Lockheed Martin Corp. (LMT) reported fourth-quarter and full-year 2025 results Thursday that perfectly capture the current defense spending environment: revenue crushing expectations, earnings just shy of targets, and a backlog so massive it's basically a multi-year revenue guarantee.
The defense giant posted fourth-quarter sales of $20.321 billion, up from $18.622 billion in the prior year and comfortably ahead of the $19.849 billion analyst estimate. Net earnings came in at $1.344 billion, or $5.80 per diluted share, compared to $527 million or $2.22 per share a year earlier. The earnings per share figure missed the analyst consensus of $5.86 by a hair, but investors clearly weren't bothered.
Cash generation told an even stronger story. Operating cash flow in the quarter reached $3.219 billion versus $1.023 billion last year, while free cash flow hit $2.756 billion compared to just $441 million in the fourth quarter of 2024. That free cash flow figure came after the company made a pension contribution of $860 million, so the underlying cash generation was particularly robust.
Business Segment Performance Shows Broad Strength
Every single business segment posted year-over-year sales growth. Aeronautics, home to the F-35 program, saw sales rise 6% to $8.524 billion with operating profit of $782 million and a 9.2% margin. Missiles and Fire Control was the standout performer with sales jumping 18% to $4.020 billion, generating operating profit of $535 million and a 13.3% margin.
Rotary and Mission Systems reported sales of $4.616 billion, up 8% from last year, with operating profit of $468 million and a 10.1% margin. The Space division increased sales 8% to $3.161 billion, posting operating profit of $273 million and an 8.6% margin.
Full-Year Results Reflect Strong Demand
For the full year 2025, sales increased 6% to $75.048 billion from $71.043 billion in 2024. Net earnings were $5.017 billion, or $21.49 per diluted share, compared with $5.336 billion or $22.31 per share a year earlier. The year-over-year earnings decline reflected a non-operational charge of $479 million ($377 million or $1.63 per share after-tax) related to a pension obligation transfer completed in December 2025.
Annual cash from operations totaled $8.557 billion versus $6.972 billion in 2024, while free cash flow reached $6.908 billion compared to $5.287 billion the previous year. The company attributed the operating cash flow increase primarily to working-capital changes and lower tax payments reflecting the impact of the One Big Beautiful Bill Act.
Record Backlog and Strategic Investments
Here's the number that really matters for Lockheed Martin: backlog totaled $193.622 billion at the end of 2025, up from $176.040 billion a year earlier. For context, that's more than two and a half years of revenue locked in. The company delivered 191 F-35 aircraft and 90 government helicopter program units during 2025.
"With a record $194 billion backlog, 6% year-over-year sales growth, and free cash flow generation above our prior expectation, 2025 marked a year of unprecedented demand for Lockheed Martin capabilities," said Chairman, President and CEO Jim Taiclet. "We will continue to deliver superior, reliable capabilities to U.S. and Allied militaries to strengthen deterrence and provide overwhelming combat advantage, while providing strong results and value to our shareholders."
During 2025, Lockheed invested $1.6 billion in capital expenditures and $2.0 billion in independent research and development. The company returned capital to shareholders through $3.1 billion in cash dividends and repurchased 6.6 million shares for $3.0 billion. The balance sheet remained solid with cash and equivalents of $4.121 billion and long-term debt of $20.532 billion.
2026 Outlook and Production Expansion
For 2026, Lockheed Martin forecast sales of $77.500 billion to $80.000 billion and diluted earnings per share of $29.35 to $30.25, both ahead of analyst estimates of $77.831 billion in sales and $29.14 in EPS. Free cash flow is projected at $6.5 billion to $6.8 billion. The company noted its outlook does not include potential impacts from government shutdown or Executive Orders issued by the Administration.
In a separate announcement, Lockheed Martin said it signed a framework agreement with the Department of War to quadruple annual production of Terminal High Altitude Area Defense (THAAD) interceptors from 96 to 400 over the next seven years. This builds on an earlier agreement to accelerate PAC-3 MSE interceptor production. To support this massive ramp-up, the company will break ground in Camden, Arkansas, on a new Munitions Acceleration Center supporting THAAD, PAC-3 and other capabilities.
Shares of Lockheed Martin surged 7.65% to $642.99 following the earnings release, reaching a new 52-week high as investors bet on continued strong defense spending and the company's ability to execute on its record backlog.
