The US shipbuilding industry is poised to grow significantly in the next five years as the Department of the Navy receives funding to build new vessels and for maintenance, repair, and overhaul (MRO). These investments will increase demand for an expanded maritime industrial base (MIB) encompassing sectors from ship module construction to component manufacturing and service providers.
- The FY27 President’s Budget Request (PBR) includes approximately $66 billion for US Navy shipbuilding, an increase of about 46% from $45 billion in FY26. The requested ship maintenance budget is $14 billion, an increase of approximately 6% from $13.5 billion in FY26. The Navy also released its 2026 Shipbuilding Plan in May, which sets the goal of growing the fleet by 100 ships in the next 30 years.
- The FY27 PBR and 2026 Shipbuilding Plan are very positive signs for all aspects of the shipbuilding and repair industry. Support for shipbuilding is likely to survive congressional scrutiny and will result in meaningful funding increases and demand across the maritime industrial base.
- Shipbuilding and repair are segmented into multiple verticals based on ship type and the types of services required. There is also capital demand across the MIB horizontally, such as for newly built auxiliary ships, module construction on warships, and repair of surface ships, as well as vertically by looking down into the subsystems and components for Navy vessels.
Growth in US Shipbuilding
Shipbuilding is a top priority of the Trump administration and Congress, reflected not only in plans to build what the White House calls the Golden Fleet but also in the administration’s consistent signaling of the importance of shipbuilding and ship repair to national security through the appropriations process. The FY27 shipbuilding and conversion appropriation account is requesting $65.8 billion, split between $60.2 billion in base funding and $5.6 billion in reconciliation funding. This represents a sizable increase from FY26, which received $45.1 billion, split between $27.2 billion in base funding and $17.9 billion in reconciliation funding. Likewise, the main ship repair account, titled 1B4B, is requesting $14.3 billion for FY27, up from $13.5 billion in FY26.
Additionally, the US Navy released its 2026 Shipbuilding Plan in May, which had been in development since the Trump administration took office, and it expanded on the FY27 budget request. The plan outlines the notional force structure of the US Navy over the next 30 years; as within any forward-looking strategy document, the details will certainly change, but it outlines some durable trends. For example, US military planners intend to increase the size of the fleet by more than 100 ships—from the current 290 to 398—a mission that will be achieved by accelerating new builds and extending the service life of existing ships until deliveries match retirements.
Capstone believes that the funding landscape for shipbuilding is broadly durable, while acknowledging that it is early in the FY27 budgetary process and that multi-year plans still rely on future annual appropriations. The top-line spending figures projected over the next five years show substantive growth across all shipbuilding and repair accounts. Importantly, the Trump administration also made its budget request through the annual defense appropriations process rather than in a reconciliation bill. This underscores how important shipbuilding is to the administration, given that many other major defense programs in the FY27 request seek funding through reconciliation — a process that Capstone is skeptical will be completed this year. And while ultimately the final appropriations figures may be reduced by Congress, shipbuilding enjoys bipartisan support, with many critical shipyards in Democratic districts, further reducing risks to the sector.
Capstone clients have been interested in opportunities to invest in the US Navy shipbuilding push, as well as the broader revitalization of the US domestic commercial shipbuilding space. This note will assess the multiyear outlook for US shipbuilding and highlight specific areas where capital partners and greater capacity are required to support the MIB and US national security.
FY27 Budget Shipbuilding Review
Activity in shipbuilding is driven by a few critical ship classes, all of which have very healthy budgetary outlooks: nuclear submarines, including the Columbia-class and Virginia-class; the Ford-class aircraft carrier; the Burke-class destroyer (DDG-51); and the two large amphibious ship classes. The budget maintains a flat build rate for submarines and destroyers through 2029 (see Exhibit 1).
Despite flat procurement rates over the next few years, the plan signals the Navy’s commitment to increasing production rates over the longer term. For submarines, the Navy contracts for three per year, but manufacturers produce only about 1.5 per year on verage annually. At this rate, the national shipyard backlog continues to grow as shipbuilders with limited capacity try to deliver more submarines in the early 2030s. Destroyers are in a similar situation: the Navy has funding and contracts with private shipbuilders to build two to three ships each year, but manufacturers struggle to meet that goal due to aging infrastructure and workforce shortages.
The FY27 PBR is also notable for a dramatic increase in spending on auxiliary ships, an area the Navy has traditionally underinvested in and one that presents a major opportunity for new entrants in the maritime domain (see Exhibit 2).
Exhibit 1: FY27 US Navy Battle Force Shipbuilding Request in $ Billions (# of vessels)
| FY27 | FY28 | FY29 | FY30 | FY31 | |
| Virginia-Class Submarine | 13.31 (2) | 13.11 (2) | 14.90 (2) | 12.47 (2) | 12.24 (2) |
| Columbia-Class Submarine | 15.62 (1) | 12.96 (1) | 11.53 (1) | 12.53 (1) | 12.19 (1) |
| Burke-Class Destroyer | 3.27 (1) | 6.32 (1) | 4.18 (1) | 6.55 (2) | 6.78 (2) |
| Ford-Class Carrier (CVN-81) | 1.45 | 1.64 | 1.48 (1) | 2.30 | 0.08 |
| FF(X) | 1.43 (1) | 0.30 | 1.65 (1) | 0.91 | 2.76 (2) |
| LHA Replacement | 4.03 (1) | 0.54 | 0.43 | 2.51 (1) | 2.48 |
| LPD Flight II | 2.71 (1) | 2.49 (1) | 2.98 (1) | 2.77 (1) | 2.55 (1) |
| Medium Landing Ship* | 1.89 (6) | 1.77 (6) | 1.22 (4) | 1.17 (4) | 0.84 (3) |
| TAO Fleet Oiler | 2.25 (2) | 1.19 (1) | 1.09 (1) | 1.04 (1) | 2.17 (2) |
| As Submarine Tender | 4.44 (2) | 0.00 | 0.00 | 0.00 | 0.00 |
| TAGOS Surtass Ships | 0.61 (1) | 0.62 (1) | 0.62 (1) | 0.59 (1) | 0.60 (1) |
| Total | 51.01 (18) | 40.94 (13) | 40.07 (13) | 42.83 (13) | 42.67 (14) |
Source: FY27 Defense Budget Request, Department of the Navy (DON) Comptroller
Note: Numbers in parentheses indicate the quantity of vessels the Navy aims to procure.
Exhibit 2: FY27 US Navy Auxiliary Shipbuilding Request in $ Billions (of vessels)
| FY27 | FY28 | FY29 | FY30 | FY31 | |
| T-AH(X)* | 0.65 (1) | 0.00 | 0.65 (1) | 0.00 | 0.00 |
| Bulk Fuel Vessel | 0.45 (1) | 0.45 (1) | 0.00 | 0.45 (1) | 0.90 (2) |
| Strategic Sealift | 0.45 (1) | 0.35 (1) | 0.00 | 0.35 (1) | 0.70 (2) |
| Sealift/Auxiliaries (Used)* | 0.13 (1) | 0.13 (1) | 0.00 | 0.00 | 0.00 |
| Fireboats* | 0.65 (5) | 0.00 | 0.00 | 0.00 | 0.00 |
| Special Mission Ship* | 0.20 (1) | 0.00 | 0.00 | 0.00 | 0.00 |
| Ship to Shore Connector | 0.76 (4) | 0.75 (4) | 0.76 (4) | 0.76 (4) | 0.76 (4) |
| LCAC SLEP | 0.04 (2) | 0.04 (2) | 0.00 | 0.00 | 0.00 |
| Total | 3.33 (16) | 1.72 (1) | 0.76 (1) | 1.56 (1) | 2.36 (1) |
Source: FY27 Defense Budget Request, DON Comptroller
Note: Numbers in parentheses indicate the quantity of vessels procured. Declining funding beyond 2027 should not be interpreted as a future lack of support for shipbuilding. Money is appropriated annually, and future budget numbers are always notional and subject to revision. Some peaks and valleys are procedural artifacts of evolving DON plans.
Regarding auxiliary ships, the PBR states that the current Ready Reserve Force (RRF) consists of 43 ships averaging 41 years old, and that the fleet would require 18 new ships over the next five years to offset any capacity loss from retirements. While spending in this area is relatively small, totaling between $1 billion and $2 billion annually, it is still a major change in government funding that investors should not miss. In addition, the government says the Navy is exploring foreign shipbuilding opportunities for the FY27 and FY28 sealift ships, creating opportunities for creative teaming arrangements that leverage international capacity to fulfill USN commercial capacity requirements.
Ship repair is also increasing under the FY27 budget, although at a slower pace than new builds. Ship depot maintenance is projected to grow to $14.3 billion in FY27 from $13.5 billion in FY26 — a growth rate of 5.5%. While often an afterthought to new builds, repair is a growing segment of the maritime space that uses a separate set of shipyards, many of which need investment.
2026 Shipbuilding Plan Highlights
Beyond the five-year outlook provided in the FY27 PBR, the 2026 Shipbuilding Plan outlines a structural commitment to increasing the size of the Navy, acknowledging that major changes are required to grow the fleet by approximately 100 ships despite an impending wave of ship retirements. These changes include greater reliance on distributed or federated shipbuilding, expanding more private capital into the maritime industrial base, and the adoption of a hedge strategy to diversify the Navy’s fleet and its reliance on high-end platforms.
- Distributed shipbuilding: Notably for investors, distributed shipbuilding, which refers to the practice of offloading significant construction work to facilities outside of a shipyard, will grow from 10% of the work on existing ships to 50%, aligning with broader efforts that emphasize modularity to mitigate major production bottlenecks. Capstone has been emphasizing this growing trend to clients for some time and believes that including this push in the FY26 budget will further solidify the need and opportunities. Building ship parts in more locations will stimulate industrial base opportunities across wider areas of the country and strengthen supply chains in important ways. We also see this as potentially loosening the hold that the major shipbuilding prime contractors currently hold over new builds.
- Attracting more private capital: The government highlights its goal of attracting private capital to invest in the maritime industrial base. The Navy wants to shift away from government-funded expansion toward a model that incentivizes investment and directly engages the private sector when managing acquisition programs. Policymakers want to use technology developed with private capital to close technological gaps in shipyards and expand existing capacity.
- Adopting a hedge strategy: Recognizing the challenges within the existing industrial base, the 2026 Shipbuilding Plan calls for the adoption of a hedge strategy that simultaneously procures high-end warships, like the ones being delivered today, and lower-end platforms, such as larger uncrewed surface vessels. The further segmentation of the naval force into high- and low-end categories creates opportunities for investors seeking horizontal investment options. The low-end fleet’s primary vessel will be the new frigate (FFG-X), designed to perform lower-threat missions.
US Shipbuilding Reform Efforts
A key challenge in shipbuilding has been poor operational performance despite strong financial support from Congress and the Navy. Despite the level of investment, the major shipyards have struggled to deliver ships on schedule, resulting in significant cost overruns. Poor contractual performance by the primes causes tangible downstream effects on the industrial base, exacerbating challenges such as fragile supply chains and labor and wage issues. In addition, the Navy has poorly managed its design and upgrades, with cancellations of recent ship classes, such as the Littoral Combat Ship and the Constitution-class frigate, causing significant instability for suppliers. Despite these challenges, the administration has taken significant steps to rectify the worst problems, and there is increased bipartisan attention to these issues.
At the Defense Department (DOD) level, major acquisition reform efforts have been undertaken to positively impact shipbuilding rates in the coming years. For example, Deputy Secretary of Defense Steve Feinberg has appointed a portfolio manager for all submarine programs who reports directly to him rather than to the Secretary of the Navy—an indicator of the high level of attention from senior officials to shipbuilding.
Other policy levers are being used to improve the shipbuilding outlook in the US. For example, the Trump administration recently released the Maritime Action Plan (MAP), which details efforts to directly address structural challenges facing the maritime industry, including the shortage of skilled shipyard labor. Another pillar of the MAP focuses on modernizing US shipyards to increase total capacity. On the legislative front, Congress is also considering the SHIPS for America Act, which is closely tied to the MAP and focuses on civilian shipbuilding
What’s Next
There will be two types of developments to watch over the next few months. Most important will be the public political debate about the size and scale of the defense budget, particularly shipbuilding accounts. While Capstone believes that shipbuilding is a bipartisan priority, the growing shipbuilding budget could be caught in pre-2026 midterm election politics and receive some pushback. The government FY27 begins on October 1st, but a continuing resolution into Q1 2027 appears likely.
A second important factor is how legislation to support commercial shipbuilding progresses in Congress. Passage of the SHIPS for America Act could significantly animate the maritime industrial base. Other pieces of legislation supporting US shipbuilding are also being debated in Congress. The most likely vehicle for passage here would be the FY27 National Defense Authorization Act, the only piece of legislation that has consistently passed Congress in recent years despite significant political gridlock.
Other developments to monitor include:
- Efforts to expand distributed shipbuilding and how major shipbuilders are utilizing subcontractors to construct ship modules.
- Funding of US auxiliary and merchant marine ships. If the government is serious about expanding US shipbuilding beyond military ships, it needs to provide greater commercial incentives in the US.
Read more from Capstone’s National Security Team:
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