LMTLockheed MartinQ2 FY2026Earnings Analysis

Profit rebound was heavily aided by comparison with prior-year contract losses

Quarterly gross profit rose to $2.4B from $734M and operating profit rose to $2.5B from $748M. The comparison benefited materially from $950M of reach-forward loss recognized on a classified Aeronautics contract and $665M of losses on the Canadian Maritime Helicopter Program and Turkish Utility Helicopter Program at RMS in Q2 2025; Q2 FY2026 still included unfavorable adjustments on certain programs, including F-16, C-130, Heavy Lift, and Seahawk programs during the first six months.

Source: 10-Q Item 2 MD&A, pp.28-33

Missile-defense production ramps drove the strongest sales growth

Missiles and Fire Control sales increased 19% year over year to $4.1B in Q2 FY2026, led by approximately $560M of higher sales on integrated air and missile defense programs, including PAC-3 and THAAD, plus roughly $100M from tactical and strike missile programs including PrSM. Segment operating profit increased 24% to $594M.

Source: 10-Q Item 2 MD&A, p.34

Aeronautics benefited from F-35 volume and prior-year loss comparisons

Aeronautics sales increased 9% to $8.1B, principally due to $475M of higher F-35 production-contract volume and a $360M sales effect from the prior-year classified-program reach-forward loss. The segment delivered 19 F-35 aircraft during Q2 FY2026 and reported backlog of 317 aircraft as of June 28, 2026.

Source: 10-Q Item 2 MD&A, p.33

U.S. Government funding concentration remains central to demand

For the six months ended June 28, 2026, 70% of $38.1B in sales came from the U.S. Government, including 61% from the Department of War/Department of Defense, while 30% came from international customers. Management noted that the proposed FY2027 defense budget is subject to congressional appropriation and may not translate into orders for Lockheed Martin programs within a particular timeframe.

Source: 10-Q Item 2 MD&A, pp.26-27

Liquidity improved, while cash flow reflects year-to-date activity

Cash and cash equivalents were $3.8B at June 28, 2026, and the company had no borrowings outstanding under its revolving credit facilities or commercial-paper program. Operating cash flow was $3.5B for the six months ended June 28, 2026, compared with $1.6B in the comparable prior-year period; these are year-to-date, not single-quarter, figures.

Source: 10-Q Item 2 MD&A, p.35; 10-Q Cash Flow Statement (XBRL)

Long-term debt was $20.5B at Q2 FY2026, while stockholders' equity was $8.8B, producing a debt-to-equity ratio of 6.12x. This capital structure may make equity value and financial flexibility more sensitive to changes in borrowing costs, operating performance, or cash-flow generation.

Source: 10-Q Balance Sheet (XBRL)

The current ratio was 1.19x at Q2 FY2026, meaning current assets only modestly exceeded current liabilities. Although cash and equivalents increased to $3.8B, working-capital needs or adverse cash-flow movements could pressure near-term liquidity more than at companies with a larger current-asset buffer.

Source: 10-Q Balance Sheet (XBRL)

Net income increased 436.8% year over year to $1.8B and gross margin expanded to 12.2% from 4.0%. The magnitude of the year-over-year increase indicates that reported growth is being measured against a materially depressed prior-year profit base, so this growth rate may not represent a normalized run rate.

Source: 10-Q Income Statement (XBRL)

Share buybacks were $0 in the fiscal year-to-date period, compared with $1.3B in the comparable prior-year period. The absence of repurchases removes a prior source of capital return and means per-share results will not receive incremental support from current-period buyback activity.

Source: 10-Q Cash Flow Statement (XBRL)