Lockheed Martin Corp Earnings - Q4 2025 Analysis & Highlights
Lockheed Martin Corp.'s Q4 2025 earnings call highlighted strong financial performance with record backlog and significant sales growth, driven by unprecedented demand for defense technologies. The company discussed substantial investments in capital and R&D to support transformative innovation and increased production capacity, particularly for F-35 fighter jets and PAC-3 MSE interceptors. Management also provided a positive 2026 financial outlook, anticipating continued sales growth and increased free cash flow, while emphasizing a disciplined capital allocation strategy and strategic partnerships with the U.S. government to enhance defense industrial base capabilities.
Key Financial Results
Lockheed Martin finished 2025 with a record high backlog of $194 billion.
The company delivered 6% year-over-year sales growth.
Free cash flow generated was $6.9 billion, exceeding prior expectations.
A significant $3.5 billion investment was made in capital and independent research and development.
191 F-35 fighter jets and 620 PAC-3 MSE interceptors were delivered, both record numbers.
Q4 consolidated sales were $20.3 billion, up 9% year-over-year.
Segment operating profit in Q4 was $2.1 billion.
Segment operating profit margins were 10.1% in Q4.
Earnings per share (EPS) was $5.80 in Q4.
Free cash flow in Q4 was $2.8 billion.
Full-year sales were $75 billion, up 6%.
Full-year segment operating profit was $6.7 billion, growing approximately 11% year-over-year.
Full-year book-to-bill was 1.2, resulting in a record backlog of $194 billion.
Full-year earnings per share was $21.49, down 4% from the prior year.
Full-year free cash flow was $6.9 billion.
$3.6 billion was reinvested back into the business.
Business Segment Results
Aeronautics
Q4 sales increased 6% year-over-year.
Adjusted sales growth at Aero was approximately 4% year-over-year in Q4.
Segment operating profit increased 80% compared to Q4 2024.
Full-year sales increased 6% to $30.3 billion.
Full-year segment operating profit decreased 17%.
Adjusted full-year segment operating profit growth was 4%.
Full-year segment operating profit margin was 6.9%.
Adjusted full-year segment operating profit margin was 9.9%.
Successfully completed the first flight of the X-59 quiet supersonic aircraft.
Missiles and Fire Control (MFC)
Q4 sales increased 18% from the prior year.
Q4 segment operating profit increased by $1.3 billion year-over-year to $535 million.
Full-year sales increased by 14% to $14.5 billion.
Full-year segment operating profit increased by $1.6 billion year-over-year.
Full-year segment operating profit margin was 13.8%.
Delivered the 750th HIMARS on November 5.
Rotary and Mission Systems (RMS)
Q4 sales increased 8% year-over-year.
Q4 operating profit decreased 9% year-over-year.
Full-year sales were comparable to 2024 at $17.3 billion.
Full-year operating profit decreased 31%.
Adjusted full-year operating profit grew 3% year-over-year.
Full-year segment operating profit margin was 7.6%.
Adjusted full-year segment operating profit margin was 11.3%.
The fully autonomous Black Hawk helicopter, the U-Hawk, was highlighted.
Space
Q4 sales increased 8% year-over-year.
Q4 operating profit decreased 4% compared to Q4 2024.
Full-year sales increased 4% to $13 billion.
Full-year operating profit increased 10% to $1.3 billion.
Full-year segment operating profit margin was 10.3%.
Awarded a contract for 18 satellites for its Tranche 3 Tracking Layer constellation with a potential value of more than $1 billion.
Capital Allocation
The company will continue to use a disciplined and dynamic capital allocation process.
Capital expenditures are estimated to be between $2.5 billion and $2.8 billion in 2026.
Discretionary pension contributions of $860 million were made.
The company pre-funded the required 2026 pension in full.
The 2027 pension requirement is at least $1 billion.
The company will continue to be opportunistic regarding pre-funding future pension requirements.
Share count will be reported quarterly.
Industry Trends and Dynamics
2025 marked unprecedented demand for Lockheed Martin's industry-leading defense technologies.
The Department of War's Acquisition Transformation Strategy is supported by new agreements.
The PAC-3 MSE agreement will increase annual production capacity from approximately 600 to 2,000 per year.
There is broad support for national defense initiatives from the administration, Department of War, and Congress.
Lockheed Martin's core programs are fundamental to defense priorities.
The company is focused on converting its backlog and partnering with customers to deliver systems for global security and deterrence.
The administration is striving to modify annual appropriations for missile systems to a seven-year basis.
Agreements include make-whole provisions if procurement strategy changes during the seven years.
There are incentives for outperforming objectives in the Patriot and THAAD framework agreements.
A profit-sharing mechanism is in place for reinvestment and better support of programs with the government.
Competitive Landscape
Lockheed Martin is making continued significant investment to advance technology development and produce proven major weapon systems at ever greater scale.
The F-35 production rate is five times faster than any other allied fighter currently in production.
The company is involved in disruptive technology opportunities in every business area.
Lockheed Martin aims to provide decisive military advantage.
The company combines its capabilities with proven products and new vehicles, such as integrating a reconfigured JAGM missile onto Saildrone autonomous ships.
Macroeconomic Environment
The geopolitical environment is increasingly unsettled.
The dynamic geopolitical environment influences the FY 2026 appropriations process.
The company acknowledges the need to marshal all resources in American industry due to the current geopolitical environment.
Growth Opportunities and Strategies
Lockheed Martin made a significant $3.5 billion investment in capital and independent research and development in support of transformative innovation and increased production capacity.
The company is pioneering over-the-air updates to the AEGIS Weapon System using AI.
Successfully launched GPS III and Tranche 1 Transport Layer satellites.
A landmark seven-year framework agreement for PAC-3 MSE interceptors was reached.
A similar framework agreement for the THAAD interceptor was announced.
A multibillion-dollar investment is planned to accelerate munition production over the next three years, including building facilities across five states.
Lockheed Martin's role in driving acquisition transformation and delivering critical capabilities was underscored.
Further investments will be made in the F-35 program to advance its position as the world's most capable multi-role fighter, focusing on Block IV capability improvements.
An additional $1 billion of strategic internal investment is committed for the F-35 sustainment system to improve mission capable rates.
Investments are being made in advanced technologies such as unmanned systems.
Demonstrated the capability to control a drone wingman from the cockpit of an F-22.
Successfully completed the first flight of the experimental X-59 aircraft.
Awarded a contract for 31 THAAD interceptors and the largest production contract to-date for the Infrared Search and Track IRST21 Block II Pod System.
Successfully used the shipboard laser system, HELIOS, to knock an incoming UAV out of the sky.
Making substantial investments to rapidly increase production capacity across missiles, sensor suites, battle management systems, and satellites.
Developing space-based interceptors relevant to the Golden Dome objective.
Exploring and attempting mergers and acquisitions.
Investing in R&D for prototypes like the autonomous Black Hawk helicopter, the CMMT low-cost cruise missile design, and drone wingman CCA.
Building an operable space-based interceptor to fly in space by 2028 as part of Golden Dome.
Building military-hardened low-orbit satellites for the Tracking Layer.
Partnering with Saildrone to arm their autonomous ships with reconfigured JAGM missiles.
Financial Guidance and Outlook
Year-over-year sales growth is expected to be approximately 5% at the midpoint in 2026.
Year-over-year reported segment operating profit growth is expected to be more than 25% in 2026.
Free cash flow is anticipated to be in the range of $6.5 billion to $6.8 billion in 2026.
Investment is expected to increase by about 35% year-over-year, with capital and independent research and development approaching $5 billion in 2026.
Sales are forecasted to be in the range of $77.5 billion to $80 billion in 2026, implying 5% organic growth.
Segment operating profit is anticipated to be in the range of $8.425 billion to $8.675 billion, with a midpoint margin of 10.9% in 2026.
Aeronautics expects low-single-digit overall growth in 2026, with Skunk Works and F-35 sustainment potentially seeing double-digit growth.
F-35 production rate will hold steady at 156 aircraft per year.
Aero margins are projected at 9.8% at the midpoint.
MFC estimates 14% year-over-year sales growth at the midpoint, with margins consistent with 2025 levels.
RMS anticipates overall sales to grow in the low-single-digit range.
RMS margins are projected at 10.5% at the midpoint.
Space is projected to grow approximately 5% year-over-year at the midpoint.
Space margins at the midpoint are slightly above 10%.
Earnings per share is projected in a range of $29.35 to $30.25.
Capital expenditures are estimated to be between $2.5 billion and $2.8 billion.
Investment will continue to be elevated to meet customer demand for munitions.
MFC sales are expected to have a compound annual growth rate of at least double-digit through the end of the decade.
The majority of cash is expected in the second half of 2026.
