Lockheed Martin Corporation

Lockheed Martin Corporation is the largest U.S. defense contractor by sales. It is headquartered in Bethesda, Maryland, and at the end of 2025 employed about 123,000 people, including about 72,000 engineers, scientists and IT professionals. 93% of the workforce is in the U.S.

The company operates in four segments. Aeronautics — the F-35 fighter, the F-16, the F-22 and the C-130J airlifter. Missiles and Fire Control — PAC-3 (Patriot) and THAAD interceptors, JASSM and LRASM missiles, and PrSM. Rotary and Mission Systems — Sikorsky helicopters (Black Hawk, Seahawk, CH-53K), command and control systems, and Aegis. Space — submarine-launched ballistic missiles, the NGI interceptor, missile-warning satellites and NASA's Orion spacecraft.

The U.S. Government is the main customer: 70% of sales in the first half of 2026, including 61% from the Department of Defense (now also called the Department of War). 30% came from international customers, including sales through the U.S. Government. The F-35 program alone is about 28% of sales.

Two terms are needed to read Lockheed's reports. Segment operating profit is the profit of the four segments before corporate items, and it is the measure management guides on. A reach-forward loss is recorded when the company estimates that a fixed-price contract will cost more than its price: the entire future loss is booked immediately, in the quarter it becomes evident, even though the cash goes out in later years.

The quarter: sales growth, a distorted profit comparison

In the April–June 2026 quarter, sales rose 11% to $20,063 million and segment operating profit rose to $2,162 million, from $571 million a year earlier. The jump is explained mainly by the base: Q2 2025 included reach-forward losses of $1,615 million — $950 million on a classified Aeronautics program, $570 million on the Canadian Maritime Helicopter Program (CMHP) and $95 million on the Turkish Utility Helicopter Program (TUHP). Adding those losses back to the prior-year quarter, segment profit this quarter is similar ($2,162 million versus $2,186 million).

Net earnings in the quarter were $1,836 million, or $7.94 per share, versus $1.46. The effective tax rate fell to 15.7% from 18.0%. No shares were repurchased in the quarter.

2026 guidance — according to company management

In July the company raised its 2026 sales guidance to $79.75–81.75 billion, growth of about 8%, and segment operating profit to $8.5–8.7 billion, an increase of about 28%. The base matters here too: 2025 segment profit without the program losses was $8,358 million, and against that the guidance is 2% to 4% higher. Free cash flow guidance rose to $7.0–7.2 billion, while cash-from-operations guidance stayed around $9.3 billion and capital expenditure guidance fell from $2.5–2.8 to $2.0–2.4 billion.

The company closes its quarters on the last Sunday of the quarter. Q1 2026 had 12 weeks (13 in 2025), and Q4 2026 will have 14 weeks.

On June 28, 2026 the company held $3,791 million of cash against $21.7 billion of debt (principal). Net debt was about $17.9 billion, roughly 1.65 times trailing-twelve-month EBITDA. There were no borrowings under the credit facilities. In August 2026 the company entered into a new $2.25 billion 364-day credit facility and extended its $3 billion five-year facility to 2031. Neither contains a financial maintenance covenant.

Shareholders' equity is small relative to the company's size — $8,768 million. In 2021–2025 the company repurchased $24.7 billion of stock, and diluted shares fell from 277 to 231 million. Actuarial pension losses also reduce equity by $7.5 billion. Equity rose by $2 billion in the first half because no shares were repurchased. Remaining repurchase authorization: $8.3 billion. In its annual report the company notes that dividends and repurchases "may also be impacted by the implementation of presidential executive orders".

Working capital: contract assets — work performed but not yet billed — rose by $3.0 billion in the first half to $16.0 billion, which the company attributes mainly to the F-35 program and missiles. Contract assets also rose in the first half of 2025, by $2.2 billion, so this year's increase is about $0.9 billion above the seasonal pattern. Customer advances stood at $12.2 billion (+$0.7 billion). Inventories include $1.9 billion of costs incurred ahead of anticipated contracts ($1.5 billion at the end of 2025), mainly on classified programs, the F-35, the F-16 and Sikorsky; if those awards slip, the costs may not be recovered.

Other commitments: in June 2026 the company guaranteed borrowings of ULA, its launch joint venture with Boeing, up to $500 million, and stated that both partners plan to provide additional financial support. In July it signed an agreement to acquire Ultra Maritime, an undersea warfare systems company, for $3.45 billion, funded with cash and additional financing. Closing, according to the company, is in Q4 2026, subject to approvals.

Pension: in December 2025 the company contributed $860 million to its pension plans, a contribution which, per its release, fulfils the 2026 obligation, and transferred $943 million of obligations to insurers. Following the 2025 tax law, the company is not subject to the corporate alternative minimum tax this year, and its 2026 federal tax payments are lower.

Missiles and Fire Control is the fastest-growing segment: +19% in sales in the quarter, driven by production ramps on PAC-3 and THAAD (+$560 million) and PrSM (+$100 million). In early 2026 the company signed multi-year munitions framework agreements with the Department of Defense, which management says are intended to allow production rates to rise 3 to 4 times. In Q2 a multi-year THAAD contract of $35 billion was signed, still as an undefinitized contract action (UCA) whose final terms have not been set. The segment's backlog nearly doubled, from $46.7 to $87.9 billion.

Aeronautics: sales rose 9%, mainly from F-35 production. Deliveries fell at the same time: 51 aircraft in the first half, versus 97 in the prior-year period. The report does not state the reason. The F-35 backlog fell from 368 to 317 aircraft.

Profit booking rate adjustments: when the company updates a contract's cost estimate, the difference is booked in profit immediately. In Q2, net adjustments added $375 million to segment profit (17% of it), of which $190 million was in Missiles. Without the adjustments, the Missiles segment margin in the quarter was about 9.9%, and Aeronautics about 8.6%. The first half also included unfavorable adjustments: F-16 ($125 million), C-130 ($95 million), CH-53K ($95 million) and Seahawk ($80 million).

According to the company, about 30% of the current backlog will be recognized as sales over the next 12 months and about 50% over the next 24 months. For the December 2025 backlog the ratios were 37% and 60%. In dollars, the 24-month portion is nearly identical at both dates (about $115 billion versus about $116 billion); most of the addition to backlog extends into later years.

In several of its core programs Lockheed is the sole supplier: the F-35 is the fifth-generation fighter the West exports, with a U.S. program of record of 2,456 aircraft, seven partner countries and 12 additional foreign military sales customers. PAC-3 and THAAD interceptors, and the U.S. Navy's strategic submarine-launched missiles, are produced by Lockheed. In long-running programs of this kind, switching suppliers takes years.

Demand: the FY2026 National Defense Authorization Act authorized $901 billion; the 2025 tax law added more than $150 billion of defense funding through 2029. The FY2027 budget request, per the report, is $1.5 trillion, including $760 billion for procurement and modernization — subject to Congressional approval. International sales rose 19.5% in the quarter, and European sales 34%.

What the reports show on the other side: market leadership does not guarantee profitability on every contract. In 2024 and 2025 the company recorded reach-forward losses of $1.97 and $1.62 billion, mostly on fixed-price development programs it won competitively. In 2025 the company was not selected in the Air Force's next-generation air dominance (NGAD) competition and wrote off related assets. Its main customer also sets contract terms, and per the report it is shifting more risk to contractors.

Risks arising from the reports

• Fixed-price development contracts: two classified programs with cumulative losses of about $3.3 billion and an explicit warning of possible further losses. On the classified Missiles program, the company states that each option exercised would be at a loss.
• Canadian helicopter program: contract assets of about $585 million; per the company, negotiations to restructure terms may fail and could result in contract termination.
• Concentration: 70% of sales from the U.S. Government and 28% from one program. Budget decisions, government shutdowns and continuing resolutions have a direct effect.
• Payment terms: a move to progress payments as the baseline on fixed-price contracts (59% of sales) could delay cash receipts.
• ULA: a guarantee of up to $500 million, planned further support, and impairment exposure if the Vulcan rocket does not perform as assumed.
• Supply chain: rare-earth shortages and tariffs — cited explicitly by the company as a risk to profit and cash flow on fixed-price contracts.
• Securities class action regarding disclosures on the classified programs and the F-35 in 2024–2025. Per the company, it does not have a material effect.

Items to monitor in the Q3 report (October 22, 2026)