Lockheed Martin backlog hits record $292 billion on PAC-3 award; F-35 funding gap flagged

Lockheed Martin (NYSE: LMT) said on Thursday that its backlog rose to a record $292.0 billion after a multi-year award for PAC-3 missile interceptors and that it was raising its 2026 outlook, but it also disclosed that F-35 costs have begun to exceed the funding authorized, according to its earnings release.

What happened

Third-quarter sales were $20.711 billion, up 11.3% from $18.609 billion a year earlier. Net earnings were $1.845 billion, or $7.97 per diluted share, compared with $1.619 billion, or $6.95. Business segment operating profit rose to $2.229 billion from $2.029 billion. All four segments reported higher sales; Missiles and Fire Control sales grew fastest, up 24.2% to $4.501 billion (computed).

Cash from operations was $3.438 billion, compared with $3.728 billion a year earlier. Free cash flow was $3.0 billion, compared with $3.3 billion.

The backlog

Backlog, work under contract that has not yet been recognized as sales, was $291.984 billion at the end of the quarter, which Lockheed rounded to $292.0 billion. That is up 27% from the second quarter, the company said, and up 50.8% from $193.622 billion at December 31, 2025 (computed). The release says the total includes $52.5 billion for a multi-year award to produce PAC-3 Missile Segment Enhancement interceptors. Missiles and Fire Control backlog stood at $142.5 billion, compared with $46.7 billion at the end of 2025.

The outlook

Lockheed raised its 2026 outlook for the second consecutive quarter. It now expects sales of about $80.0 billion-$82.0 billion, compared with $79.75 billion-$81.75 billion in July. Diluted earnings per share are expected at about $30.35-$30.75, up from $29.95-$30.65. Cash from operations is expected at about $10.0 billion-$10.2 billion, up from $9.2 billion-$9.4 billion, and free cash flow at about $7.8 billion-$8.0 billion, up from $7.0 billion-$7.2 billion.

Chairman, President and Chief Executive Officer Jim Taiclet said the backlog allowed the company "to raise our dividend for the 24th year in a row."

The F-35 funding gap

In a separate section, Lockheed said it "remains in negotiations with the U.S. Government on the production contracts for F-35 lots 20 and higher." Its costs incurred "began to exceed the current contractual authorization and funding on the Lot 20 advance acquisition contract" during the third quarter. Without additional authorization and funding, the company said, its results of operations, cash flows and financial condition "will be negatively impacted in future periods." Lockheed delivered 43 F-35 aircraft in the quarter, compared with 46 a year earlier.

What to watch

The release does not say how large the F-35 exposure could become or when a contract is expected, so the resolution of those negotiations is the main open item against the raised outlook.