opened Thursday at $545.00 against a Wednesday close of $514.36 and kept going. The stock traded as high as $575.20 and was changing hands near $571 by mid-morning, up roughly 11% on the session. Pre-market had it at $543.52, a 5.64% gain, which turned out to understate the reaction by half. Market capitalization crossed $132.6 billion on roughly 230.6 million shares outstanding.
The move is remarkable for two reasons beyond its size. First, it happened on a day when the S&P 500 fell 0.8%, the Nasdaq Composite dropped 1.5%, and the Dow shed roughly 365 points as Brent crude crossed $100 and the 10-year Treasury yield sat at 4.695%. An 11% gain in a $130 billion defense prime against that tape is not a sympathy move — it is a repricing.
Second, it reclaimed a technical level that had been resistance since spring. The 200-day moving average has been sitting near $570, and the stock had spent the prior three months trading below it. The 50-day at roughly $521 had been acting as the ceiling. Thursday’s session cleared both in a single gap.
The context makes the move more legible. Lockheed closed at $626.83 on January 29 following its fourth-quarter report, ran to $676.70 within thirty days, then gave the entire advance back. It dipped to approximately $490 in mid-June on index-driven pressure and sector rotation, recovered to $545.91 by July 2 on a 4.62% single-day gain after a broker upgrade, then drifted back to the low $510s into the print. The 52-week range spans $412.55 to $692.00.
What broke the stock in the first place was the first quarter. Sales came in at $18.021 billion, up just 0.3% and below a roughly $18.2 billion consensus. Diluted EPS of $6.44 fell 11.5% year over year and missed estimates near $6.70. Cash from operations collapsed to $220 million from $1.4 billion, and free cash flow turned negative at minus $291 million. Backlog fell to $186.4 billion from $193.6 billion at year-end. Management reaffirmed full-year guidance without raising it. The stock dropped about 5%.
Thursday reversed every one of those data points simultaneously. Sales, earnings, cash flow, backlog and guidance all moved decisively in the other direction in the same release. That is why an established, low-beta industrial with a 0.11 five-year beta just traded like a growth stock.
The Numbers: $20.1 Billion in Sales and $7.94 of EPS Against a $7.22 Bar
Second-quarter sales came in at $20.1 billion against $18.2 billion in the same quarter of 2025, growth of 11%. Consensus sat at roughly $19.33 to $19.35 billion depending on the compiler, so the top line cleared by something close to $750 million.
Net earnings were $1.8 billion, or $7.94 per diluted share. Wall Street had modelled between $7.11 and $7.28, with the most widely cited figure at $7.22 across fifteen to eighteen analysts. The GAAP print came in 10.3% above consensus.
The year-over-year comparison requires an immediate caveat, because the headline growth rate is distorted beyond usefulness. Second-quarter 2025 net earnings were $342 million, or $1.46 per share, and that figure included $1.6 billion of program losses and $169 million of other charges. Diluted EPS therefore increased $6.48 year over year, but roughly two-thirds of that improvement is the absence of a one-time disaster rather than underlying operating leverage.
Working through the bridge: consolidated operating profit rose $1.7 billion, driven largely by the prior-year reach-forward losses of $1.6 billion — recognised on a classified program at Aeronautics and on the Canadian Maritime Helicopter Program and Turkish Utility Helicopter Program at Rotary and Mission Systems — plus a prior-year $66 million fixed-asset write-off and a $43 million increase in the FAS/CAS operating adjustment. Business segment operating profit rose $1.6 billion from the same reach-forward comparison plus genuine munitions ramps at Missiles and Fire Control. Net earnings increased $1.5 billion, partially offset by a $267 million increase in income tax expense.
Strip the noise and the underlying growth is still real: an 11% top line with the fastest-growing segment expanding 19% and margins improving sequentially from a first quarter that management had already flagged as the trough.
The cash statement is where the quarter becomes genuinely difficult to argue with. Cash from operations reached $3.2 billion against $201 million a year earlier. Free cash flow was $2.9 billion against negative $150 million. Both figures are large in absolute terms, not just relative to a weak base, and both arrive after a first quarter that burned $291 million.
For a business whose entire investment case rests on converting a contracted backlog into distributable cash, that is the line item that matters most.
A $65 Billion Order Quarter and a Backlog That Went Vertical
Lockheed booked $65 billion of new orders in three months. Against quarterly sales of $20.1 billion, that is a book-to-bill ratio above three — a figure that essentially does not occur in mature defense primes outside of multi-year contract signings.
The result is a record backlog of $230.4 billion, up from $193.6 billion at year-end 2025 and up 38.3% from $166.5 billion a year ago. On an annualised run rate of roughly $80 billion in sales, that is close to three years of revenue already contracted. Management framed the prior record of $194 billion at year-end as about two and a half times annual sales; the multiple has now expanded further even as the sales base grows.
The composition matters more than the headline. Missiles and Fire Control backlog nearly doubled to $87.9 billion, driven by a $35 billion multi-year contract with the Missile Defense Agency for THAAD interceptors signed during the quarter. That single award is roughly 54% of a full year of consolidated sales, booked in one quarter, in the highest-growth segment the company operates.
Backlog quality is the right question to ask about any number this large, and the THAAD structure answers part of it. Multi-year interceptor contracts with the Missile Defense Agency are among the most durable revenue streams in the industry — they carry funded and unfunded components, they survive administration changes better than platform programs, and they are supported by allied demand that is currently unconstrained.
The book-to-bill trajectory has been building. Full-year 2025 produced a ratio of 1.2 with backlog growing $17.3 billion, or 17%, marking the fourth consecutive annual increase. The second quarter of 2026 did more than the whole of 2025 in a single period.
The obvious caution is that backlog is a promise, not revenue. Converting $230.4 billion into sales requires production capacity that does not currently exist, and management has been explicit that building it takes years rather than quarters. A backlog growing faster than the ability to work it down is a good problem, but it is still a constraint — and it is the constraint that determines how much of Thursday’s enthusiasm survives the next four quarters.
Missiles and Fire Control Is Now the Entire Story
Missiles and Fire Control posted sales of $4.1 billion, up 19% or $668 million year over year. The composition is precise: approximately $560 million came from integrated air and missile defense programs on production ramps for PAC-3 and THAAD, and roughly $100 million from tactical and strike missile programs on the Precision Strike Missile ramp. Segment operating profit rose $115 million, or 24%, growing faster than sales — which is the signature of genuine operating leverage rather than mix.
The structural story behind those ramps was set earlier this year. Lockheed signed a seven-year framework agreement for PAC-3 missiles in the first quarter and announced a comparable arrangement for THAAD on the same call. The stated objective is to lift annual PAC-3 production capacity from roughly 600 to 650 units to 2,000 per year. The framework agreements also carry make-whole provisions that protect returns if the customer changes procurement strategy mid-stream — a meaningful de-risking of the capital being committed.
Management has guided Missiles and Fire Control to at least double-digit compound annual sales growth through the end of the decade. On a $4.1 billion quarterly base growing 19%, that is a conservative-sounding target that implies the segment roughly doubles by 2030.
The demand backdrop is not speculative. NATO awards approaching $50 billion have been announced this year. European rearmament has accelerated, with Britain’s new government redirecting spending toward defense and space capability. The US-Iran war that began in late February has run continuously since, with a twelfth consecutive night of strikes completed this week, consuming interceptors at a rate that guarantees restocking demand for years. A pledge to allow Ukraine to license Patriot production layers additional volume onto a queue that is already committed.
Here is the honest limitation, and it came directly from the chief executive earlier this year. The ramp from 650 Patriot missiles annually to 2,000 will take three to four years depending on supply chain conditions. Demand is not the constraint. Physical production capacity is. That timeline is what paces how quickly $87.9 billion of segment backlog becomes recognised revenue, and it is why the segment’s growth rate — impressive at 19% — is not going to inflect to 40% no matter how many contracts get signed.
Capital is being deployed against it. Lockheed put more than $3.5 billion into production capacity and next-generation technology in 2025 and is guiding combined capital and internal research spending toward approaching $5 billion in 2026.
Aeronautics Cleaned Up After a Genuinely Bad First Quarter
Aeronautics generated $8.1 billion of sales, up 9%, led by higher F-35 production volume. Segment operating profit increased $858 million, though the bridge again requires care: the improvement was primarily attributable to the $950 million reach-forward loss recognised on a classified contract in the prior-year quarter, plus higher sales volume on F-35 production contracts, partially offset by $160 million of lower net favourable profit adjustments across the portfolio.
That last item deserves attention. A $160 million reduction in favourable profit booking adjustments means the underlying program performance was slightly less generous than a year ago even as volume improved. Defense primes recognise profit on long-term contracts through estimates-at-completion, and adjustments swing both ways. This quarter they leaned modestly negative on the margin line even while the headline exploded.
Compare that with the first quarter, when the same segment produced sales of $6.953 billion — down 1% — with operating profit of $619 million, down 14%, and margin compressing to 8.9% from 10.2%. The damage came from $125 million of unfavourable profit adjustments on the F-16 program tied to production performance and development delays, plus $55 million of net unfavourable adjustments on the C-130 program from diminishing manufacturing source integration challenges and associated delivery delays. Thirty-two F-35 aircraft were delivered in that quarter.
The F-35 franchise itself remains the anchor. Deliveries reached 191 aircraft in 2025, up sharply from 110 in 2024. Contract awards tied to Lots 18 through 21 plus full-year sustainment total more than $15 billion, and a $700 million award for long-lead materials on Lots 20 and 21 for international partners was booked earlier this year. The program’s estimated lifetime cost to purchase, operate and sustain exceeds $2 trillion, making it the largest acquisition program the Pentagon has ever run and one Lockheed expects to operate into the 2060s.
International expansion continues to add optionality. Reports this month indicated the administration is likely to support F-35 sales to Turkey, which would restore a partner removed from the program in 2019. Allied commitment has strengthened as the aircraft has been used operationally.
Aeronautics is not the growth engine anymore — that title belongs to munitions. But it is roughly 40% of consolidated sales, and a quarter where it grows 9% with clean execution removes the single biggest overhang the stock carried into this print.
Rotary, Space, and the Ultra Maritime Chapter That Is Not Yet in the Numbers
Rotary and Mission Systems delivered $4.4 billion in sales, up 9%. Space contributed $3.5 billion, up 6%. Neither segment produced fireworks, and after the first half of this year that is precisely the point.
Rotary and Mission Systems carried two of the prior year’s three reach-forward losses — the Canadian Maritime Helicopter Program and the Turkish Utility Helicopter Program — and its recovery to clean 9% growth removes a source of recurring negative surprise. Government helicopter deliveries reached 90 units in 2025, up from 72 in 2024, and the production base has been stabilising alongside that volume.
The forward-looking item for this segment is the pending acquisition of Ultra Maritime for $3.45 billion, announced earlier this month. The deal expands undersea and anti-submarine warfare capability and would sit inside Rotary and Mission Systems. It remains subject to regulatory approvals and — this matters for anyone modelling the guidance — it is explicitly not incorporated into the raised outlook. Every figure management published Thursday excludes it.
That is a meaningful piece of hidden upside if the transaction closes on schedule. Anti-submarine warfare is among the fastest-growing niches in allied procurement given undersea infrastructure vulnerability and great-power naval competition, and Lockheed’s existing sonar and maritime systems positions give it a credible integration case. It is also a capital deployment of roughly 2.6% of market capitalisation into a business the company will now have to prove it can absorb.
Space at $3.5 billion and 6% growth is the quietest part of the portfolio and the one most exposed to a shifting competitive landscape. Commercial launch economics have changed the calculus for national security space, and the segment’s growth rate reflects that.
Two smaller items from recent weeks fill in the innovation picture. On July 21 the company announced a joint technology development agreement with a propulsion startup to evaluate and mature rotating detonation rocket engine technology for future long-range precision fires — a genuine attempt to leapfrog conventional propulsion for hypersonic-class weapons. Separately, it unveiled a counter-swarm interceptor system aimed at the drone threat that has dominated recent conflicts.
Neither moves the model this year. Both indicate where the roughly $5 billion of combined capital and research spending planned for 2026 is going.
