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    LMT
    Earnings call· Mar 2026(Q1 FY26)

    LOCKHEED MARTIN Q1 FY26 earnings call LMT

    Apr 23, 2026 Source

    Executive summary

    Lockheed Martin Q1 FY26 — Strong Demand and Strategic Wins Despite Q1 Headwinds

    Lockheed Martin reported solid Q1 FY26 results, driven by strong demand for its defense technologies and space capabilities, highlighted by strategic contract wins and successful program execution. Despite some Q1 headwinds related to a shortened fiscal period, ERP implementation, and program adjustments, the company remains confident in its full-year guidance, supported by significant backlog and ongoing investments in production capacity and innovation. Management emphasized disciplined operational execution and strategic partnerships to meet urgent customer requirements and drive long-term value.

    Highlights

    5

    • Secured a $1.5 billion contract with the Peruvian Air Force for 12 Block 70 F-16 fighters, broadening Latin American footprint.

    • MFC awarded $7 billion in PAC-3 contracts, including a $4.8 billion fully funded undefinitized contract, underscoring sustained demand.

    • Secured a $700 million contract for F-35 long-lead materials, signaling continued international commitment.

    • Artemis 2 mission successfully completed using the Orion spacecraft, cementing Lockheed Martin's role in deep space discovery.

    • Pentagon requested 85 F-35s in the FY27 budget, an increase from 47 last year, reflecting strong operational performance.

    Concerns

    5

    • First quarter sales were impacted by a shortened fiscal period compared to the prior year.

    • Segment operating profit declined due to nonrecurring events in the prior year and unfavorable performance adjustments at Aeronautics (F-16, C-130).

    • Earnings per share decreased 12% primarily driven by lower profit and mark-to-market losses.

    • Reported a use of $291 million in free cash flow, largely due to working capital timing and ERP system implementation.

    • Rotary and Mission Systems (RMS) sales decreased 8% and operating profit decreased 19% year-over-year.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year sales growth
    mid-single-digit
    high materiality
    High
    Full-year profit
    $8.4 billion to $8.7 billion
    high materiality
    High
    Full-year free cash flow
    $6.5 billion to $6.8 billion
    high materiality
    High
    Full-year capital expenditures
    $2.5 billion and $2.8 billion
    medium materiality
    High
    Operating margins
    improve over the course of the year, with gains anticipated in the second half of 2026
    medium materiality
    High
    Patriot missile production rate
    2,000 per year
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Aeronautics
    Sales decreased primarily due to life cycle timing and classified programs, losses recognized on the F-16 program, and lower production volume, partially offset by increased volume on F-35 sustainment. Operating profit decreased due to unfavorable profit adjustments on F-16 and C-130 programs and the absence of favorable profit adjustments on classified programs in Q1 2025.
    F-16 unfavorable profit adjustmentsC-130 unfavorable profit adjustmentsF-35 favorable profit adjustments
    		—-1%—-14%
    Missiles and Fire Control (MFC)
    Sales and operating profit increased primarily driven by higher volume from production ramps on existing PAC-3 tactical strike missile programs, including JASSM, LRASM, and PRISM.
    Higher volume from production ramps on PAC-3, JASSM, LRASM, PRISM
    		—+8%—+8%
    Rotary and Mission Systems (RMS)
    Sales decreased primarily from lower production volume of both RADAR programs and at Sikorsky. Operating profit decreased due to unfavorable profit adjustments at Sikorsky programs and the absence of a cost recovery from an intellectual property license arrangement that occurred last year.
    Lower production volume of RADAR programsLower production volume at SikorskyUnfavorable profit adjustments at Sikorsky programsAbsence of cost recovery from intellectual property license arrangement
    		—-8%—-19%
    Space
    Sales increased primarily driven by higher sales volume on strategic and missile defense programs, including the Fleet Ballistic Missile and next-generation interceptor. Operating profit decreased primarily due to the absence of a benefit from the completion of a commercial civil space program.
    Higher sales volume on strategic and missile defense programsAbsence of benefit from completion of a commercial civil space program
    		—+7%—-26%

    Operational metrics

    19
    Dividends paid
    $816M
    Q1 FY26

    Paid in the first quarter.

    Long-term debt retired
    $1B
    Q1 FY26

    Retired in the first quarter.

    Research and development
    $458M15% increase over prior year Q1
    Q1 FY26

    Investment in research and development.

    Lockheed Martin Venture Fund capacity
    $1Bmore than double its formal size
    Ongoing

    Expanding the fund's capacity to support startups and new entrants.

    Lockheed Martin Venture Fund companies backed
    120+
    Ongoing

    Number of companies backed by the Venture Fund.

    Lockheed Martin Venture Fund new companies
    25
    Last 2 years

    Number of new companies added to the Venture Fund portfolio.

    Factory production increase
    >60%from 2 years ago
    Current

    Factory production is up significantly, reflecting efforts to enhance and accelerate execution.

    C-130 deliveries
    4
    Q1 FY26

    C-130 deliveries have resumed, keeping on track for full year targets.

    Sales impact from shortened fiscal period
    few hundreds of millions of dollars
    Q1 FY26

    Impact on Q1 sales due to a shorter fiscal period compared to the prior year, expected to be recovered in Q4.

    One-time charges impact on sales
    $190M
    Q1 FY26

    Impact of one-time charges across 3 business areas on sales.

    One-time charges impact on profit
    $240M
    Q1 FY26

    Impact of one-time charges across 3 business areas on profit.

    Classified programs cash burn
    $500M to $700M
    Annual

    Expected annual cash burn for classified programs.

    Capital expenditures increase
    $1Byear-over-year
    Annual

    Increase in capital expenditures, with about half tied to agreements with cash flow protection.

    Voluntary turnover rate
    ~4%half of general industry (8%-10%)
    Ongoing

    Lockheed Martin's voluntary turnover rate, indicating strong talent retention.

    MFC PAC-3 new orders
    $7B
    Q1 FY26

    Awarded for PAC-3 contracts, advancing ramp production agreements.

    Aeronautics F-35 long-lead materials contract
    $700M
    Q1 FY26

    Secured contract for F-35 long-lead materials.

    Space Fleet Holistic Missile capabilities contract
    $890M
    Q1 FY26

    Secured contract for sea-based nuclear deterrents program.

    RMS Aegis Ballistic Missile Defense contract
    $365M
    Q1 FY26

    Awarded contract for Aegis Ballistic Missile Defense.

    Aeronautics C-130J support contract
    $462M
    Q1 FY26

    Awarded contract to expand support of the Royal Canadian Air Force's fleet of C-130Js.

    Industry KPIs

    6
    MetricValueDetails
    Free cash flow bridge-$291MUSD
    Defense program awards$7BUSD
    Unit deliveries by program4aircraft
    Production rates by program2,000missiles per year
    Program margins eac chargesno charges
    Production capacity expansion20+facilities

    Product announcements

    2
    ProductTypeDetails
    PRISM increment 2milestone
    UH-60 MX Black Hawk helicopterlaunch

    Deals & partnerships

    2
    Peruvian Air Forcecustomer contract$1.5B

    Contract for 12 Block 70 F-16 fighters, with an opportunity for a second squadron of an additional 12 aircraft. This is the first F-16 direct commercial sale contract in decades.

    Fortem Technologiesstrategic investment

    Strategic investment to bring to market a fully integrated end-to-end turnkey counter UAS solution, seamlessly using detection, control, identification, and mitigation capabilities. This partnership will accelerate Fortem's ability to scale production and incorporate its products into Lockheed Martin's Sanctum counter UAS ecosystem.

    Capital programs

    2
    Munitions acceleration centerunderway

    Benefit: production facility and development hub for next generation defense talent

    Building in Camden, Arkansas, exemplifying efforts to grow workforce and utilize AI and robotics.

    Expanded munition production facilitiesunderway

    Benefit: achieving expanded production rates of sophisticated munitions

    Construction and/or modernization of more than 20 facilities across several states dedicated to PAC-3 and THAAD interceptors.

    Risks & headwinds

    5
    F-16 program design and development delaysQ1 FY26

    unfavorable performance adjustments

    Mitigation: Rework completed, successful flight test, deliveries of first aircraft resuming this week.

    C-130 program integration challenges and supplier constraintsQ1 FY26

    unfavorable performance adjustments

    Mitigation: Deliveries have resumed with 4 aircraft delivered as of today, keeping on track for full year targets.

    Free cash flow impact from ERP system implementationQ1 FY26

    negative cash of $291M

    Mitigation: Anticipated impact, expected to be resolved by Q2 FY26.

    Classified program in Aeronautics complexityOngoing

    complex, cutting-edge, still some risk

    Mitigation: Increased scrutiny, higher-level executive oversight, ongoing discussions with government on contract structure for success.

    Classified missile program at MFC complexityOngoing

    complex, cutting-edge, still some risk

    Mitigation: Risk mitigation measures in place, oversight by high-level experts, no charges taken in Q1 FY26 (last charge in 4Q 2024).

    Q&A highlights

    8

    Can you provide an update on the F-35 program, its role in modern warfare, and your outlook for production and sustainment, especially given the increased Pentagon request?

    Jim Taiclet highlighted the F-35's proven dominance in active operations, citing its unique fifth-generation capabilities in air-to-air and air-to-ground missions, including its role as a 'flying command post' for data fusion and command and control. He emphasized its superior performance compared to other aircraft and the solidified demand from the U.S. government and allies.

    “the F-35 is basically a flying command post, where it can ingest sensor data from the aircraft, organize it, declassify it necessary and pass it off without any pilot intervention into the command and control system for multiple services and multiple allies”

    asked by Kristine Liwag · answered by James Taiclet

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Wins and Operational Relevance

    Lockheed Martin secured a $1.5 billion contract with the Peruvian Air Force for 12 Block 70 F-16 fighters, marking the first direct commercial sale in decades and expanding its Latin American footprint. The Orion spacecraft successfully completed the Artemis 2 mission, carrying four astronauts beyond low Earth orbit, demonstrating its unique deep space capabilities. Additionally, Lockheed Martin platforms like the F-22, F-35, C2 BMC, FAD, PAC-3, THAAD, Black Hawk, and C-130 have shown highly effective performance in recent U.S. and allied operations in active conflict zones, underscoring their critical operational relevance.

    02

    Production Acceleration and Supply Chain Resilience

    The company is rapidly expanding production for key munitions, including quadrupling PRISM output and increasing PAC-3 and THAAD interceptor production by 3x and 4x, respectively. These efforts are supported by multi-year framework agreements with the Pentagon, enabling investments in over 20 new or modernized facilities across several states. Lockheed Martin is also actively working with major suppliers like L3Harris and Boeing, and exploring second and third sources within its supply chain, to enhance resilience and meet accelerated demand.

    03

    Innovation and Digital Transformation

    Lockheed Martin is advancing its 21st Century Security vision by integrating AI solutions for enterprise efficiency, digital threat integration, and model-based engineering to accelerate program timelines. The company operates an internalized AI center, leveraging external models on its secure infrastructure, to apply AI to business processes and product sets like target recognition and battle management. This strategic focus aims to deliver more capable, integrated, and reliable systems that can be quickly assimilated into existing force structures.

    04

    Capital Allocation and Financial Performance

    In Q1 FY26, Lockheed Martin paid $816 million in dividends and retired $1 billion of long-term debt, demonstrating its commitment to disciplined capital allocation. The company invested $511 million in capital expenditures and $458 million in research and development, representing an approximately 15% increase over the prior year. While free cash flow was a use of $291 million due to working capital timing and an ERP system implementation, the full-year cash guidance remains strong, with higher cash flow projected for the latter half of the year.

    05

    Evolving Landscape and Strategic Partnerships

    Lockheed Martin is actively engaging with the evolving defense landscape, expanding its Venture Fund capacity to $1 billion to back over 120 companies, including a recent strategic investment in Fortem Technologies for counter-UAS solutions. The company welcomes competition and collaboration with new entrants, viewing them as partners to access best-in-class technology. Management highlighted a shift towards more commercial-like contracting models with the U.S. government, exemplified by multi-year agreements that include risk mitigation and cash flow neutral approaches.

    AI-generated summary of the company’s earnings call. Not investment advice.