Defense and Space Industry News — 2026-05-17

Headline Summary

• Lockheed Martin Wins F-35 Upgrade Contract: The U.S. Department of War awarded Lockheed Martin a $991 million contract to produce and deliver F-35 Lightning II modification packages through 2032.

• SpaceX Starship 12th Flight Test Set for May 19: The first Starship test flight of 2026 will take place at Starbase, Texas, featuring the largest and most powerful version of the rocket to date. It serves as a key milestone for NASA’s Artemis lunar return program.

• UK Selects Four Companies for Apache Drone Wingman: BAE Systems (UK), Anduril (UK subsidiary), Tekever (Portugal), and Thales (France) have been selected for the "Project NYX" concept demonstration.

• European-Led Coalition Plans Strait of Hormuz Operations: A coalition involving up to 40 countries, led by the UK and France, is being formed to secure the Strait of Hormuz, with operations expected to begin following a declared ceasefire.

• SpaceX and Blue Origin Race for Orbital Data Centers: Both companies are entering the development of solar-powered, satellite-based orbital data centers. Blue Origin’s "Project Sunrise" aims to deploy up to 51,600 satellites.

• U.S. Army Small C-UAS Budget Nears $1 Billion: A total of $994 million has been allocated for small counter-drone (C-UAS) systems in the FY27 budget request, designated as discretionary spending.

Major Defense Contracts and Programs

Lockheed Martin — $991 Million F-35 Modification Contract

• Client / Contractor: U.S. Department of War (DoW) → Lockheed Martin
• Contract Value: $991 million, through 2032
• Key Details: The DoW awarded Lockheed Martin a contract for the production and delivery of modification packages for F-35 Lightning II multi-role fighters. This covers software and hardware upgrades to modernize the U.S. F-35 fleet.
• Strategic Significance: The F-35 platform remains a cornerstone of air power for the U.S. and its allies. This contract is part of a long-term roadmap to ensure combat readiness throughout the 2030s and strengthens the revenue base for Lockheed Martin's F-35 program.

UK Ministry of Defence — Apache Drone Wingman Project NYX

• Client / Contractors: UK Ministry of Defence → BAE Systems (UK), Anduril (UK), Tekever (Portugal), Thales (France)
• Contract Value: Undisclosed (Concept demonstration phase)
• Key Details: The UK has selected four companies for Project NYX, an Apache helicopter drone wingman project. The multinational consortium will focus on demonstrating Manned-Unmanned Teaming (MUM-T) technology.
• Strategic Significance: This positions the UK as a leader in the "loyal wingman" drone race within NATO. The multinational makeup signals deepening European defense cooperation.

U.S. Army — $994 Million Budget for Small C-UAS Technology

• Client / Contractor: U.S. Army → Competitive bidding among multiple suppliers
• Contract Value: $994 million (FY27 budget request)
• Key Details: The Army has allocated $994 million in discretionary spending in the FY27 budget for purchasing small counter-drone systems, a direct response to the surge in drone threats experienced on the battlefield, including in Iran-related fronts.
• Strategic Significance: As small drones become a primary modern battlefield threat, supply chain opportunities for C-UAS tech are expanding significantly. Companies like L3Harris and Anduril are expected to be major beneficiaries.

Space Industry Trends

SpaceX Starship 12th Flight Test — Powerful Rocket Launching May 19

• Entity: SpaceX
• Vehicle · Payload: New Starship version (12th flight test), launching from Starbase, Texas
• Status: Scheduled for May 19, 2026
• Industrial Implications: As the first test flight of 2026, this new version is the largest and most powerful rocket ever. Success is critical for NASA’s Artemis lunar landing missions (targeted for at least 2028) and would provide momentum for commercial and national security applications.

SpaceX CRS-34 — NASA ISS Resupply Mission Launched May 15

• Entity: SpaceX / NASA
• Vehicle · Payload: Falcon 9 / Dragon cargo ship, ISS resupply
• Status: Launched May 15, 2026, at 6:05 PM ET
• Industrial Implications: The 34th commercial resupply mission (CRS-34) reaffirms NASA's reliance on commercial transport, signaling an accelerated shift toward private-sector-led space logistics.

SpaceX and Blue Origin — Orbital Data Center Competition

• Entities: SpaceX, Blue Origin
• System: Large-scale satellite constellations (solar-powered orbital data centers)
• Status: In development; Blue Origin announced "Project Sunrise" aiming for up to 51,600 satellites
• Industrial Implications: The race to dominate space-based AI computing infrastructure is underway. Orbital data centers offer resilient command-and-control platforms. This surge in satellite launches will likely increase commercial launch demand for the Falcon 9 and Starship.

Geopolitical & Policy Context (As of 2026)

U.S. and Asian Allies

As of May 2026, the U.S. Department of War is accelerating export programs for F-35 upgrades and PAC-3 MSE interceptors. Lockheed Martin’s $4.7 billion PAC-3 MSE contract from early April targets the strengthening of air defense capabilities for Indo-Pacific allies including South Korea, Japan, and Taiwan.

Europe and NATO

A UK and French-led coalition of 40 countries is planning to secure the Strait of Hormuz. The operation, which integrates assets ranging from destroyers to drones, aims to deploy immediately following a ceasefire. Simultaneously, the UK's Project NYX demonstrates a clear intent to lead NATO in MUM-T technologies. Reports indicate a sharp increase in the use of AI-based "Project Maven" during strikes against Iran, signaling pressure for NATO allies to increase investment in AI warfare infrastructure.

Comparative Analysis Insight

SpaceX vs. Blue Origin — Orbital Data Center Strategies

Analysis: Both are attempting to move AI compute to space, but SpaceX is taking an incremental approach using existing infrastructure, while Blue Origin is making a large-scale bet. SpaceX currently leads in operational execution, but Blue Origin's scale could shift interest if it captures significant Pentagon attention.

Upcoming Watchlist

• May 19: SpaceX Starship 12th test flight — Success is vital for NASA's Artemis schedule and Starship's commercial future.
• Project NYX Progress: Monitoring for further disclosures on schedules and contract values from the BAE/Anduril/Tekever/Thales consortium.
• Pentagon AI Network: Watch for follow-up contract announcements regarding the deployment of AI-classified networks following the approval for eight tech firms.

Reader Action Guide

• Investors: Lockheed Martin (LMT)'s F-35 upgrades provide stable long-term earnings visibility (2026-2032). SpaceX-linked public entities (e.g., space infrastructure ETFs) may see volatility around the 12th flight test.
• Policy & Strategy: The Strait of Hormuz coalition signals a realignment of European maritime security. Asian defense authorities should review PAC-3 MSE procurement priorities and C-UAS collaboration opportunities.
• Industry & Supply Chain: The $994 million C-UAS budget is a massive opportunity for SMEs in electronic warfare and interception. Meanwhile, the orbital data center race will drive demand for satellite components, solar panels, and onboard computing modules over the next 2-3 years.