Direct Answer
Lockheed Martin is the world's largest defense contractor by revenue. It builds the F-35 stealth fighter, C-130J transport, Aegis naval combat systems, missile systems, and space vehicles primarily for the U.S. government and its allies. Nearly all revenue is government-funded, giving the company exceptional revenue stability but making it a direct proxy on U.S. defense budget priorities.
Company snapshot
| Field | Detail |
|---|---|
| Company | Lockheed Martin Corporation |
| Ticker | LMT |
| Exchange | NYSE |
| Index | S&P 500, Wilshire 5000 |
| Sector | Industrials |
| Industry | Aerospace & Defense |
| Headquarters | Bethesda, Maryland, United States |
| Founded | 1995 (merger of Lockheed and Martin Marietta) |
| Fiscal year end | December 31 (52/53-week fiscal year) |
| SEC CIK | 0000936468 |
What Lockheed Martin does
Lockheed Martin Corporation is the world's largest defense contractor by revenue, supplying advanced defense, space, and security products primarily to the U.S. government and allied nations. The company operates through five business segments: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS), Space, and Sikorsky (helicopters).
Aeronautics is the largest segment and encompasses the F-35 Lightning II fighter jet production and sustainment, the F-22 Raptor (production complete, now sustainment-only), and the C-130J Super Hercules military transport aircraft. The F-35 program alone accounts for approximately 25 to 30 percent of total company revenue, making it the single most important program in Lockheed's portfolio.
Missiles and Fire Control produces precision-guided munitions (PAC-3 Patriot missiles in a joint venture with Raytheon), hypersonic missiles under development, tactical missiles including the AGM-158 JASSM family, fire control systems, and logistics systems.
Rotary and Mission Systems includes combat ships (Littoral Combat Ship), Aegis combat management systems, radar and sonar systems, C2 systems, training systems, and Sikorsky helicopters (Black Hawk, Seahawk, CH-53K King Stallion).
Space produces strategic ballistic missile systems (Trident II D5), satellites (GPS III, Advanced Extremely High Frequency), and the Orion crew vehicle for NASA's Artemis deep space program.
How Lockheed Martin makes money
Lockheed Martin generates approximately 70 percent of revenue from the U.S. government (primarily the Department of Defense) and the remainder from international customers, primarily via U.S. government-administered Foreign Military Sales (FMS). Revenue is booked under two broad contract types: cost-plus contracts (common in development and early production) and fixed-price contracts (common in mature production).
Cost-plus contracts reimburse Lockheed for actual costs incurred plus a negotiated profit fee. These provide revenue stability but cap profit since fees are negotiated as a percentage of costs. Fixed-price contracts pay a set amount regardless of actual costs, transferring cost risk to Lockheed. When fixed-price production costs exceed estimates, Lockheed absorbs the loss; when costs come in below, Lockheed retains the savings. The company's margin profile is therefore partly a function of how accurately it estimates costs on fixed-price programs.
The sustainment phase of large platforms like the F-35 generates recurring revenue over the aircraft's operational life. As the F-35 fleet grows, sustainment revenue (spare parts, maintenance, training, software upgrades) is expected to grow and eventually exceed production revenue, providing decades of contracted revenue visibility.
The F-35 program
The F-35 Lightning II is the world's most expensive defense program and Lockheed Martin's central asset. The program covers three variants: the F-35A (conventional takeoff and landing, for the Air Force and allied air forces), the F-35B (short takeoff/vertical landing, for the Marine Corps and Royal Navy), and the F-35C (carrier variant, for the Navy). The U.S. has committed to purchasing more than 2,000 aircraft total; international partners and foreign military sales customers plan several hundred more across allied air forces.
The F-35's economics have a long tail. Production is expected to continue through the 2030s, and the aircraft will remain in service through the 2060s, generating five decades of sustainment revenue for Lockheed and its supply chain partners. The F-35 Joint Program Office, which oversees the program, periodically negotiates production lot contracts that span multiple years, providing near-term revenue and margin visibility.
The program also carries risks. Software development and capability block upgrades have faced delays; fixed-price production lots create margin pressure when actual costs exceed estimates; and the question of whether a next-generation fighter platform might eventually replace the F-35 is a long-term variable to monitor. For now, there is no credible near-term successor, and the F-35 is deeply embedded in U.S. and allied defense planning.
Risks and watchlist
- F-35 execution: Production rate ramp, software capability block delivery, and fixed-price production lot negotiations directly affect revenue and margins. Any government-imposed production pauses or customer delivery deferrals are material events.
- Defense budget uncertainty: The U.S. government funds approximately 70 percent of Lockheed's revenue. Budget disagreements, continuing resolutions, and defense priority shifts can delay contract awards, slow production payments, and disrupt program schedules.
- Fixed-price contract losses: Several major fixed-price contracts (including classified programs and helicopter programs) have generated charges in recent years when actual costs exceeded contract ceilings. Additional fixed-price programs remain in backlog.
- Export control risk: International sales of F-35s and other advanced systems require U.S. government approval. Diplomatic changes, congressional restrictions, or security concerns can delay or block foreign sales that are in the backlog.
- Program concentration: The F-35 accounting for roughly 25 to 30 percent of revenue means any significant program disruption has an outsized company-level impact.
Frequently asked questions
What does Lockheed Martin do?
Lockheed Martin is the world's largest defense contractor by revenue. It designs, manufactures, and sustains advanced defense platforms and systems, primarily for the U.S. government and its allies. The company's most prominent products include the F-35 Lightning II multirole stealth fighter jet (the world's most expensive defense program), the F-22 Raptor stealth air superiority fighter, C-130J Super Hercules military transport aircraft, Aegis combat systems, Patriot air defense (with partner companies), and a range of space systems including GPS satellites and the Orion crewed spacecraft.
How does Lockheed Martin make money?
Lockheed Martin generates revenue primarily from U.S. government defense contracts, with the balance from international sales to U.S. allies under Foreign Military Sales (FMS) arrangements. Revenue is split between development contracts (R&D and engineering for new systems), production contracts (manufacturing delivered units), and sustainment contracts (maintenance, training, and logistics for fielded systems). The F-35 program contributes a significant share of total revenue across both production and sustainment. Cost-plus contracts (where the government reimburses costs plus a fee) dominate development-phase work; fixed-price contracts are more common in mature production.
Why is the F-35 program so important to Lockheed Martin?
The F-35 Lightning II is the most significant program in Lockheed Martin's history and one of the largest defense programs in the world. The U.S. plans to acquire more than 2,000 F-35s across Air Force, Navy, and Marine Corps variants; allied nations plan several hundred more. Production is expected to continue through the 2030s. Beyond production, the F-35 will require decades of sustainment and upgrades as the aircraft remains in service, generating sustainment revenue that Lockheed Martin expects to exceed production revenue over the full program lifecycle. The F-35's scale makes it both the company's most important growth driver and a significant concentration risk.
What is the difference between cost-plus and fixed-price defense contracts?
Cost-plus contracts reimburse the contractor for actual costs incurred plus a negotiated fee (profit margin). They are used for development and high-uncertainty work where the government accepts cost risk in exchange for accessing advanced technology. Fixed-price contracts pay a set amount regardless of actual costs; the contractor absorbs cost overruns and retains cost savings. Fixed-price contracts transfer cost risk to the contractor and can create significant losses when production costs escalate beyond the contract ceiling, as Lockheed Martin and other defense contractors experienced on several programs in the early 2020s.
What are the main risks for Lockheed Martin investors to watch?
Key risks include F-35 program execution (production rate increases, software development delays, and cost growth on fixed-price contracts create persistent execution risk), defense budget uncertainty (Lockheed's revenue is almost entirely government-funded and subject to budget negotiations and continuing resolutions), fixed-price contract exposure (fixed-price production and development contracts can generate material losses when costs exceed estimates), customer concentration (the U.S. government accounts for approximately 70% of revenue, making Lockheed highly sensitive to U.S. defense policy), and export control risk (international sales require U.S. government approval and can be delayed or blocked by diplomatic considerations).