tapebrief
LMT · Q4 2025

LMT · Q1 2026 Earnings

Cautious

Lockheed Martin

Reported April 23, 2026

30-second summary

Lockheed printed Q1 FY2026 revenue of $18.02B (+0.3% YoY), running far below the ~5% FY2026 sales-growth guide that was reaffirmed wholesale on this print, and segment operating margin compressed to 10.1% against a full-year guide that implies ~10.9%. Management held every FY2026 dollar range unchanged — revenue, EPS, FCF, segment profit — and the operating-profit-growth qualifier shifted from "more than 25%" (Q4 FY2025 framing) to "approximately 25%," a tonal narrowing rather than a numerical revision since the $8.425–8.675B segment profit range was reaffirmed identically. The setup now requires meaningful H2 acceleration on both top line and margin to land the ranges; the third consecutive clean quarter on classified Aeronautics is the offset.

Headline numbers

EPS

Q1 FY2026

$6.44

Revenue

Q1 FY2026

$18.02B

+0.3% YoY

Gross margin

Q1 FY2026

11.5%

Free cash flow

Q1 FY2026

$-0.29B

Operating margin

Q1 FY2026

11.4%

Key financials

Q1 FY2026
MetricQ1 FY2026YoYQ4 FY2025QoQ
Revenue$18.02B+0.3%$20.32B-11.3%
EPS$6.44—$5.80+11.0%
Gross margin11.5%—11.4%+10bps
Operating margin11.4%—11.5%-10bps
Free cash flow$-0.29B—$2.76B-110.6%

Guidance

Lockheed reaffirms FY2026 full-year guidance across all major metrics (Revenue, EPS, FCF, SegOp Profit) but with softer Q1 revenue growth (+0.3% YoY vs. ~5% FY guide) and subtle language downgrade on operating profit growth ('approximately' replacing 'more than'), signaling execution headwinds in near term.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Reaffirmed unchanged this quarter: Revenue ($77.5 - $80.0 billion), Diluted EPS (GAAP) ($29.35 - $30.25), Free Cash Flow ($6.5 - $6.8 billion), Business Segment Operating Profit ($8.425 - $8.675 billion), Capital Expenditures ($2.5 - $2.8 billion), Cash from Operations ($9.15 - $9.45 billion), Sales Growth YoY (Approximately 5%), Operating Profit Growth YoY (Approximately 25%)

Segment KPIs

Q1 FY2026
SegmentQ1 FY2026YoY
Aeronautics$6.953B-1.5%
Missiles and Fire Control$3.649B+8.2%
Rotary and Mission Systems$3.991B-7.8%
Space$3.428B+6.9%

Other KPIs

Q1 FY2026
SegmentQ1 FY2026
Total Backlog$186.4 billion
F-35 Deliveries (Q1)32 aircraft
Business Segment Operating Margin10.1%
Cash from Operations (Q1)$220 million
FY2026 Guidance - Sales Growth~5% YoY
FY2026 Guidance - Operating Profit Growth~25% YoY
Government Helicopter Program Deliveries (Q1)19 aircraft
Capital Expenditures (Q1)$511 million

Management tone

The F-35 narrative has shifted from delivery-cadence and sixth-gen technology insertion toward operational validation. Management explicitly attributes accelerating demand to validated combat performance, citing the Midnight Hammer operation against Iran and the Pentagon's FY27 request for 85 F-35s vs. 47 last year. The verbatim line: "The operational relevance of these systems has direct implications for our business." This is management stating the causal chain — combat use drives orders — directly in a print. The signal: management has moved from selling capability to citing kill chains, an unusually assertive posture even for a defense prime in an active conflict environment.

Munitions production has hardened into operating model. The verbatim line: "[PAC-3] production is already up more than 60% from just two years ago" — management citing an achieved multi-year production increase rather than a target. The PRISM quadrupling commitment, the 20+ facility construction/modernization footprint, and the Patriot ramp framework (650 → 2,000/year over 3–4 years, disclosed in Q&A) are now framed as in-flight execution, not commitments to make. The risk surface shifts accordingly: from "will demand materialize" to "will supply chain hold."

The acquisition-transformation narrative positions Lockheed as the first mover in a government-industry model it "long advocated for." The verbatim: "These munitions agreements provide risk mitigation for industry and efficiency and speed for government, a combination that benefits customers and shareholders alike." The reframing matters because it converts multi-year contracts from one-off wins into a paradigm, supporting the recurring-revenue case for a higher multiple.

The assertiveness in the closing positioning statement — "Our strategy has taken hold, our solutions are in high demand, and we remain confident in our full-year guidance for 2026" — is unusually declarative for Lockheed, which historically hedges around appropriations and program timing.

The risk language is muted but specific. Five named risks (F-16, C-130, ERP timing, classified lifecycle, Sikorsky materials) all map to operational timing rather than program economics. The classified Aeronautics program received one line, with no incremental charges — the third consecutive clean quarter.

Recurring themes management leaned on this quarter:

Operational validation driving demand accelerationMunitions production scale-up as strategic imperativeSupply chain expansion and facility modernization across 20+ locationsGovernment-industry partnership model and acquisition transformationDemonstrated platform performance in active conflict zonesWorkforce expansion and manufacturing talent development

Risks management surfaced:

F-16 design and development delays temporarily impacted performanceC-130 integration challenges and supplier constraints persisted into Q1 2026Working capital timing impacts from ERP system implementationLifecycle timing on classified programs affecting aeronautics volumeSikorsky heavy lift program timing of material receipts

Q&A highlights

Christine Liwag · Morgan Stanley

Requested orientation on F-35 program status, role in modern warfare, and outlook for production and sustainment given the Pentagon's request for 85 F-35s in FY27 (up from 47) and increased sustainment funding.

Management highlighted F-35's proven performance in active operations, including the Midnight Hammer operation against Iran where F-35s provided air-to-ground escort capabilities. Emphasized F-35's unique status as the only fifth-generation fighter in current production in the free world, its command-post functionality for sensor data fusion across multiple services and allies, and its capability to execute multiple mission types (combat air patrol, close air support, surveillance) in single sorties.

Pentagon requesting 85 F-35s in FY27 vs 47 last yearF-35 performed escort missions for B-2 bombers in Midnight Hammer operationF-35 acts as flying command post with sensor data ingestion and declassification capabilitiesSingle pilot or four-ship formations executing 3-4 missions over multiple hours

Seth Seisman · JP Morgan

Asked about multi-year contracts for missiles and fire control production rate scaling (tripling/quadrupling), and what financial downside risks exist if target rates aren't achieved.

Management detailed comprehensive risk mitigation framework for multi-year agreements including: government and major suppliers (L3Harris, Boeing) funding non-recurring expenses; seven-year framework with clawback/recovery mechanisms if government reduces production rates; inflation-indexed escalators with fixed-price base; cash flow neutral arrangements with advanced government payments; Department of War support for small/medium supplier financing through Office of Strategic Capital; addition of second/third sources enabled by seven-year commitment visibility.

Seven-year framework agreements with clawback mechanisms protecting company from production rate reductionsInflation-indexed escalators with fixed-price base for seven-year periodCash flow neutral approach with advanced government paymentsMajor suppliers (L3Harris, Boeing) committed to own non-recurring costs

Gautam Khanna · TD Cowan

Asked about pinch points in ramping MFC (Missiles and Fire Control) capacity, particularly solid rocket motors, and whether increased investment could accelerate timelines beyond current expectations.

Management outlined three to four-year ramp from 650 Patriot missiles/year to 2,000/year. Identified solid rocket motors and Patriot seekers as primary bottleneck areas. Highlighted mitigation: General Dynamics-Lockheed Martin joint venture on SRMs, Northrop Grumman SRM expansion into Patriot, L3Harris spinning out SRM business with government funding support, and Boeing's public commitment and improving delivery performance on seekers. Secondary pinch points in small/medium supply chain being addressed through government Office of Strategic Capital financing.

Scott Duschel · Deutsche Bank

Requested update on classified aeronautics program including risk trending and whether government willing to provide additional funding to keep program on track.

Management stated no charges taken in Q1 on classified aeronautics program, increased company scrutiny with higher-level executive oversight. Indicated sufficient financial coverage for flight test and remaining program activities to avoid additional write-downs. Noted risk remains but program is well-managed. Emphasized strong government interest at high departmental levels and ongoing contract structure discussions to enable company and industry success.

No Q1 charges taken on classified aeronautics programIncreased scrutiny and senior executive oversight implementedSufficient financial coverage for flight test and program completionStrong high-level government commitment to program success

Ken Herbert · RBC Capital Markets

Asked to verify if Q1 free cash flow impact was F-35 related and to clarify working capital cadence expectations for full-year guidance achievement.

Management attributed Q1 working capital headwind to ERP/billing system transformation at one business area (closed year-end, completed Q1, expected back on track Q2). Noted deliberate surge in prior-year collections to offset. Highlighted F-35 continuing to make progress with more cash liquidation opportunities ahead. Indicated cash flow will be back-end loaded similar to prior years, with year-end strength. Cited tax policy supporting American manufacturing investment as additional confidence factor for hitting top of cash guidance range.

ERP/billing system transformation in one business area caused Q1 working capital stepCompany surged collections end of prior year anticipating this headwindAdditional pension contribution made using collected cashF-35 deliveries and milestones will drive progressive cash increases throughout year

Answers to last quarter's watch list

FY2026 segment margin walk against the +25% profit guide. Q1 FY2026 segment operating margin printed 10.1% — materially below the ~10.9% implied by the reaffirmed FY2026 guide. Aeronautics revenue actually contracted (-1.5% YoY) and RMS swung to -7.8%, neither consistent with the normalization thesis. The qualifier shift from "more than 25%" to "approximately 25%" on profit growth narrows the implied upside within the reaffirmed dollar range. Status: Continue monitoring, with bearish tilt.
Framework agreement contract definitization. A $4.8B fully funded, undefinitized PAC-3 contract was signed early in Q2 FY2026, advancing the first of the munition ramp production agreements. Management discussed the framework architecture extensively in Q&A (seven-year terms, clawback mechanisms, Office of Strategic Capital supplier financing) but full definitization is in progress across the agreements. Status: Continue monitoring.
Capex run-rate against the $2.5–2.8B guide. Q1 FY2026 capex was $511M, annualizing to $2.04B — below the FY range low end. Hitting $2.5B FY requires Q2–Q4 to average $663M; hitting $2.8B requires $763M. Management reaffirmed the range and the "20+ facility construction/modernization" footprint, so the back-end loading is consistent with stated commitments, but Q1 is a slow start. Status: Continue monitoring.
MFC segment margin trajectory. MFC revenue grew +8.2% with segment operating margin of 13.7% (vs. 13.8% in Q1 FY2025, -10 bps YoY). Margin has held essentially flat through the early stages of the PAC-3/THAAD ramp. Status: Continue monitoring.
F-35 multi-year sustainment contract award. No multi-year sustainment vehicle was awarded this quarter. The Pentagon's FY27 request of 85 F-35s with increased sustainment funding (cited in Q&A) is a positive demand signal but does not change the contracting framework. Status: Continue monitoring.
Third consecutive clean quarter on classified Aeronautics. No incremental charges in Q1 FY2026. Management's Q&A statement of "confidence higher than at any point in six years," paired with no Q1 charge, satisfies the three-quarter validation threshold. Status: Resolved positively.

What to watch into next quarter

Q2 FY2026 revenue growth trajectory vs. the +5% FY pace. Q1 FY2026 at +0.3% YoY against $17.96B prior-year base requires Q2–Q4 to accelerate meaningfully to hit the midpoint $78.75B. Management explicitly said "we expect sales to grow in the second quarter and throughout the remainder of the year" — a soft Q2 print would force a formal FY revenue cut.

Segment operating margin walk to the FY implied 10.9%. Q1 FY2026 ran 10.1%. Watch Q2 FY2026 segment margin print; another quarter at or below 10.1% makes the $8.55B FY midpoint mechanically unreachable without a Q3–Q4 jump to ~11.5%+.

PAC-3 and THAAD framework agreement definitization with disclosed dollar values. The $4.8B PAC-3 undefinitized award is a first step; watch for full definitization across the munitions agreements in Q2 or Q3.

Capex run-rate trajectory. Q1 FY2026 at $511M annualizes below the FY low end. Watch Q2 FY2026 capex — anything below $625M means the "step-function" investment is back-loading more aggressively than guided, or slipping into FY2027.

Backlog re-acceleration after the $7.2B QoQ decline. Watch whether Q2 FY2026 returns to growth or whether $186.4B marks the cycle peak.

Aeronautics segment revenue recovery. -1.5% YoY in Q1 FY2026 reopens the question on F-16/C-130 execution. A second consecutive negative-YoY quarter would invalidate the FY +5% framing for the largest segment.

Sources

  1. Lockheed Martin Q1 2026 press release (Form 8-K Exhibit 99.1), filed April 23, 2026 — https://www.sec.gov/Archives/edgar/data/936468/000162828026026683/ex991q12026.htm

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