When watching the turn replay, both ships and settlements do not have the upgraded armor shown until the turn is over. It's hard to get a screen shot of this, but it's reproducible for me every time. The armor does upgrade properly behind the scenes, so that during the attack phase, the attack is reduced by 1. However, the visual display that armor has been increased does not show up until the end of the turn. Both attack and health improvements show up right away during the Upgrade phase of the turn.