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    LMT
    Earnings call· Jun 2026(Q2 FY26)

    LOCKHEED MARTIN CORP LMT

    Jul 23, 2026 Source

    Executive summary

    Lockheed Martin Q2 FY26 — Record Backlog and Raised Full-Year Guidance

    Lockheed Martin reported a strong Q2 FY26, driven by record backlog and accelerating sales across all segments, leading to a raised full-year outlook. The company is strategically investing in manufacturing capacity and advanced technologies, including AI, while pursuing commercial-like agreements with the government to ensure long-term, profitable growth and meet increasing global demand for defense systems.

    Highlights

    5

    • Backlog reached a new all-time high of $230 billion, an increase of roughly $64 billion versus Q2 2025.

    • Generated $2.9 billion in free cash flow in Q2 FY26, recovering from a negative $150 million in the prior year period.

    • Sales increased 11% year-over-year to $20.1 billion in Q2 FY26.

    • Recorded a second quarter book-to-bill ratio of 3.2:1.

    • Raised full-year 2026 sales guidance to $79.75 billion-$81.75 billion, representing an 8% year-over-year increase at the midpoint.

    Concerns

    2

    • Space full-year profit outlook lowered to $1.34 billion-$1.38 billion due to reduced ULA equity earnings from the Vulcan launch anomaly.

    • Aeronautics margins pegged modestly lower than prior guidance due to scaling new F-35 contracts, expanding sustainment work, and absorbing Q1 F-16 and C-130 challenges.

    Guidance & targets

    16
    CategoryTargetConfidence
    Total sales
    $79.75B-$81.75B
    high materiality
    High
    Segment operating profit
    $8.5B-$8.7B
    high materiality
    High
    Free cash flow
    $7B-$7.2B
    high materiality
    High
    Earnings per share
    $29.95-$30.65
    high materiality
    High
    Capital expenditures
    $2B-$2.4B
    medium materiality
    High
    Second half 2026 sales growth rate
    High single digits and perhaps even the low double digits
    high materiality
    High
    Aeronautics full-year sales
    $31.7M-$32.7B
    medium materiality
    High
    Aeronautics full-year profit
    $3B-$3.08B
    medium materiality
    High
    Missiles and Fire Control (MFC) full-year sales
    $16.5B-$16.9B
    medium materiality
    High
    Missiles and Fire Control (MFC) full-year profit
    $2.3B-$2.35B
    medium materiality
    High
    Rotary and Mission Systems (RMS) full-year sales
    $17.7M-$18.1B
    medium materiality
    High
    Rotary and Mission Systems (RMS) full-year profit
    $1.86B-$1.89B
    medium materiality
    High
    Space full-year sales
    $13.85B-$14.05B
    medium materiality
    High
    Space full-year profit
    $1.34B-$1.38B
    medium materiality
    Medium
    Next-generation interceptor (NGI) capability demonstration
    Expected by 2028
    medium materiality
    High
    PAC-3 multiyear contract
    Expected in H2 2026
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Aeronautics
    Full-year sales and profit outlook raised, driven by strong F-35 production and sustainment volumes. Margins are modestly lower due to scaling new F-35 contracts, expanding sustainment work, and absorbing Q1 F-16 and C-130 challenges. Top end of sales range dependent on timing of next F-35 production lot award.
    Sales growth H1 2026: Low single-digit YoY (excluding prior year losses)Sales growth H2 2026: Mid-single-digit YoYMargins: Modestly lower than prior guidance
    		$31.7B-$32.7BMid-single-digit (H2 FY26)—$3B-$3.08B
    Missiles and Fire Control (MFC)
    Very strong growth in Q2, fueling a raise to the full-year outlook as munitions production accelerates. Sales range adjusted, lifting the low end of prior guidance. Second half 2026 growth rate expected to be even faster than H1.
    Profit growth Q2 FY26: 24% YoYSales growth H1 2026: 14% YoYMargins: Mid-teens
    		$16.5B-$16.9B19% (Q2 FY26)—$2.3B-$2.35B
    Rotary and Mission Systems (RMS)
    Full-year sales and profit outlook raised due to new radar awards and continued production ramps at Sikorsky. Sales in H1 2026 were comparable to prior year, with acceleration to mid-single-digit growth expected in H2.
    Sales growth H1 2026: Comparable to prior yearSales growth H2 2026: Mid-single-digit YoY
    		$17.7B-$18.1B——$1.86B-$1.89B
    Space
    Full-year sales outlook raised, supported by key wins on NGI, FBM, and classified national security programs. Full-year profit outlook lowered due to reduced ULA equity earnings from the Vulcan launch anomaly. Sales growth expected to step up to high single digits in H2.
    Profit growth Q2 FY26: 2% YoYSales growth H1 2026: Mid-single-digit YoYSales growth H2 2026: High single-digit YoY
    		$13.85B-$14.05B6% (Q2 FY26)—$1.34B-$1.38B

    Operational metrics

    12
    Sales growth (excluding 2025 adjustments)
    7%YoY
    Q2 FY26

    Excluding unfavorable adjustments taken in Q2 2025.

    Segment operating margin
    10.8%
    Q2 FY26

    As profit climbed to $2.2 billion.

    Segment operating profit
    $2.2BImproved from prior year
    Q2 FY26

    Mostly reflects the absence of unfavorable profit adjustments recorded in Q2 2025.

    Earnings per share
    $7.94Improved from prior year
    Q2 FY26

    Mostly reflects the absence of unfavorable profit adjustments recorded in Q2 2025.

    Investment in capital assets and R&D
    $876M
    Q2 FY26

    Included production capacity upgrades, next-generation mission facilities, and AI-enabled autonomous manufacturing infrastructure.

    Capital returned to shareholders (dividends)
    $796M
    Q2 FY26

    Through dividends in the second quarter.

    MFC production margins
    High 13s, low 14s
    Future

    Expected to be consistent with current performance when ramps are hitting targets.

    MFC near-term margin dilution
    20-30 bps
    Next few years

    Expected due to large ramps and upfront investments in new contracts, with a goal to achieve higher than historic margins long-term.

    F-16 deliveries
    2
    Q2 FY26

    Resumed deliveries after redesign and re-flight testing.

    C-130 deliveries
    7
    Q2 FY26

    Increased output.

    Classified program adjustment (MFC)
    Last adjustment in 4Q 2024
    4Q FY24

    New baselines set and being met.

    Classified program adjustment (Aeronautics)
    Last adjustment in 2Q 2025
    2Q FY25

    New baselines set and being met.

    Industry KPIs

    7
    MetricValueDetails
    Book to bill ratio3.2:1ratio
    Total company backlog$230BUSD
    Defense program awards$35BUSD
    Program segment backlog$35BUSD
    Unit deliveries by program2 F-16s, 7 C-130sunits
    Production rates by program156 aircraft per yearunits/year
    Production capacity expansion87,000 sq ftsq ft

    Orderbook & backlog

    2
    Total backlog$230BQ2 FY26

    Up ~$64B vs Q2 FY25

    Reached a new all-time high.

    Orders realized$65BQ2 FY26

    Largest orders include multiyear FAD contract, new RADAR awards, and strategic wins in Space.

    Product announcements

    7
    ProductTypeDetails
    Next-generation glide-bodymilestone
    QuadStarSeekermilestone
    PRISM increment for missilemilestone
    Santam counter UAS solution (Grizzly containerized launcher)launch
    Morpheuslaunch
    Golden Dome (directed energy laser weapon)milestone
    Joint laser weapon systemlaunch

    Deals & partnerships

    11
    Missile Defense Agency7-year contract to quadruple production of FAD interceptors.$35B7 years

    Awarded in late June, marking the next of the munitions frameworks to transition to a contract.

    U.S. ArmyDIMER production contract covering current version and newly developed successor.$3B

    Awarded a DIMER production contract.

    U.S. Army, Marine Corps and up to 5 allied nationsHigh MARS award.Up to $1.1B

    Secured a High MARS award.

    U.S. Space ForceDevelop space-based interceptor prototypes under Golden Dome.

    Selected as one of the awardees.

    UndisclosedRADAR contract.$2.3B

    Signed a $2.3 billion RADAR contract.

    Joint Army and Navy programCumulative contract modifications for the conventional prompt strike hypersonic weapons program.$1.4B

    Cumulative contract modifications totaling $1.4 billion.

    General Motors DefenseCollaboration to explore applying automotive industry's high-rate manufacturing and supply chain expertise to defense production.

    Joint objective to provide more access to the speed and scale of America's commercial industrial base.

    Ultra MaritimeAcquisition to enhance advanced undersea sensing and autonomous sea drone capabilities.

    Signed an agreement to acquire Ultra Maritime.

    RheinmetallMemorandum of Understanding toward the first European Center of Excellence for tanks production.

    Signed at the NATO Summit.

    U.S. governmentJoint laser weapon system contract to develop a containerized 500-kilowatt laser.

    Awarded a joint laser weapon system contract.

    Department of DefenseF-35 spare parts award.$1.6B

    Secured a $1.6 billion F-35 spare parts award.

    Capital programs

    4
    Missile assembly buildingcompleted

    Benefit: Future home of the next-generation interceptor program and critical hub for integrated air and defense work.

    Held the opening of the facility in Cortland, Alabama.

    Munitions production centerunderway

    Benefit: 87,000 square feet of production space to support FAD interceptors and future NGI work.

    Broke ground in May in Troy, Alabama.

    Production facilityunderway

    Benefit: Support critical development of the TRID 2 missile.

    Continued progress on the new facility in Titusville, Florida.

    Munition scaling investmentunderway$8B-$9B

    Benefit: Expand munitions capacity, including tripling PAC-3 MSE production, quadrupling FAD production, and scaling PRISM production.

    Commitment to total investment is unchanged, despite efficiencies leading to lower CapEx guidance for FY26. Leveraging partnerships and international facilities (e.g., Rheinmetall in Germany) to achieve efficiency and speed.

    Risks & headwinds

    3
    Reduced ULA equity earningsFY26

    Lowered Space full-year profit outlook to $1.34B-$1.38B

    Aeronautics margin pressureFY26

    Margins pegged modestly lower than prior guidance

    Mitigation: Scaling up new F-35 contracts, expanding sustainment work, absorbing F-16 and C-130 challenges from Q1.

    Near-term margin dilution in MFCNext few years

    20-30 basis points over the next few years

    Mitigation: Expected to be offset by long-term goal of higher than historic margins due to framework agreements incentivizing cost and schedule performance.

    What to watch in Q3 FY26

    4

    PAC-3 multiyear contract finalization

    Next quarter
    CurrentExpected in H2 2026
    TargetContract finalized

    Why it matters

    Finalization of this multiyear contract will provide greater revenue visibility and solidify the commercial-like acquisition model.

    and we're attending in the second half of the year to also get a multiyear on PAC-3.

    Q&A highlights

    8

    What is the timeline for manufacturing scale-up for new solutions like PAC-3 ACE and Santam, and is Lockheed willing to deploy CapEx ahead of formal awards?

    Lockheed Martin is shifting its mindset to be America's leader in Defense Technologies, investing in manufacturing and design capabilities ahead of orders based on predicting customer needs. This includes 'target weapons matching' to develop more cost-effective solutions for specific threats, like a lower-cost PAC-3 variant for short-range threats. The company is willing to invest CapEx before formal awards.

    “So yes, we are investing in the manufacturing and design capabilities before the orders come in. And I think that's the right way to run the company, Scott.”

    asked by Scott Deuschle · answered by James Taiclet

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Investments & Capacity Expansion

    Lockheed Martin is proactively investing in its physical backbone, including new factories, advanced automation, and AI-enabled manufacturing infrastructure. This includes the opening of a missile assembly building in Cortland, Alabama, for the Next-Generation Interceptor program, and breaking ground on an 87,000 square foot munitions production center in Troy, Alabama, to support FAD interceptors and future NGI work. The company also continues progress on a new production facility in Titusville, Florida, for the TRID 2 missile, demonstrating a commitment to expanding capacity ahead of demand.

    02

    Innovation & Rapid Development

    The company is shifting its mindset to predict and address military needs before formal RFPs, focusing on 'target weapons matching' and rapid integration of existing technologies. Examples include the Santam counter UAS solution, which went from concept to live-fire testing in 45 days by integrating existing combat-proven components, and the Morpheus high-power microwave drone. This approach leverages internal talent, venture investments, and existing manufacturing capabilities to quickly develop and deploy solutions for evolving threats.

    03

    Commercial Acquisition Model Advocacy

    Lockheed Martin advocates for the Pentagon to adopt more commercial-like acquisition models, citing the new multiyear munitions commercial framework agreements as critical. These agreements aim to provide industry with the confidence to make upfront investments by allowing companies to retain profitability from efficiencies gained, unlike traditional cost-accounting systems. This shift is seen as essential for incentivizing innovation and meeting rapid scaling demands from the government.

    04

    International Partnerships & Co-production

    The company is expanding its global footprint and partnerships to enhance production resilience and access to critical skills. This includes a collaboration with General Motors Defense to apply automotive high-rate manufacturing expertise to defense production, the acquisition of Ultra Maritime to boost undersea capabilities, and a Memorandum of Understanding with Rheinmetall for a European Center of Excellence for tanks production. Efforts also include exploring a PAC-3 missile facility in Europe for maintenance, positioning capabilities closer to allied needs.

    05

    F-35 Program Outlook

    Management expressed strong confidence in the sustained demand for the F-35 aircraft, projecting a continued production rate of 156 aircraft per year. This confidence stems from the F-35's unique position as the only in-production fifth-generation fighter in the free world and ongoing global demand from the U.S. government and allies, despite political budget cycles. The program is expected to be a long-term driver of revenue growth.

    06

    Classified Programs & Portfolio Resilience

    The company provided an update on classified programs in Aeronautics and Missiles and Fire Control, noting stability and progress since the last adjustments in 4Q 2024 and 2Q 2025, respectively. Management emphasized the broad-based scaling across the portfolio, with multiple Sikorsky platforms, F-16, C-130, and 10 munitions programs all increasing deliveries year-over-year. The F-16 redesign and subsequent resumption of deliveries were highlighted as an example of the company's resilience in execution.

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