The U.S. is navigating an increasingly complex geopolitical and military environment.

On one hand, the war in Ukraine, geopolitical tensions in Asia, and recent flashpoints in the Middle East have heightened the U.S. military’s defense posture, leading to fast-tracked arms  procurements, increased military mobilizations, and other related moves. 

Meanwhile, the advent of AI has made it easier and faster for malicious actors to conduct sophisticated cybersecurity attacks at scale.

America is facing threats from multiple directions. And as a result, the Trump administration is proposing a massive boost in the nation’s defense budget to sufficiently meet those challenges.

The administration recently made headlines after reports came out that it was seeking a defense budget of $1.5 trillion for fiscal year 2027—a 42% year-over-year increase. 

Under this proposed budget, funds would be allocated to the expansion of the country’s defense manufacturing industrial base, the proposed space-based Golden Dome defense system, and other military priorities. 

While it’s too early to say whether this budget request will be passed by Congress, it’s clear that defense remains to be one of the administration’s biggest priorities.

And with military readiness remaining a key priority, defense technology firms like Parsons Corporation (PSN) stand to benefit.

The company provides digitally enabled solutions for defense, intelligence, and critical infrastructure sectors.

Parsons operates two major segments, Critical Infrastructure and Federal Solutions. 

Critical Infrastructure provides engineering and project management solutions for transportation, water and waste management, and urban development.

Meanwhile Federal Solutions acts as a systems integrator for U.S. defense and intelligence agencies, providing solutions for cybersecurity, electronic warfare, space operations, and missile defense.

Parsons delivered $6.4 billion in revenue in 2025, with Federal Solutions accounting for slightly more than half of sales.

With defense spending in areas where Parsons specializes, the company has an opportunity to improve upon its above-average 25%-plus returns it has achieved in recent years.

However, investors seem to disagree.

We can see this through Valens’ Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At current valuations the market believes that Parsons’ Uniform return on assets (“ROA”) will decline from 26% in 2025 to 18% by 2030.