THE APEX TIMES
Lockheed Martin lifts third-quarter sales and backlog to record, cites contract negotiations for F-35 lots
The defense contractor reported 2026 third-quarter revenue of $20.7 billion and record backlog of $292.0 billion, while warning that negotiations for additional F-35 production funding could affect future results.
Lockheed Martin posted stronger third-quarter 2026 results, with sales rising to $20.7 billion and net earnings increasing to $1.8 billion, as the company’s backlog reached a new record. In a results release dated Oct. 22, 2026, the Bethesda, Maryland-based contractor said free cash flow was $3.0 billion for the quarter and that its backlog grew 27% since the second quarter to $292.0 billion.
The company’s earnings growth translated into per-share improvement. Net earnings were $1.8 billion, or $7.97 per share, compared with $1.6 billion, or $6.95 per share, in the third quarter of 2025. Lockheed Martin reported cash from operations of $3.4 billion, down from $3.7 billion a year earlier, and said free cash flow fell to $3.0 billion from $3.3 billion in the same period.
Management linked the quarter’s performance to progress across its portfolio and ongoing work on major defense platforms. Chairman, President and CEO Jim Taiclet said Lockheed’s teams are improving mission performance by combining “proven systems” including Aegis, F-35 and Hellfire with digital capabilities such as artificial intelligence and autonomy. He also pointed to efforts to integrate internal technology with capabilities from start-ups and commercial technology providers.
Taiclet said each of Lockheed Martin’s four segments posted year-over-year sales growth in the quarter, and he attributed the company’s momentum to pulling through existing platforms with new digital technologies. He also said the company delivered $3.0 billion of free cash flow and increased its backlog to $292 billion, enabling Lockheed Martin to raise its dividend for a 24th consecutive year.
According to the release, third-quarter 2026 sales increased $2.1 billion, or 11%, year over year, driven by growth in all four business segments. The company reported business segment operating profit rising by $200 million, citing munition ramp activity at Missiles and Fire Control and higher volume at Aeronautics. Consolidated operating profit increased by $61 million, or 9%, which management attributed primarily to higher sales volume, partly offset by unfavorable profit adjustments in some programs.
Lockheed Martin provided program-level commentary on why sales increased. It said F-35 sales rose $710 million, driven by higher production and sustainment contract volume, and that C-130 sales increased $270 million due to the liquidation of pre-contract costs tied to a contract award expected in the third quarter of 2026. Offsetting items included lower F-16 sales, with the release citing reduced production volume and unfavorable profit adjustments.
In integrated air and missile defense, Lockheed said sales rose $480 million on Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD) as production ramps accelerated. For tactical and strike missiles, it cited increases of $330 million tied to ramps for Guided Multiple Launch Rocket Systems (GMLRS) and Precision Strike Missile (PrSM). In sensors and related systems, the company said sales increased $140 million due to higher volume on radar programs, while strategic and missile defense sales rose $185 million related to the Fleet Ballistic Missile (FBM) and Next Generation Interceptor (NGI) programs.
Beyond product performance, the most significant forward-looking warning in the release concerned government contract negotiations for F-35 production. Lockheed Martin said it remains in negotiations with the U.S. government over production contracts for F-35 lots 20 and higher. The company stated that its costs incurred began to exceed current contractual authorization and funding on the Lot 20 advance acquisition contract during the third quarter of 2026, adding that without additional authorization and funding, future results of operations, cash flows, and financial condition would be negatively impacted.
The company also said it raised its financial guidance for the second consecutive quarter, expressing confidence in increased outlooks for sales, earnings per share and free cash flow. As is typical for quarterly releases, the document includes a standard disclaimer that it does not incorporate adjustments for proposed acquisitions, divestitures, joint ventures, changes in tax laws, or special items until they are consummated or enacted. It also noted that it defines free cash flow as cash from operations minus capital expenditures, and that segment operating profit and free cash flow are non-GAAP measures. What remains uncertain is how quickly the F-35 negotiations resolve and whether additional authorization arrives on terms and timing that fully neutralize the cash-flow risk outlined in the release. Investors and defense procurement watchers will likely focus on subsequent contract awards and funding updates as the next catalysts for cash flow and delivery planning.
Why It Matters
- A record backlog supports visibility into future work, even as cash flow can fluctuate quarter to quarter.
- The guidance increase indicates management confidence, but the F-35 funding negotiation warning highlights timing risk that can affect future operations and cash flows.
- Program ramps across air and missile defense and tactical strike platforms show continued momentum in areas tied to U.S. and allied procurement priorities.
Sources
Key Facts
- Lockheed Martin reported third-quarter 2026 sales of $20.7 billion, up from $18.6 billion in the third quarter of 2025.
- Net earnings for the quarter were $1.8 billion, or $7.97 per share, compared with $1.6 billion, or $6.95 per share, a year earlier.
- Cash from operations was $3.4 billion and free cash flow was $3.0 billion, both down versus the prior year’s quarter.
- Backlog grew 27% since the second quarter of 2026 to a new record of $292.0 billion.
- The company is negotiating F-35 production contracts for lots 20 and higher, and warned that costs incurred exceeded current contractual authorization and funding on the Lot 20 advance acquisition contract during the third quarter, creating potential future negative impacts without additional authorization.
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