Lockheed Martin (LMT) — Earnings Preview (Q3 2026)
Key Preview Takeaways
| Factor | Details |
|---|---|
| Consensus Revenue | Q3 2026: $20,430M (+12% YoY); Q4 2026: $22,496M (+13% YoY) |
| Consensus EPS | Q3 2026: $7.45; Q4 2026: $8.43 |
| Guidance (Updated) | FY26 Sales: $79,750M–$81,750M (raised from $77,500M–$80,000M); FCF: $7,000M–$7,200M |
| Key Watch Items |
|
| Prior-Year Comp | Q3 2025 revenue: $18,526M; EPS: $6.36; tough comp due to strong prior-year growth |
| Backlog | Record $230B at Q2 2026 (+19% vs. Dec 2025) |
| Recent Trends | Accelerating sales growth, strong cash flow, margin improvement, robust order activity |
Summary and Conclusions
Lockheed Martin enters Q3 2026 earnings with strong momentum, having raised full-year guidance after a robust Q2. The company is benefiting from unprecedented demand for munitions, missile defense, and advanced platforms like the F-35, supported by multi-year framework agreements and a record backlog. The most important factors for the upcoming report are:
- Sustained acceleration in top-line growth: Consensus expects Q3 revenue of $20.4B (+12% YoY), following Q2’s 11% YoY growth.
- Margin performance and mix: Management has flagged some near-term margin dilution in MFC as new contracts ramp, but expects long-term expansion.
- Execution on production ramps: Investors will focus on progress toward tripling PAC-3 and quadrupling THAAD output, as well as F-35 delivery cadence and sustainment growth.
- Conversion of framework agreements to definitive contracts: Especially for PAC-3, THAAD, and PrSM, which underpin the multi-year growth outlook.
- CapEx efficiency and cash flow: Management reduced FY26 CapEx guidance due to efficiency gains, while raising FCF guidance above $7B.
- International demand and co-production: New international wins (e.g., F-16 for Peru, ATACMS in Europe) and co-production initiatives are key for future growth.
The YoY comp is challenging given strong Q3 2025 results, but the company’s raised outlook and accelerating order book suggest continued outperformance is possible if execution remains strong.
Most Important Factors to Watch This Quarter
| Factor | Why It Matters | What to Watch For |
|---|---|---|
| Munitions Ramp (PAC-3, THAAD) | Largest driver of incremental growth and margin expansion | Update on production rates, contract finalizations, supply chain resilience, CapEx deployment |
| F-35 Production/Sustainment | Still ~30% of revenue; sustainment is fastest-growing Aero subsegment | Delivery numbers, sustainment revenue growth, Block 4/Tech Refresh 3 progress |
| Segment Margins | Margin trajectory is key for EPS and FCF; MFC margins expected to expand after initial dilution | MFC, Aero, RMS, and Space margin trends; impact of new contracts and risk retirements |
| CapEx and Cash Flow | Efficiency gains have enabled higher FCF guidance despite heavy investment | CapEx actuals vs. guide, FCF conversion, working capital trends |
| Backlog Conversion | Record $230B backlog underpins multi-year growth | Book-to-bill, order intake, timing of framework-to-contract conversion |
| International/Co-Production | Diversifies revenue, supports growth beyond U.S. budget cycles | New international wins, co-production updates (e.g., Rheinmetall, ATACMS, PAC-3 in Europe) |
Quarterly Financial Snapshot — Actuals and Consensus
Quarterly Results and Consensus (Q3 2025–Q4 2026)
| Quarter | Revenue ($M) | YoY Growth | EPS (GAAP) | Gross Margin (%) | EBITDA ($M) | Net Income ($M) |
|---|---|---|---|---|---|---|
| Q4 2026E | 22,496 | +13% | 8.43 | 12.6 | 3,177 | 1,999 |
| Q3 2026E | 20,430 | +12% | 7.45 | 12.4 | 2,835 | 1,746 |
| Q2 2026A | 19,329 | +6% | 7.20 | 12.5 | 2,748 | 1,562 |
| Q1 2026A | 18,253 | +1% | 6.69 | 13.5 | 2,616 | 1,588 |
| Q4 2025A | 19,858 | +10% | 5.75 | 11.4 | 2,663 | 1,369 |
| Q3 2025A | 18,526 | +8% | 6.36 | 12.9 | 2,597 | 1,470 |
*Consensus figures are not actuals; reported revenue for Q2 2026 was $20,063M (+11% YoY), Q1 2026 was $18,021M (flat YoY).
Full-Year Guidance and Consensus
FY26 Guidance vs. Consensus
| Metric | FY26 Guidance (Updated Q2) | Prior Guidance (Q1) | FY26 Consensus | FY25 Actual |
|---|---|---|---|---|
| Sales ($M) | $79,750–$81,750 | $77,500–$80,000 | $81,010 | $74,583 |
| Segment Op Profit ($M) | $8,500–$8,700 | $8,425–$8,675 | $6,743 | |
| EPS (GAAP) | $29.95–$30.65 | $29.35–$30.25 | $30.48 | $21.46 |
| Free Cash Flow ($M) | $7,000–$7,200 | $6,500–$6,800 | $7,046 | $6,908 |
| CapEx ($M) | $2,000–$2,400 | $2,500–$2,800 | $1,649 |
Segment Outlook — FY26 Guidance (as of Q2 2026)
| Segment | FY26 Sales Guidance ($B) | FY26 Profit Guidance ($B) | Key Drivers / Commentary |
|---|---|---|---|
| Aeronautics | $31.7–$32.7 | $3.00–$3.08 | F-35 production/sustainment, mid-single-digit 2H growth |
| Missiles & FC | $16.5–$16.9 | $2.30–$2.35 | Munitions ramp, mid-teens margins, accelerating 2H growth |
| Rotary & MS | $17.7–$18.1 | $1.86–$1.89 | Radar awards, Sikorsky ramps, mid-single-digit 2H growth |
| Space | $13.85–$14.05 | $1.34–$1.38 | NGI, FBM, classified, high-single-digit 2H growth |
Last Year’s Reported Results (Q3 2025)
| Metric | Q3 2025 Actual | YoY Growth (vs. Q3 2024) |
|---|---|---|
| Revenue ($M) | 18,526 | +8% |
| EPS (GAAP) | 6.36 | |
| Gross Margin | 12.9% | |
| EBITDA ($M) | 2,597 | |
| Net Income ($M) | 1,470 |
- Q3 2025 was a strong quarter, with 9% YoY sales growth and robust free cash flow. The company benefited from strong demand across all segments, particularly in munitions and F-35 production.
Management Commentary and Intra-Quarter Color
- Momentum and Confidence: Management raised FY26 guidance after Q2, citing “accelerated year-over-year sales growth of approximately 8%, driving 28% higher segment operating profit, and increased free cash flow, now projected to be over $7 billion.”
- Munitions Ramps: “We are being asked to triple PAC-3 MSE production, quadruple THAAD production and scale up PrSM production faster than we ever thought we would. And all those things are happening because we're using every card in the deck to get that...ramp rate as high as we can, as fast as we can, as efficiently as we can.”
- Framework Agreements: “With the UCAS, we have all we need for now to be able to go at full speed and get our suppliers aligned and to waste no time in ramping up to meet the need.”
- Margins: “We expect [THAAD contract margins] to be consistent with our historic munitions production margins...there can be a little bit of near-term dilution just based on the long nature of the programs...but long term, we would expect this to match our traditionally very strong margins in MFC with a goal to increase versus historical margins in MFC.”
- CapEx and Cash Flow: “Our commitment to invest a total between $8 billion to $9 billion of capital in munition scaling is unchanged. So you're going to see us continue to be in a growth and investment mode over the next few years.”
- International Demand: “There is significant international demand...right now, the U.S. government is parsing out as they always do for foreign military sales, who gets what? Well, if we've got them coming out the end of the factory, that whole demand is going to be able to absorb it.”
What Changed Since Last Year
- Guidance Raised: FY26 sales, segment operating profit, and FCF guidance all raised after Q2.
- Backlog Surge: Backlog reached $230B (+19% YTD), driven by multi-year contracts (THAAD, PAC-3).
- Accelerating Growth: Q2 2026 sales +11% YoY, with management guiding to even faster growth in 2H.
- Margin Expansion: Segment margins improved, with MFC margins in the high 13%–14% range.
- CapEx Efficiency: FY26 CapEx guidance lowered due to efficiency gains, but total investment commitment unchanged.
- Framework Agreements Progress: Multiple multi-year agreements (PAC-3, THAAD, PrSM, JATM) now in place or in process, supporting multi-year growth visibility.
Conclusion
Lockheed Martin is entering Q3 2026 earnings with strong momentum, a raised outlook, and accelerating growth across all segments. The most important factors for the upcoming report are continued execution on munitions production ramps, F-35 program performance, margin trajectory (especially in MFC), and efficient capital deployment. The company faces a tough YoY comp but is well positioned to deliver another strong quarter if it maintains operational discipline and converts its record backlog into revenue and profit growth.
