Lockheed Martin raised its 2026 financial outlook after third-quarter sales climbed 11%, even as costs on an F-35 contract began to outpace existing contractual authorization and funding.
The U.S. defense contractor reported $20.711 billion in sales for the quarter ended Sept. 27, up from $18.609 billion a year earlier. Net earnings increased to $1.845 billion, or $7.97 per diluted share, from $1.619 billion, or $6.95, in the same period of 2025.
Lockheed now expects 2026 sales of about $80 billion to $82 billion, compared with its previous range of $79.75 billion to $81.75 billion. Its diluted EPS forecast rose to $30.35 to $30.75 from $29.95 to $30.65. The company also raised its free-cash-flow outlook to $7.8 billion to $8 billion, up from $7 billion to $7.2 billion.
Backlog stood at a record $292 billion, 27% above the second quarter. Lockheed said $52.5 billion was associated with a multiyear award to produce PAC-3 Missile Segment Enhancement interceptors.
Missiles and Fire Control sales rose 24% to $4.501 billion, with higher production of PAC-3, THAAD, GMLRS and PrSM systems contributing to the increase. Aeronautics sales grew 13% to $8.214 billion, mainly on higher F-35 and C-130 sales. All four business segments reported year-over-year sales growth.
Cash from operations fell to $3.438 billion from $3.728 billion a year earlier. Free cash flow, which Lockheed defines as cash from operations less capital expenditures, declined to $2.999 billion from $3.347 billion. The company attributed the decreases mainly to higher customer receipts in the year-earlier quarter.
Lockheed said costs incurred on its F-35 Lot 20 advance-acquisition contract began to exceed current contractual authorization and funding during the third quarter. It said additional U.S. government authorization and funding are needed to prevent the contract from weighing on future earnings, cash generation and the company’s financial position. Chairman, President and CEO Jim Taiclet said broad financial momentum supported the outlook increase, the second consecutive quarterly raise. The company gave no timetable for additional government support.
