Defense Upstarts Capitalize on Global Conflict as Budgets Shift

A new crop of defense startups from drone makers to software developers are emerging on Wall Street as governments raise military budgets and refill depleting supplies amid intensifying geopolitical tensions.

In recent years, the Pentagon has been diversifying from traditional military contractors Northrop Grumman Corp. and Lockheed Martin Corp. and looking into nimble companies that resemble technology upstarts — with lofty valuations – that offer systems and materials that make fighting more cost efficient. As a result, investors are getting excited about defense names.

“A lot of the companies that are going public right now are focused in areas that ...