LOCKHEED MARTIN CORP

Lockheed Martin Corporation is a global aerospace and defense technology company that builds and sustains the solutions America and its allies need to deter conflict and advance national security and scientific exploration objectives. The company operates in four business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS), and Space, offering integrated solutions across all warfighting domains. Its principal customers are agencies of the U.S. Government and allies, and the company derived 72% ¹ of its total consolidated sales from the U.S. Government in 2025, including 63% ² from the Department of War (DoW). Recent regional conflicts have demonstrated the integral role Lockheed Martin products play in protecting people, and the company is rapidly transforming its business to meet increased demand by expanding production capacity and harnessing leading-edge technologies like artificial intelligence and autonomy, open-architecture systems, and advanced networking.

The filing names The Boeing Company, General Dynamics, L3Harris Technologies, Northrop Grumman, and RTX Corporation as some of Lockheed Martin's primary competitors. Key characteristics of the industry include long operating cycles and intense competition, evidenced by the number of competitors bidding on program opportunities and the existence of bid protests. The company often collaborates with competitors through teaming arrangements and may serve as a subcontractor to a competitor that wins a prime contract. Principal factors of competition include technical excellence, reliability, safety, cost competitiveness, the ability to innovate, successful program execution, reputation, and global footprint. The F-35 program is the company's largest program, generating 27% ³ of total consolidated sales and 67% ⁴ of Aeronautics' sales in 2025.

Lockheed Martin generates revenue primarily from long-term contracts with the U.S. Government and international customers for the research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. Substantially all of the company's revenue is recognized over time using the percentage-of-completion cost-to-cost method. The company operates under fixed-price and cost-reimbursable contracts. In 2025, 72% ⁵ of sales were from the U.S. Government and 28% ⁶ were from international customers. The company's business is primarily long-cycle, and its four business segments work as one company offering integrated solutions at scale.

The Aeronautics segment is engaged in the research, design, development, manufacture, integration, sustainment, support, and upgrade of advanced military aircraft, including combat and air mobility aircraft, unmanned air vehicles, and related technologies. Its major programs include the F-35 Lightning II, C-130 Hercules, F-16 Fighting Falcon, and F-22 Raptor. The F-35 program is the company's largest, generating 27% ⁷ of total consolidated sales and 67% ⁸ of Aeronautics' sales in 2025. The segment also includes the Advanced Development Programs (ADP) organization, known as Skunk Works, focused on future systems. Aeronautics' sales in 2025 were $30.257 billion ⁹ with an operating profit of $2.086 billion ¹⁰ and an operating margin of 6.9% ¹¹. The Missiles and Fire Control (MFC) segment provides air and missile defense systems; tactical missiles and precision strike weapon systems; logistics; fire control systems; and mission operations support. Major programs include PAC-3, THAAD, MLRS, PrSM, JASSM, LRASM, Hellfire, JAGM, Javelin, and hypersonics programs. MFC's sales in 2025 were $14.450 billion ¹² with an operating profit of $1.989 billion ¹³ and an operating margin of 13.8% ¹⁴. The Rotary and Mission Systems (RMS) segment designs, manufactures, services, and supports various military and commercial helicopters, sea- and land-based missile defense systems, radar systems, laser systems, mission and combat systems, command and control mission solutions, cyber solutions, and simulation and training solutions. Major programs include Sikorsky helicopters (Black Hawk, Seahawk, CH-53K), Aegis Combat System, and C2BMC. RMS' sales in 2025 were $17.312 billion ¹⁵ with an operating profit of $1.323 billion ¹⁶ and an operating margin of 7.6% ¹⁷. The Space segment is engaged in the research and design, development, engineering, and production of satellites, space transportation systems, and strategic, advanced strike, and defensive systems. Major programs include Trident II D5 FBM, Next Gen OPIR, NGI, Orion, GPS III, and hypersonics programs. Space's sales in 2025 were $13.029 billion ¹⁸ with an operating profit of $1.345 billion ¹⁹ and an operating margin of 10.3% ²⁰.

The F-35 program consists of multiple development, production, and sustainment contracts. Development is focused on modernizing F-35's capability and addressing emerging threats, while sustainment provides logistics and training support. Aircraft production is expected to continue well into the future given the U.S. Government's stated objective of procuring 2,456 ²¹ aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy. The company also has commitments from seven international partner countries and 12 FMS customers, who collectively during the year indicated their intent to purchase 72 ²² additional aircraft beyond their existing programs of record. From inception of the F-35 program through December 31, 2025, the company has delivered 1,293 ²³ production F-35 aircraft, including 927 ²⁴ F-35A variants, 238 ²⁵ F-35B variants, and 128 ²⁶ F-35C variants. During the third quarter of 2025, Lockheed Martin and the Joint Program Office reached an agreement for Lot 18 and Lot 19 F-35 Air Vehicle Production Contract for 296 ²⁷ aircraft.

During the second quarter of 2025, the company paid $360 million ²⁸ in cash for the acquisition of Amentum's Rapid Solutions business, which integrates advanced space and airborne mission capabilities into Lockheed Martin's portfolio. The company recorded goodwill of $195 million ²⁹ at its Space business segment from this acquisition. In 2025, the company paid $3.0 billion ³⁰ to repurchase 6.6 million ³¹ shares of its common stock, compared to $3.7 billion ³² to repurchase 7.5 million ³³ shares in 2024. In October 2025, the Board of Directors authorized an increase to the share repurchase program by $2.0 billion ³⁴. The total remaining authorization for future common share repurchases was $8.3 billion ³⁵ as of December 31, 2025. The company also issued senior unsecured notes, receiving net proceeds of $2.0 billion ³⁶ in 2025, and repaid $642 million ³⁷ of long-term notes. In December 2025, the company executed buy-out conversions of group annuity contracts, transferring $943 million ³⁸ of gross defined benefit pension obligations and related plan assets to insurance companies, requiring recognition of a noncash, non-operating pretax settlement charge of $479 million ³⁹.

Total consolidated sales for 2025 were $75.048 billion ⁴⁰, compared to $71.043 billion ⁴¹ in 2024. Net earnings were $5.017 billion ⁴² in 2025, compared to $5.336 billion ⁴³ in 2024. Diluted earnings per share were $21.49 ⁴⁴ in 2025, compared to $22.31 ⁴⁵ in 2024. Operating profit was $7.731 billion ⁴⁶ in 2025, compared to $7.013 billion ⁴⁷ in 2024. Net cash provided by operating activities was $8.557 billion ⁴⁸ in 2025, compared to $6.972 billion ⁴⁹ in 2024. Free cash flow, a non-GAAP measure defined as cash from operations less capital expenditures, was $6.908 billion ⁵⁰ in 2025, compared to $5.287 billion ⁵¹ in 2024.

A key growth vector is the F-35 program, which is the company's largest program. The U.S. Government has a stated objective of procuring 2,456 ⁵² aircraft for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy. Additionally, seven international partner countries and 12 FMS customers collectively indicated their intent to purchase 72 ⁵³ additional aircraft beyond their existing programs of record. The company is focused on technology modernization, life-cycle cost containment, delivery schedule optimization, and aircraft readiness enhancements. Another growth vector is the expansion of international sales, which accounted for 28% ⁵⁴ of total sales in 2025. The company continues to focus on strengthening relationships internationally through partnerships and joint technology efforts. International interest remains strong in the F-35, F-16, C-130J, PAC-3, THAAD, and Aegis programs. The company is also expanding production capacity to meet increased demand driven by recent regional conflicts and is harnessing leading-edge technologies like artificial intelligence and autonomy.

The filing discusses the company's multi-year business transformation initiative, which seeks to significantly enhance digital infrastructure to increase efficiencies and collaboration throughout the business while reducing costs. This digital transformation effort requires substantial investment. The company is also focused on improving cost competitiveness and affordability of its products and services, which may, in part, offset cost increases from inflation. The company recorded impairment and other charges totaling $66 million ⁵⁵ in 2025 and $87 million ⁵⁶ in 2024. The FAS/CAS pension operating adjustment, which favorably impacts operating profit, was $1.518 billion ⁵⁷ in 2025, compared to $1.624 billion ⁵⁸ in 2024.

The company is expanding production capacity to continue delivering at scale. It is working with the U.S. Government, international partners, and its supply chain to increase capacity and enhance its ability to scale operations. As of December 31, 2025, the company had a highly skilled workforce of approximately 123,000 ⁵⁹ employees, including approximately 72,000 ⁶⁰ engineers, scientists, and information technology professionals. Approximately 93% ⁶¹ of the workforce was located in the U.S., and approximately 19% ⁶² of employees were covered by collective bargaining agreements. During 2025, the company hired nearly 10,800 ⁶³ new employees, nearly 1,500 ⁶⁴ of which were college hires, and created internship opportunities for an additional 2,000 ⁶⁵ students. The company has a distributed workforce model that enables flexible working arrangements.

Company-funded research and development costs charged to operating costs totaled $2.0 billion ⁶⁶ in 2025, compared to $1.6 billion ⁶⁷ in 2024. Capital expenditures were $1.649 billion ⁶⁸ in 2025, compared to $1.685 billion ⁶⁹ in 2024. In October 2025, the Board of Directors authorized an increase to the share repurchase program by $2.0 billion ⁷⁰, bringing the total remaining authorization to $8.3 billion ⁷¹ as of December 31, 2025. Dividends declared were $13.35 per share ⁷² in 2025, compared to $12.75 per share ⁷³ in 2024. The company paid $3.131 billion ⁷⁴ in dividends in 2025.

The company faces headwinds from supply chain challenges, including supplier shortages and performance issues, which have resulted in delays and increased costs. These dynamics are expected to continue in 2026. Inflationary pressures present risks for the company, its suppliers, and the stability of the broader defense industrial base. Tariffs enacted by the U.S. or other countries had an impact of approximately $485 million ⁷⁵ on the company's cash flows during the year ended December 31, 2025, though a substantial portion is expected to be recoverable over time. The company also faces risks related to the availability of rare earth minerals and other raw materials. The U.S. Government budget environment, including the potential for continuing resolutions and shifting funding priorities, poses a constraint. The company noted that the Administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which could result in impacts to both current and future business prospects.

The company derived 72% ⁷⁶ of its total consolidated sales from the U.S. Government in 2025, making it heavily dependent on U.S. Government contracts. Changes in U.S. Government priorities, budget uncertainty, extended continuing resolutions, or government shutdowns could materially adversely affect the business. The F-35 program, which represented 27% ⁷⁷ of total consolidated sales in 2025, is a material concentration risk; reductions or delays in funding, or performance, schedule, cost, and requirements issues on this program could adversely affect performance. The company is subject to extensive procurement laws and regulations, and the U.S. Government may terminate any contract at its convenience or for default. The company faces significant risks from fixed-price development contracts, as evidenced by reach-forward losses of $950 million ⁷⁸ on a classified program at Aeronautics and $1.4 billion ⁷⁹ on a classified program at MFC in 2024. The company is heavily dependent on suppliers, and supply chain challenges, including shortages of advanced microelectronics and rare earth minerals, have resulted in delays and increased costs. Tariffs had an impact of approximately $485 million ⁸⁰ on cash flows in 2025. The company has $11.3 billion ⁸¹ of goodwill, representing approximately 19% ⁸² of total assets, which is subject to impairment testing.

Management's message emphasizes that the company is a global aerospace and defense technology company that builds and sustains solutions for America and its allies. The tone is forward-looking and focused on transformation, with management stating that recent regional conflicts have demonstrated the integral role Lockheed Martin products play in protecting people, and the company is rapidly transforming its business to meet increased demand. The key strategic priorities emphasized for the period ahead include expanding production capacity to continue delivering at scale, harnessing leading-edge technologies like artificial intelligence and autonomy, open-architecture systems, and advanced networking, and executing on the multi-year business transformation initiative. Management also highlights the importance of maintaining fiscal discipline, continuing to cultivate the greatest aerospace and defense workforce talent, and deepening connections to commercial industry through cooperative partnerships, joint ventures, and equity investments.