01—Abstract
Summary
Summary of the 10-Q filed April 23, 2026. Cited figures are marked; the original filing is the authoritative source.
Lockheed Martin Corporation's first-quarter 2026 results show a slight increase in total sales to $18.02 billiona, up from $17.96 billion in the prior year period, driven by growth in its Missiles and Fire Control and Space segments.
However, net earnings saw a decline to $1.49 billionb, or $6.44 per diluted share, compared to $1.71 billion, or $7.28 per diluted share, in the first quarter of 2025. This decrease is primarily attributed to a significant unfavorable profit booking rate adjustment of $125 million on a classified Aeronautics program due to production performance and development delays, alongside other program-specific challenges. The company experienced a substantial decrease in cash provided by operating activities, falling to $220 million from $1.41 billion year-over-year, largely due to working capital timing.
This led to negative free cash flow of $291 millionc for the quarter, a significant drop from the $955 million generated in the prior year. While total sales saw modest growth, the decline in profitability and operating cash flow are key concerns for investors. The company continues to navigate a complex global security environment and supply chain challenges, while also facing program-specific issues that impact financial performance.
02—Key points
Key Highlights
- Total sales increased slightly to $18.02 billion in Q1 2026 from $17.96 billion in Q1 2025.
- Net earnings decreased to $1.49 billion ($6.44 EPS) in Q1 2026 from $1.71 billion ($7.28 EPS) in Q1 2025.
- Operating profit declined to $2.06 billion in Q1 2026 from $2.37 billion in Q1 2025.
- Net cash provided by operating activities significantly decreased to $220 million from $1.41 billion.
- Free cash flow turned negative at $(291) million in Q1 2026, compared to $955 million in Q1 2025.
- Aeronautics segment faced a $101 million decrease in operating profit due to unfavorable profit booking rate adjustments, particularly on a classified program.
- Significant cumulative losses remain on several key programs, including a classified Aeronautics program ($1.8 billion), an MFC classified program ($1.46 billion), and the Canadian Maritime Helicopter Program ($670 million).
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Lockheed Martin kept $0.08.
- Revenue$18.02B100.0%
- Cost of revenue−$15.94B88.5%
- Gross profit$2.08B11.5%
- Operating costs−$15.0M0.1%
- Operating income$2.06B11.4%
- Interest, other & tax−$575.0M3.2%
- Net income$1.49B8.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed April 23, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $18.02B$17.96B | +0.3% |
| Cost of Revenue | $15.94B$15.64B | +1.9% |
| Gross Profit | $2.08B$2.32B | −10.5% |
| Operating Income | $2.06B$2.37B | −13.0% |
| Net Income | $1.49B$1.71B | −13.1% |
| EPS (Basic) | $6.47$7.30 | −11.4% |
| EPS (Diluted) | $6.44$7.28 | −11.5% |
| Shares Outstanding (Basic) | 229.90M234.40M | −1.9% |
| Shares Outstanding (Diluted) | 231.10M235.30M | −1.8% |
05—Questions
Frequently Asked Questions
What is the primary reason for the decrease in net earnings and earnings per share?
The decrease in net earnings and earnings per share for the first quarter of 2026 compared to the prior year is primarily due to unfavorable profit booking rate adjustments on several programs, most notably a $125 million adjustment on a classified Aeronautics program stemming from production performance and development delays. Other program-specific challenges and lower overall operating profit also contributed to the decline.
Why did operating cash flow and free cash flow decrease so significantly?
Operating cash flow saw a substantial decrease mainly due to working capital timing, particularly the timing of billing activities. This, combined with higher capital expenditures and software development costs, led to a significant decline in free cash flow, which turned negative in the first quarter of 2026. This suggests challenges in converting earnings into cash during the period.
What are the key risks highlighted in the report regarding ongoing programs?
The report highlights significant cumulative losses and ongoing performance issues on several major programs. These include a classified Aeronautics program with approximately $1.8 billion in cumulative losses, an MFC classified program with approximately $1.46 billion in cumulative losses, and the Canadian Maritime Helicopter Program with approximately $670 million in cumulative losses. The company acknowledges the potential for further losses on these programs if estimates change or performance issues persist.
How are supply chain issues and inflation impacting Lockheed Martin?
Lockheed Martin continues to experience supply chain challenges, including supplier shortages and performance issues, as well as inflationary pressures. While the company is working to mitigate these impacts, they present risks to future profits, margins, and cash flows, especially for existing fixed-price contracts. The company is focused on increasing operational efficiency and improving cost competitiveness to offset these pressures.
06—Continue