Lockheed Martin (NYSE:LMT) reported what executives described as a strong second quarter of 2026, citing a record backlog, higher sales, improved earnings and a significant rebound in free cash flow. The defense contractor also raised its full-year outlook across key financial metrics, pointing to accelerating demand for munitions, F-35 aircraft, radar systems and space and missile defense programs.
Chairman, President and Chief Executive Officer Jim Taiclet said the company’s backlog reached an all-time high of $230 billion, while free cash flow totaled nearly $3 billion in the quarter. Chief Financial Officer Evan Scott said sales were $20.1 billion, up $1.9 billion, or 11%, from the prior-year period. Excluding unfavorable adjustments recorded in the second quarter of 2025, sales rose 7% year over year.
Backlog climbs on munitions and missile defense awards
Scott said Lockheed Martin recorded $65 billion of orders during the quarter and a book-to-bill ratio of 3.2 to 1. The largest award was a seven-year, $35 billion Missile Defense Agency contract to quadruple production of Terminal High Altitude Area Defense, or THAAD, interceptors.
Taiclet said the quarter also included a $3 billion Army production contract for Guided Multiple Launch Rocket System, or GMLRS, covering the current version and a successor with twice the range from the same launcher. Lockheed Martin also received a HIMARS award valued at up to $1.1 billion for the U.S. Army, Marine Corps and as many as five allied nations.
Taiclet said the awards “strengthen the nation’s production base” by adding manufacturing capacity, additional supply sources and surge capability. He said Lockheed Martin had been increasing munitions capacity ahead of contracted demand and expanding manufacturing footprints in allied countries before co-production requirements became more prominent.
Company raises 2026 guidance
Lockheed Martin raised its full-year 2026 sales outlook to a range of $79.75 billion to $81.75 billion, which Scott said represents an 8% year-over-year increase at the midpoint, up from prior guidance of 5% growth. Segment operating profit guidance was increased to $8.5 billion to $8.7 billion.
The company also raised its free cash flow outlook to $7 billion to $7.2 billion and projected earnings per share of $29.95 to $30.65. Scott said the earnings outlook was driven by higher year-to-date profits and a lower effective tax rate. Capital expenditure guidance was updated to a range of $2 billion to $2.4 billion, reflecting efficiencies in the Missiles and Fire Control munitions build-out.
Scott said every business segment is expected to grow faster in the second half of 2026 than in the first half, with Missiles and Fire Control leading the company’s growth.
Segment outlooks improve broadly
Mark Kvasnak, vice president of investor relations, said Aeronautics is now expected to generate 2026 sales of $31.7 billion to $32.7 billion, supported by F-35 production and sustainment volumes. Aeronautics profit guidance was raised to $3 billion to $3.08 billion, though margins were projected modestly lower than prior guidance as the company scales new F-35 contracts, expands sustainment work and absorbs earlier F-16 and C-130 challenges.
Missiles and Fire Control sales are now projected at $16.5 billion to $16.9 billion, with profit expected between $2.3 billion and $2.35 billion. Kvasnak said the segment’s second-quarter sales were up 19% and profit rose 24% year over year.
Rotary and Mission Systems’ full-year sales outlook increased to $17.7 billion to $18.1 billion, supported by radar awards and Sikorsky production ramps. Profit guidance rose to $1.86 billion to $1.89 billion. Space sales are expected to range from $13.85 billion to $14.05 billion, supported by wins on the Next Generation Interceptor, Fleet Ballistic Missile and classified national security programs. Space profit guidance was lowered to $1.34 billion to $1.38 billion due to reduced ULA equity earnings tied to an ongoing technical investigation of a Vulcan launch anomaly earlier in the year.
Executives highlight technology investments and capacity expansion
Taiclet said Lockheed Martin is investing in advanced manufacturing, automation, robotics and artificial intelligence-enabled production systems. He cited the opening of a missile assembly building in Courtland, Alabama, and the groundbreaking of a munitions production center in Troy, Alabama, as examples of recent capacity expansion.
The company also signed an agreement to acquire Ultra Maritime, which Taiclet said would enhance undersea sensing and autonomous sea drone capabilities. At the NATO summit, Lockheed Martin signed a memorandum of understanding with Rheinmetall toward a European Center of Excellence for ATACMS production. Taiclet also said the company welcomed efforts by the U.S., Germany, the Netherlands, Poland and Sweden to explore a dedicated PAC-3 missile maintenance facility in Europe.
Taiclet discussed several newer defense technology efforts, including the Sanctum Counter-UAS system using the Grizzly containerized launcher. He said the system moved from concept to successful live-fire testing in under 45 days by integrating existing components, including a battle manager, radar, launcher and JAGM missiles. He said the company is increasingly investing ahead of formal requests from customers when it believes it can anticipate mission needs.
Q&A focuses on acquisition models, demand and margin outlook
During the analyst question-and-answer session, Taiclet said Lockheed Martin is seeking to become “America’s clear leader in the defense technology segment,” not only the largest defense prime contractor. He said the company is building “mission technology roadmaps” based on customer needs and investing before formal orders in some cases.
Asked about commercial-style acquisition models, Taiclet said multiyear munitions framework agreements are important because they provide industry with more confidence to invest. He said Lockheed Martin does not plan to take risks similar to the historical C-130J example unless it has confidence in long-term contractual arrangements.
On demand, Taiclet cited long-term need for the F-35, calling it the only in-production fifth-generation fighter in the free world. He said the company remains confident that a 156-aircraft annual production rate can be sustained for some time, despite budget-cycle uncertainty.
Scott said margins on the new THAAD contract are expected to be consistent with historical munitions production margins over time, though large ramps can create near-term dilution. He said Missiles and Fire Control margins should generally remain in the high-13% to low-14% range, with a goal of improving over historical levels as long-term agreements incentivize cost and schedule performance.
Taiclet closed the call by thanking Lockheed Martin employees, suppliers and military customers, saying the company is focused on delivering “reliable mission-ready capabilities and equipment” to U.S. and allied forces.
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.
