Lockheed Martin Corporation: Q2 2026 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 28, 2026, and the six months ended on that date. Lockheed Martin Corporation (LMT) is a global aerospace and defense technology company organized into four segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS), and Space. The company primarily serves the U.S. Government (70% of sales in the first half of 2026) and international customers.
Key Financial Metrics
| Metric (in millions) | Q2 2026 | Q2 2025 | 6 Months 2026 | 6 Months 2025 |
|---|---|---|---|---|
| Total Sales | $20,063 | $18,155 | $38,084 | $36,118 |
| Operating Profit | $2,479 | $748 | $4,542 | $3,120 |
| Net Earnings | $1,836 | $342 | $3,324 | $2,054 |
| Diluted EPS | $7.94 | $1.46 | $14.38 | $8.75 |
| Operating Cash Flow (6mo) | $3,455 (2026) vs $1,610 (2025) | |||
| Free Cash Flow (6mo) | $2,626 (2026) vs $805 (2025) | |||
| Cash & Equivalents | $3,791 (as of June 28, 2026) | |||
| Long-Term Debt | $20,538 (as of June 28, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Sales increased 10.5% in Q2 2026 and 5.4% for the six-month period compared to 2025. Growth was driven by higher volume in F-35 production, MFC missile defense programs (PAC-3, THAAD), and Space strategic programs.
- Profitability Surge: Operating profit increased significantly (231% in Q2) primarily due to the absence of massive "reach-forward losses" recorded in Q2 2025. In Q2 2025, the company recognized $950 million in losses on a classified Aeronautics program and $665 million on RMS helicopter programs. These one-time charges are not present in the 2026 results.
- Cash Flow Improvement: Operating cash flow for the six months ended June 28, 2026, more than doubled to $3.46 billion, driven by timing of customer receipts and lower tax payments following the "One Big Beautiful Bill Act" (Tax Act).
- Segment Performance:
- Aeronautics: Operating profit rebounded to $760 million from a loss of $98 million in Q2 2025.
- MFC: Sales grew 19% and operating profit grew 24% due to production ramps.
- RMS: Operating profit improved to $437 million from a loss of $172 million, excluding the 2025 reach-forward losses on the Canadian Maritime Helicopter Program (CMHP) and Turkish Utility Helicopter Program (TUHP).
Guidance, Outlook, Risks, and Unusual Items
- Backlog: Ending backlog as of June 28, 2026, was $230.4 billion, an increase of $36.8 billion, largely due to an undefinitized contractual action for the THAAD program.
- Profit Booking Adjustments: While 2025 was marred by large losses, 2026 saw unfavorable profit adjustments totaling $395 million across six months (e.g., $125M on F-16, $95M on C-130, $95M on Heavy Lift, $80M on Seahawk) due to production performance and schedule delays.
- Outstanding Contingencies:
- Classified Programs: Cumulative losses on the Aeronautics classified program remain at ~$1.8 billion; MFC classified program losses remain at ~$1.5 billion. Additional losses could be material if performance issues persist.
- CMHP & TUHP: Cumulative losses on these RMS programs remain at ~$670 million and ~$130 million, respectively. Restructuring discussions with the Canadian government are ongoing.
- ULA Investment: Lockheed holds a 50% stake in United Launch Alliance (ULA). Due to Vulcan Centaur rocket performance challenges, Lockheed guaranteed $500 million of ULA borrowings in Q2 2026, recognizing a $64 million fair value obligation.
- Acquisition: On July 6, 2026, Lockheed announced a definitive agreement to acquire Ultra Maritime Solutions for $3.45 billion, expected to close in Q4 2026.
- Risks: Key risks include U.S. Government budget uncertainty, supply chain constraints (including rare earth minerals), inflation, and the potential for further reach-forward losses on fixed-price development programs.
Investor Verification Checklist
- Reach-Forward Loss Accruals: Verify the remaining accrued liabilities for the Aeronautics classified program ($427M), MFC classified program ($1.1B), and CMHP ($365M) to assess future cash outflow risks.
- ULA Exposure: Monitor the performance of ULA's Vulcan Centaur rocket and the potential for additional financial support or impairment charges related to the $500M guarantee.
- Profit Booking Volatility: Review the specific drivers of the $395M in unfavorable profit adjustments in 2026 (F-16, C-130, Heavy Lift, Seahawk) to gauge execution risks on mature programs.
- Backlog Quality: Assess the convertibility of the $36.8B backlog increase, specifically the THAAD UCA, into recognized revenue.
- Acquisition Integration: Track the regulatory approval timeline and integration costs for the Ultra Maritime Solutions acquisition.