologies Ltd. (NASDAQ:PRZO)’s net loss was recorded at $11 million, worsening significantly from a loss of $3.77 million in 2023.
ParaZero Technologies Ltd. (NASDAQ:PRZO)’s shares have slumped by over 58% year-to-date, earning it a place in the list of the worst performing stocks this year. The stock risks another non-compliance notice from NASDAQ with a potential delisting warning, as its minimum bid price has again fallen below the $1 mark after regaining compliance in December.
2. Sidus Space, Inc. (NASDAQ:SIDU)
YTD Decline in Share Price: -66.33%
Sidus Space, Inc. (NASDAQ:SIDU) is engaged in the design, manufacture, launch, and data collection of satellites. It serves the aerospace, commercial space, and defense industries. With a year-to-date share price decline of 66.33%, it is among the worst performing stocks in 2025.
Weak financial performance is one of the major drivers of the slump. The company reported losses during the first three quarters of the fiscal 2024. Investors also remain concerned about Sidus Space, Inc. (NASDAQ:SIDU)’s weak gross profit margins, which stood at just 2% during the third quarter. The company is scheduled to report Q4 and full year 2024 results on March 31.
This week, Sidus Space, Inc. (NASDAQ:SIDU) announced receiving a new purchase order from a leading Asian research and development firm. The agreement marks the company’s entry into the region and will help showcase its capabilities through the Orlaith ecosystem. The initiative also highlights SIDU’s leadership in real-time data analytics and orbit computing.
On March 17, Sidus Space, Inc. (NASDAQ:SIDU) announced the successful launch and deployment of LizzieSat (LS-3) into Low Earth Orbit. It was launched on March 14 as part of the Transporter-13 rideshare mission with SpaceX. This was the company’s third satellite launch within a year, after LizzieSat-1 and 2, which have been in orbit since March and December 2024, respectively. The stock surged briefly after the news, before falling again in the days that followed.
1. Momentus Inc. (NASDAQ:MNTS)
YTD Decline in Share Price: -74.02%
Momentus Inc. (NASDAQ:MNTS) is a commercial space company that offers satellite buses and in-space infrastructure services, including hosted payloads, in-space transportation, and other in-orbit services. It is also working on several space-related defense contracts.
In February, the company was selected by the US Air Force to demonstrate low-cost sensors for in-space Rendezvous and Proximity Operations (RPO). During the same month, Momentus Inc. (NASDAQ:MNTS) was also awarded a contract expansion by the DoD to conduct an in-orbit demonstration of the assembly of large scale structures.
In March, the company announced a strategic partnership with Solstar Space for on-demand communication for space systems. Despite these encouraging developments, Momentus Inc. (NASDAQ:MNTS)’s share price has plummeted this year amid non-compliance warnings over the last few months.
On January 16, NASDAQ granted Momentus Inc. (NASDAQ:MNTS)’s request for continued listing until April 15, while the company works to regain compliance with requirements under Rule 5550(b). The NASDAQ Hearings Panel also noted that MNTS had regained compliance under the minimum $1 per share listing requirements.
On February 11, Momentus Inc. (NASDAQ:MNTS) announced the closing of a $5 million offering with an institutional investor, priced at-the-market, under NASDAQ’s rules. The company intends to use the proceeds for general corporate purposes.
Overall, Momentus Inc. (NASDAQ:MNTS) ranks first among the worst performing defense stocks so far in 2025. While we acknowledge the potential of defense companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MNTS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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