Lockheed Martin Q4 Earnings Call Highlights

Lockheed Martin (NYSE:LMT) executives said unprecedented demand for the company’s defense technologies drove record backlog and solid top-line growth in 2025, while the company also laid out a 2026 outlook that includes a “step function” increase in internal investment aimed at expanding production capacity and accelerating technology development.

2025 results: record backlog and higher cash flow

Chairman, President and CEO Jim Taiclet said Lockheed Martin finished 2025 with a record backlog of $194 billion, which he described as about 2.5 times annual sales, alongside 6% year-over-year sales growth. The company generated $6.9 billion of free cash flow, which Taiclet said was above prior expectations and came after nearly $900 million of pension pre-funding.

Taiclet also highlighted a $3.5 billion investment in capital and independent research and development (IRAD) in 2025 to support innovation and increased production capacity.

Chief Financial Officer Evan Scott said fourth-quarter consolidated sales were $20.3 billion, up 9%, with growth across all four business areas. Full-year sales were $75 billion, up 6%. Segment operating profit was $2.1 billion in the fourth quarter and $6.7 billion for the year, with executives noting year-over-year comparisons were influenced by charges in both periods.

Scott said Lockheed Martin recorded over $65 billion in orders during the second half of 2025, producing a 1.2 full-year book-to-bill and driving the fourth consecutive year of backlog growth. Earnings per share were $21.49 for 2025, down 4% year over year, which Scott attributed to below-the-line items such as higher interest expense, a higher tax rate, and higher operating FAS/CAS expense.

Operational highlights and program execution

Management emphasized production and delivery execution in 2025, including 191 F-35 fighter jet deliveries and 620 PAC-3 MSE interceptors—both described as record numbers. Taiclet also cited “over-the-air” updates to the Aegis Weapon System using AI, successful launches of GPS III and Tranche 1 Transport Layer satellites, and demonstrations of emerging capabilities such as autonomous helicopter operations and laser-based counter-drone systems.

In Aeronautics, Taiclet said the company delivered 48 F-35s in the fourth quarter and “beat” its own 2025 delivery expectation with 191 total deliveries. He also said the company definitized the Lot 18 and 19 contract with the Joint Program Office, received the full fiscal year 2026 air vehicle sustainment contract, and received a contract modification supporting Lots 20 and 21 production aircraft—awards totaling over $15 billion.

Taiclet said the company plans further investments in the F-35 program in 2026 focused on Block 4 capability improvements and an additional $1 billion of strategic internal investment emphasizing sustainment systems to improve mission capable rates.

Multi-year missile framework agreements and capacity expansion

A major theme of the call was Lockheed Martin’s push toward longer-term procurement structures. Taiclet said the company and the Department of War announced a seven-year framework agreement for PAC-3 MSE interceptors in January and that a similar framework agreement for the THAAD interceptor was announced the morning of the call.

Under the PAC-3 MSE framework, Taiclet said annual production capacity is expected to increase from approximately 600 to 2,000 interceptors per year. He added that the company intends to make a multibillion-dollar investment over the next three years to accelerate munitions production, including building facilities across five states and breaking ground on a new Munitions Acceleration Center facility in Camden, Arkansas.

In response to investor questions, Taiclet said the missile deals are frameworks that require additional steps, including contract definitization and appropriations approval, and that he expects both programs to be “up and running” under the framework agreement with appropriations in 2026. He also said the agreements include “make-whole provisions” intended to protect the company if procurement strategies change during the seven-year period.

Scott said Lockheed Martin’s 2026 guidance assumes PAC-3 and THAAD multi-year agreements are awarded during the year, with initial sales starting in 2026. He also said profit recognition typically starts at lower levels and builds over time as delivery progress and risk reduction occur. He estimated potential near-term dilution to Missiles and Fire Control (MFC) margins from startup and ramp dynamics would likely be no more than 20 to 30 basis points at most, with an opportunity for margins to exceed historical levels over time.

2026 outlook: higher investment and profit growth expectations

For 2026, executives projected sales of $77.5 billion to $80.0 billion and segment operating profit of $8.425 billion to $8.675 billion, implying a midpoint margin of 10.9%. Free cash flow guidance was $6.5 billion to $6.8 billion.

Scott said capital expenditures are expected to be $2.5 billion to $2.8 billion as the company increases investment to support production ramps and strategic opportunities, including the initial portion of the multibillion-dollar investment tied to missile production expansion. Taiclet said capital and IRAD investment is expected to approach $5 billion in 2026, which he described as a “step function” increase.

Earnings per share guidance for 2026 was $29.35 to $30.25. Scott said the midpoint is more than $8 above 2025, with about $7 of the improvement tied to program and pension-related charges. He also noted a quarterly cadence change in 2026 due to a 12-week first quarter and a 14-week fourth quarter, and said the majority of cash is expected in the second half of the year.

Investor Q&A: capital allocation, pensions, and shareholder returns

Asked about whether the company is changing its approach to returning 100% of free cash flow to shareholders, Taiclet said Lockheed Martin will continue to use a “disciplined and dynamic” capital allocation process, but that conditions have changed due to the availability of longer-term, potentially accretive investment opportunities. He also said the company continues to explore vertical integration opportunities and may pursue mergers and acquisitions if opportunities are accretive.

On share repurchases and dividends, Taiclet said the company will evaluate capital deployment options over time and disclose actions as decisions are made.

Regarding pensions, Scott said the company’s strong cash performance allowed it to pre-fund the required 2026 pension contribution, resulting in no required pension payment in 2026. He said required contributions return starting in 2027 at “at least $1 billion,” depending on pension performance, and that Lockheed Martin may again be opportunistic about pre-funding if cash flow allows.

Taiclet also provided an update on a complex Aeronautics classified program, saying there were no additional charges in the fourth quarter and that the program is being closely monitored by senior leadership.

About Lockheed Martin (NYSE:LMT)

Lockheed Martin Corporation (NYSE: LMT) is a global aerospace and defense company that designs, develops and manufactures advanced technology systems for government and commercial customers. Formed through the 1995 merger of Lockheed Corporation and Martin Marietta, the company is headquartered in Bethesda, Maryland, and focuses on providing integrated solutions across air, space, land and sea domains. Its primary customers include the U.S. Department of Defense, NASA and allied governments around the world.

Lockheed Martin’s product and service portfolio spans military aircraft, missile and fire-control systems, missile defense, space systems and satellite technologies, sensors and precision weapons.