Buoyed by a global arms race and mounting geopolitical risks, Korea's defense industry is accelerating toward record earnings in 2026, soaring on results that have exceeded expectations. Korea's four major defense firms are now on track to post operating profit of 1 trillion won for a fifth consecutive quarter. In particular, their combined second-quarter operating profit is expected to reach 1.5 trillion won, marking a record high.
According to financial data provider FnGuide, the second-quarter 2026 operating profit consensus (brokerage estimates) for the four defense firms — Hanwha Aerospace, Hyundai Rotem, Korea Aerospace Industries (KAI), and LIG Defense & Aerospace (LIG D&A) — stood at 1.4684 trillion won. If combined operating profit reaches 1.5 trillion won, it will mark a record high on a quarterly basis.
This represents an increase of about 9% from a year earlier. If the estimate is met, operating profit will have exceeded 1 trillion won for five consecutive quarters. The combined second-quarter revenue consensus also came in at 11.5554 trillion won, well above 10 trillion won, and is expected to recover to the 10-trillion-won range. Revenue slipped to 9.4691 trillion won in the first quarter of this year but is set to surpass 10 trillion won again in the second quarter.
Looking at each company, the most notable is Hanwha Aerospace. Its second-quarter operating profit consensus is forecast at 996.2 billion won. This represents an increase of more than 15% from a year earlier, drawing attention to whether it will surpass 1 trillion won in quarterly operating profit for the first time.
Hyundai Rotem is expected to post operating profit of around 270.6 billion won, up about 5% from a year earlier. LIG D&A and KAI are forecast to post operating profit of 108.5 billion won and 93.1 billion won, respectively.
The defense industry has shown remarkable growth by shifting from a domestic-focused industry to an export-driven one following the Russia-Ukraine war. The second-quarter results also reflect strong performance from previously secured European projects, including exports of Poland's K9 self-propelled howitzers and K2 tanks.
Big Four Revenue Consensus Expected to Recover to 10 Trillion Won
Above all, with news of major project wins continuing in the second half of this year, attention is focused on whether these four defense firms will post record earnings this year. As revenue recognition from export projects to Poland and other European countries expands, projects in Egypt and Australia are also expected to contribute to earnings.
For Hanwha Aerospace, major overseas orders are cited as key momentum in the second half, including the 10-trillion-won U.S. wheeled self-propelled howitzer (MTC) project, Saudi Arabia's MNG project, the third K9 local production contract with Poland, and the signing of a main contract for joint development of Spain's K9 self-propelled howitzer project with local defense firm Indra.
Hyundai Rotem is also in negotiations to export K2 tanks and K808 wheeled armored vehicles to Peru. In addition, with Iraq planning to replace its aging tanks, there is a possibility of a K2 tank export contract worth about 9 trillion won. However, the Iraq K2 tank export contract is expected to see progress only once stability is achieved in the Middle East situation.
For KAI, the greatest interest lies in whether it will actually secure orders related to Indonesia's KF-21, expected in the fourth quarter, as well as exports of the FA-50 light attack aircraft to countries such as Peru and Egypt. In the second half, mass-production revenue from the Korean supersonic fighter KF-21 will begin to be recognized in earnest, while FA-50 deliveries to Malaysia are also expected to begin.
LIG D&A, which shows the highest earnings growth rate among the four defense firms, is drawing attention over when its exports of the medium-range surface-to-air missile Cheongung-II will materialize to Qatar and Kuwait in the second half, along with the United Arab Emirates (UAE) Cheongung-II (medium-range surface-to-air missile) project, amid continued demand for air defense systems in the region.
Moreover, analysts say the future earnings visibility of these four defense firms is high. As of the first quarter of this year, the combined order backlog of the four firms exceeds 100 trillion won, giving them a stable production base for years to come based on already secured work alone.
In a recent report, DS Investment & Securities observed, "Ground weapons such as the K9 self-propelled howitzer and Chunmoo are urgently needed within the North Atlantic Treaty Organization (NATO), and as they establish themselves in a direction that meets joint procurement and intra-European production requirements, their market share will expand further." It added, "In particular, once the Middle East situation stabilizes, negotiations for large Middle East contracts such as Saudi Arabia's MNG project and Iraq's K2 are expected to reaccelerate."
