01—Abstract
Summary
Summary of the 10-Q filed July 22, 2025. Cited figures are marked; the original filing is the authoritative source.
Lockheed Martin Corporation (LMT) reported a challenging second quarter for 2025, with net earnings declining significantly year-over-year.
Sales remained relatively flat for the quarter, but a substantial increase in operating costs and expenses, particularly driven by significant program losses in Aeronautics and RMS, severely impacted profitability. The company incurred substantial reach-forward losses on classified programs in Aeronautics and the Canadian Maritime Helicopter Program (CMHP) and Turkish Utility Helicopter Program (TUHP) in RMS, leading to a dramatic decrease in operating profit for these segments and a negative operating margin for Aeronautics. Despite these significant headwinds, the Missiles and Fire Control (MFC) segment showed robust growth in both sales and operating profit, driven by production ramp-ups.
The Space segment also demonstrated modest sales growth and improved operating profit. While consolidated sales were stable, the substantial charges related to program issues have materially affected the company's bottom line and diluted earnings per share. Investors should closely monitor the resolution and future impacts of these major program losses, as well as ongoing supply chain and macroeconomic pressures, which continue to influence the company's financial performance.
02—Key points
Key Highlights
- Net earnings for the quarter ended June 29, 2025, were $342 million ($1.46 diluted EPS), a significant decrease from $1.64 billion ($6.85 diluted EPS) in the prior year's quarter.
- Total sales for the quarter were $18.16 billion, a slight increase of 0.2% compared to $18.12 billion in the prior year quarter.
- Operating costs and expenses increased substantially to $17.42 billion from $15.99 billion, significantly eroding gross profit and operating profit.
- Aeronautics segment reported an operating loss of $98 million, a sharp decline from an operating profit of $751 million in the prior year, primarily due to a $950 million reach-forward loss on a classified program.
- Rotary and Mission Systems (RMS) segment reported an operating loss of $172 million, compared to an operating profit of $495 million in the prior year, impacted by significant losses on the Canadian Maritime Helicopter Program (CMHP) and Turkish Utility Helicopter Program (TUHP).
- Missiles and Fire Control (MFC) segment showed strong performance with sales up 11% to $3.43 billion and operating profit up 6% to $479 million.
- The company repurchased $1.3 billion of its common stock in the six months ended June 29, 2025, and has $8.1 billion remaining under its share repurchase authorization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2025, Lockheed Martin kept $0.02.
- Revenue$18.16B100.0%
- Cost of revenue−$17.42B96.0%
- Gross profit$734.0M4.0%
- Operating costs$14.0M0.1%
- Operating income$748.0M4.1%
- Interest, other & tax−$406.0M2.2%
- Net income$342.0M1.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed July 22, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $18.16B$18.12B | +0.2% |
| Cost of Revenue | $17.42B$15.99B | +8.9% |
| Gross Profit | $734.00M$2.13B | −65.5% |
| Operating Income | $748.00M$2.15B | −65.2% |
| Net Income | $342.00M$1.64B | −79.2% |
| EPS (Basic) | $1.46$6.87 | −78.7% |
| EPS (Diluted) | $1.46$6.85 | −78.7% |
| Shares Outstanding (Basic) | 233.50M238.90M | −2.3% |
| Shares Outstanding (Diluted) | 234.30M239.60M | −2.2% |
05—Questions
Frequently Asked Questions
What caused the significant drop in net earnings and operating profit in Q2 2025?
The primary driver for the sharp decline in net earnings and operating profit was the recognition of substantial reach-forward losses on several major programs. Specifically, a $950 million loss on a classified program in the Aeronautics segment and significant losses on the Canadian Maritime Helicopter Program (CMHP) and Turkish Utility Helicopter Program (TUHP) in the Rotary and Mission Systems (RMS) segment heavily impacted the company's profitability.
How did the different business segments perform?
The Missiles and Fire Control (MFC) segment demonstrated strong growth, with increased sales and operating profit due to production ramp-ups. The Space segment also saw modest sales growth and an increase in operating profit. However, the Aeronautics segment reported an operating loss, and the Rotary and Mission Systems (RMS) segment also incurred an operating loss, both significantly impacted by the program-specific charges mentioned above.
What is the outlook for the F-35 program?
The F-35 program continues to show strong demand, with significant international interest and new orders. The company delivered 50 aircraft in the quarter and has a backlog of 311 aircraft. Deliveries resumed in July 2024 after a temporary hold due to technology insertion delays, and the company is working with the Joint Program Office on future lots and Block 4 modernization efforts.
Are there any significant tax-related issues the company is facing?
Yes, Lockheed Martin is contesting a proposed adjustment from the IRS for tax years 2018-2020, which could result in approximately $4.6 billion of additional federal income tax (excluding interest). The company strongly disagrees with the IRS's claims and is pursuing administrative and potentially judicial remedies. While the company believes its reserves for tax contingencies are adequate, an unfavorable resolution could materially impact profitability and future cash flows.
06—Continue