Lockheed Martin Corporation

Company Overview

Business Model: Lockheed Martin Corporation is a global aerospace and defense technology company that develops and sustains solutions to deter conflict and advance national security and scientific exploration objectives. The company's four business areas—Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space—collaborate to offer integrated solutions across all warfighting domains. Lockheed Martin Corporation serves U.S. and international customers in defense, civil, and commercial applications, with principal customers being agencies of the U.S. Government and its allies. The company's strategy involves investing in differentiating technologies, forging strategic partnerships (including with commercial companies), executing a multi-year business transformation, maintaining fiscal discipline, and cultivating a highly skilled workforce.

Market Position: Lockheed Martin Corporation plays an integral role in global security, with its products demonstrated in recent regional conflicts. The company is actively transforming its business to meet increased demand by expanding production capacity and leveraging leading-edge technologies such as artificial intelligence, autonomy, open-architecture systems, and advanced networking. The objective is to deliver overwhelming capability and value rapidly and effectively to strengthen deterrence. In 2025, 72% of Lockheed Martin Corporation's total consolidated sales were derived from the U.S. Government, including 63% from the Department of War. The F-35 program is the company's largest program, accounting for 27% of total consolidated sales and 67% of Aeronautics' sales in 2025.

Recent Strategic Developments:

• Acquisition: In the second quarter of 2025, Lockheed Martin Corporation acquired Amentum’s Rapid Solutions business for $360 million in cash. This acquisition integrated advanced space and airborne mission capabilities, including intelligence, surveillance, and reconnaissance technologies, into the Space business segment.
• Organizational Restructuring: Effective January 2026, the Integrated Warfare Systems and Sensors (IWSS) and Command, Control, Communications, Computers, Cyber, Combat Systems, Intelligence, Surveillance, and Reconnaissance (C6ISR) lines of business within Rotary and Mission Systems were restructured and renamed Sensors, Effectors & Mission Systems (SEMS) and Mission Integrated Command and Control (MIC2). This realignment aims to accelerate mission-focused solutions and enhance customer experience.
• F-35 Program Expansion: During the third quarter of 2025, Lockheed Martin Corporation and the Joint Program Office (JPO) finalized an agreement for the Lot 18 and Lot 19 F-35 Air Vehicle Production Contract, encompassing 296 aircraft. This added 3 Lot 18 aircraft and 148 Lot 19 aircraft to the F-35 backlog, underscoring the program's continued progress and longevity.
• Pension Management: In December 2025, Lockheed Martin Corporation executed buy-out conversions of group annuity contracts, transferring $943 million of gross defined benefit pension obligations and related plan assets to insurance companies.

Geographic Footprint: Lockheed Martin Corporation operates globally, with 72% of its 2025 sales from the U.S. Government and 28% from international customers. International sales are a key strategic growth area, primarily concentrated in the Aeronautics (36% of segment sales), Missiles and Fire Control (29% of segment sales), and Rotary and Mission Systems (34% of segment sales) business segments in 2025. The company's revenue distribution by geographic region in 2025 was: United States (71.6%), Europe (11.7%), Asia Pacific (10.4%), Middle East (3.8%), and Other (2.5%). As of December 31, 2025, approximately 93% of its 123,000 employees were located in the U.S. The company maintains significant operations across 333 locations, primarily in the U.S., including major sites in California, Georgia, Texas, Florida, New Jersey, New York, and Pennsylvania, with an international presence in Mielec, Poland.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 10.2% (2025)
• Operating Margin: 10.3% (2025)
• Net Margin: 6.7% (2025)

Investment in Growth:

• R&D Expenditure: $2.0 billion (2.7% of revenue) (company-funded)
• Capital Expenditures: $1.6 billion
• Strategic Investments: Lockheed Martin Corporation made a $360 million cash payment for the acquisition of Amentum’s Rapid Solutions business in 2025. The company is also making ongoing internal investments in innovative technologies, including artificial intelligence, autonomy, open-architecture systems, advanced networking, hypersonics programs, classified programs, and next-generation franchise programs. A multi-year business transformation initiative is underway to enhance digital infrastructure, increase efficiencies, and reduce costs.

Business Segment Analysis

Aeronautics

Financial Performance:

• Revenue: $30.3 billion (+5.7% YoY)
• Operating Margin: 6.9% (compared to 8.8% in 2024)
• Key Growth Drivers: The increase in sales was primarily driven by approximately $1.9 billion higher sales for the F-35 program due to increased volume on production and sustainment contracts, and about $150 million from increased production volume on the F-16 program. The decrease in operating profit was primarily attributable to higher reach-forward losses of $395 million recognized on a classified program ($950 million in 2025 compared to $555 million in 2024) and about $180 million for the C-130 program due to higher unfavorable profit adjustments and production volume. These decreases were partially offset by increased profit of approximately $270 million on the F-35 program due to higher volume and favorable profit adjustments on production and sustainment contracts.

Product Portfolio:

• Major programs include the F-35 Lightning II (international multi-role, multi-variant, fifth-generation stealth fighter), C-130 Hercules (international tactical airlifter), F-16 Fighting Falcon (combat-proven, international multi-role fighter), and F-22 Raptor (air dominance and multi-role fifth-generation stealth fighter).
• The segment is also involved in advanced development programs, including unmanned air vehicles and related technologies, and classified programs. Its Advanced Development Programs (Skunk Works®) focus on future systems such as unmanned and manned aerial systems and next-generation capabilities for air dominance, hypersonics, intelligence, surveillance, reconnaissance, situational awareness, and air mobility.

Market Dynamics:

• The F-35 program is Lockheed Martin Corporation's largest, representing 27% of total consolidated sales and 67% of Aeronautics’ sales in 2025. The U.S. Government has a stated objective of procuring 2,456 F-35 aircraft, with commitments from seven international partner countries and 12 Foreign Military Sales (FMS) customers, who collectively indicated intent to purchase 72 additional aircraft in 2025.
• Backlog for Aeronautics was $59.4 billion at December 31, 2025, a decrease from $62.8 billion at December 31, 2024, primarily due to orders timing on the C-130 program. Through December 31, 2025, 1,293 production F-35 aircraft have been delivered, with a remaining backlog of 368 aircraft.

Missiles and Fire Control (MFC)

Financial Performance:

• Revenue: $14.5 billion (+14.0% YoY)
• Operating Margin: 13.8% (compared to 3.3% in 2024)
• Key Growth Drivers: Sales increased primarily due to approximately $1.4 billion higher sales for tactical and strike missile programs (including JASSM, LRASM, Guided Multiple Launch Rocket System (GMLRS), and Precision Strike Missile (PrSM)) and about $450 million for integrated air and missile defense programs (primarily existing PAC-3 contracts). The significant increase in operating profit was primarily due to the absence of approximately $1.4 billion in reach-forward losses recognized on a classified program in 2024, and about $240 million from increased volume on tactical and strike missile programs.

Product Portfolio:

• Air and missile defense systems: Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD).
• Tactical missiles and precision strike weapon systems: Multiple Launch Rocket System (MLRS), Precision Strike Missile (PrSM), Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), Hellfire, Joint Air-to-Ground Missile (JAGM), and Javelin (produced by a joint venture with RTX Corporation).
• Fire control systems: Apache fire control system, Sniper Advanced Targeting Pod (SNIPER®), and Infrared Search and Track (IRST21®) sensors.
• Logistics and mission operations support: Special Operations Forces Global Logistics Support Services (SOF GLSS).
• Hypersonics programs and classified programs.

Market Dynamics:

• MFC continues to generate significant international interest, particularly in air and missile defense systems, with seventeen nations having chosen PAC-3 CRI and PAC-3 MSE. International demand for tactical and strike missile products and fire control systems resulted in orders for precision fire systems, Hellfire, JASSM from multiple nations, and the Apache fire control system from Poland.
• Backlog for MFC was $46.7 billion at December 31, 2025, an increase from $38.8 billion at December 31, 2024, primarily due to higher orders on JASSM, LRASM, PAC-3, and Apache programs.

Rotary and Mission Systems (RMS)

Financial Performance:

• Revenue: $17.3 billion (+0.3% YoY)
• Operating Margin: 7.6% (compared to 11.1% in 2024)
• Key Growth Drivers: Sales increased primarily due to approximately $95 million for Sikorsky helicopter programs (higher Black Hawk production volume), about $75 million for integrated warfare systems and sensors (IWSS) programs (various radar programs and the River-Class Destroyer program), and approximately $45 million for C6ISR programs. These increases were partially offset by lower sales of $165 million for various training, logistics, and simulation (TLS) programs. The decrease in operating profit was primarily due to reach-forward losses of approximately $570 million on the Canadian Maritime Helicopter Program (CMHP) and $95 million on the Türkish Utility Helicopter Program (TUHP) recognized in the second quarter of 2025, and about $60 million on C6ISR programs due to unfavorable profit adjustments. These decreases were partially offset by increased profit of approximately $90 million for IWSS programs due to favorable profit adjustments.

Product Portfolio:

• Military and commercial helicopters: Black Hawk, Seahawk®, CH-53K King Stallion, Combat Rescue Helicopter (CRH), and VH-92A helicopter.
• Integrated warfare systems and sensors (IWSS): Aegis Combat System, Littoral Combat Ship (LCS), Multi-Mission Surface Combatant (MMSC), and River-Class Destroyer (RCD) programs.
• Command, control, communications, computers, cyber, combat systems, intelligence, surveillance, and reconnaissance (C6ISR) programs: Command, Control, Battle Management and Communications (C2BMC), undersea combat systems, and Australia's Joint Air Battle Management System (AIR 6500).
• Training, logistics, and simulation (TLS) programs.
• Radar systems, laser systems, and classified programs.

Market Dynamics:

• RMS experiences international interest in the Aegis Ballistic Missile Defense System from customers such as Japan, Spain, the Republic of Korea, and Australia. The Multi-Mission Surface Combatant (MMSC) program provides surface combatant ships for international customers, including the Kingdom of Saudi Arabia.
• Backlog for RMS was $47.7 billion at December 31, 2025, an increase from $38.1 billion at December 31, 2024, primarily due to higher orders on Sikorsky programs.

Space

Financial Performance:

• Revenue: $13.0 billion (+4.4% YoY)
• Operating Margin: 10.3% (compared to 9.8% in 2024)
• Key Growth Drivers: Sales increased primarily due to approximately $380 million for strategic and missile defense programs (ramp on the Next Generation Interceptor (NGI) program and higher volume on the Fleet Ballistic Missile (FBM) program) and about $255 million for commercial and civil space programs (primarily Orion). These increases were partially offset by lower net sales of $135 million on national security space programs due to changes in the program lifecycle on the OPIR mission. The increase in operating profit was primarily attributable to approximately $175 million for commercial civil space programs government satellite programs, reflecting favorable performance at completion on certain commercial civil space programs. This was partially offset by $40 million of lower equity earnings from the investment in United Launch Alliance (ULA).

Product Portfolio:

• Satellites, space transportation systems, and strategic, advanced strike, and defensive systems.
• Network-enabled situational awareness and integration of complex space and ground global systems for intelligence data.
• Classified systems and services for vital national security systems.
• Major programs include the Trident II D5 Fleet Ballistic Missile (FBM), Orion Multi-Purpose Crew Vehicle (Orion), Next Generation Overhead Persistent Infrared (Next Gen OPIR) system, Global Positioning System (GPS) III, hypersonics programs, Transport and Tracking Layer programs, and Next Generation Interceptor (NGI).

Market Dynamics:

• Space's operating profit includes its share of earnings from the 50% ownership interest in United Launch Alliance (ULA), which provides expendable launch services to the U.S. Government and commercial customers.
• Backlog for Space was $39.8 billion at December 31, 2025, an increase from $36.4 billion at December 31, 2024, primarily due to higher orders for strategic and missile defense programs, including NGI, strategic re-entry programs, and hypersonics.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Lockheed Martin Corporation repurchased $3.0 billion of its common stock (6.6 million shares) in 2025.
• Dividend Payments: The company paid $3.1 billion in dividends ($13.35 per share) in 2025.
• Dividend Yield: 2.81% (based on 2025 dividends per share and average share price in Q4 2025).
• Future Capital Return Commitments: As of December 31, 2025, the total remaining authorization for future common share repurchases under the company's program was $8.3 billion, following a $2.0 billion increase authorized by the Board of Directors in October 2025.

Balance Sheet Position:

• Cash and Equivalents: $4.1 billion as of December 31, 2025.
• Total Debt: $22.9 billion (outstanding principal amount) as of December 31, 2025.
• Net Cash Position: -$18.8 billion (Total Debt less Cash and Equivalents).
• Debt Maturity Profile: The company's total outstanding debt, net of unamortized discounts and issuance costs, was $21.7 billion as of December 31, 2025. This debt is primarily in the form of publicly issued notes with fixed interest rates, with maturities extending from 2026 to 2064 and beyond. Key maturities include $1.0 billion due 2026, $750 million due 2027, $1.0 billion due 2028, $650 million due 2029, $1.15 billion due 2030, $600 million due 2031, $800 million due 2032, $1.0 billion due 2033, $1.45 billion due 2034, $1.25 billion due 2035, $1.054 billion due 2036, $1.336 billion due 2042, $1.0 billion due 2045, $1.326 billion due 2046, $750 million due 2050, $1.579 billion due 2052, $850 million due 2053, $1.0 billion due 2054, $1.05 billion due 2055, $650 million due 2062, $750 million due 2063, and $750 million due 2064.

Cash Flow Generation:

• Operating Cash Flow: $8.6 billion in 2025.
• Free Cash Flow: $6.9 billion in 2025.
• Cash Conversion Metrics: Net cash provided by operating activities increased by $1.6 billion in 2025 compared to 2024. This increase was primarily driven by various changes in working capital, notably the timing of cash payments for accounts payable and contract liabilities at Rotary and Mission Systems, and lower tax payments reflecting the impact of the One Big Beautiful Bill Act.

Operational Excellence

Production & Service Model: Lockheed Martin Corporation operates as a global aerospace and defense technology company, focused on building and sustaining integrated solutions across all warfighting domains. The company is undergoing a rapid business transformation to meet increased demand, which includes expanding production capacity and integrating advanced technologies such as artificial intelligence, autonomy, open-architecture systems, and advanced networking. A multi-year business transformation initiative is in progress to enhance digital infrastructure, improve efficiencies, foster collaboration, and reduce costs. Research and development costs are primarily expensed as incurred.

Supply Chain Architecture: Key Suppliers & Partners:

• General Suppliers: Lockheed Martin Corporation relies on other companies to provide materials, major components, products, and a portion of services under subcontracts, teaming arrangements, joint ventures, or supply agreements.
• Critical Materials: The company's products require relatively scarce raw materials, including rare earth minerals, aluminum, titanium, specialty steel, carbon fiber, and advanced microelectronics such as semiconductors. Efforts are underway to transition supply chains for rare earth minerals and magnets to secure and compliant sources.
• Joint Ventures: Lockheed Martin Corporation has a joint venture with RTX Corporation for the Javelin program and a 50% ownership interest in United Launch Alliance (ULA), which provides expendable launch services.
• Technology Partners: The company seeks to collaborate with commercial entities that possess complementary technologies to its own.

Facility Network: Lockheed Martin Corporation owns or leases building space at 333 locations, primarily in the U.S., and manages or occupies 9 government-owned facilities. The total floor space is 66.5 million square feet.

• Manufacturing: Key production locations include Palmdale, California; Marietta, Georgia; Greenville, South Carolina; Fort Worth, Texas (Aeronautics); Troy, Alabama; Camden, Arkansas; Ocala and Orlando, Florida; Lexington, Kentucky; Grand Prairie, Texas (Missiles and Fire Control); Stratford, Connecticut; Orlando, Florida; Moorestown/Mt. Laurel, New Jersey; Owego and Syracuse, New York; Manassas, Virginia; Mielec, Poland (Rotary and Mission Systems); Huntsville, Alabama; Sunnyvale, California; Denver, Colorado; Cape Canaveral, Florida; Valley Forge, Pennsylvania (Space).
• Research & Development: Research and development activities are conducted across the business segments, with Aeronautics' Advanced Development Programs (Skunk Works®) specifically focused on future systems and next-generation capabilities.

Operational Metrics:

• Backlog: $193.6 billion at December 31, 2025. Approximately 37% is expected to be recognized as revenue over the next 12 months, and a total of approximately 60% over the next 24 months.
• F-35 Deliveries: Through December 31, 2025, Lockheed Martin Corporation has delivered 1,293 production F-35 aircraft.
• Workforce: Approximately 123,000 employees as of December 31, 2025, including approximately 72,000 engineers, scientists, and information technology professionals.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Lockheed Martin Corporation engages in direct commercial sales (DCS) with international government customers.
• Channel Partners: A significant portion of international business is conducted through the Foreign Military Sales (FMS) program, contracted via the U.S. Government, which accounted for approximately 77% of international sales in 2025. The company also utilizes teaming arrangements and joint ventures with other companies.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Agencies of the U.S. Government are the primary customers, accounting for 72% of total consolidated sales in 2025, with 63% from the Department of War.
• Strategic Partnerships: The F-35 program involves commitments from seven international partner countries and 12 FMS customers. Lockheed Martin Corporation also has strategic partnerships through joint ventures, such as with RTX Corporation for the Javelin program and its investment in United Launch Alliance (ULA).
• Customer Concentration: The business is heavily dependent on contracts with the U.S. Government, and the F-35 program alone represented 27% of total consolidated sales in 2025.

Geographic Revenue Distribution:

• United States: 71.6% of total revenue in 2025.
• Europe: 11.7% of total revenue in 2025.
• Asia Pacific: 10.4% of total revenue in 2025.
• Middle East: 3.8% of total revenue in 2025.
• Other: 2.5% of total revenue in 2025.
• Growth Markets: International sales are a key component of Lockheed Martin Corporation's strategic plan, with a focus on strengthening international relationships through partnerships and joint technology efforts.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The aerospace and defense industry is characterized by long operating cycles and intense competition, with numerous competitors bidding on program opportunities and frequent bid protests. Customer requirements and acquisition processes are evolving to encourage expanded competition, including from new entrants, startups, and non-traditional defense contractors. Industry acquisitions, including vertical integration, can further intensify competition or limit access to certain suppliers. Technological advancements in areas such as additive manufacturing, data analytics, digital engineering, artificial intelligence, advanced materials, autonomy, robotics, and commercial access to space are introducing new competitive factors.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• The Boeing Company: Competes across various aerospace and defense sectors.
• General Dynamics: Overlap in defense systems.
• L3Harris Technologies: Competes in defense and technology solutions.
• Northrop Grumman: Overlap in aerospace, defense, and security.
• RTX Corporation: Competes in defense systems and is also a joint venture partner for the Javelin program.

Emerging Competitive Threats:

• New entrants, startups, and non-traditional defense contractors.
• Disruptive technologies, including the use of artificial intelligence and quantum computing for nefarious purposes, as well as advancements in additive manufacturing, data analytics, digital engineering, advanced materials, autonomy, and robotics.
• Competitors offering lower-cost services and products, or faster delivery, potentially with equivalent or even reduced capabilities.

Competitive Response Strategy: Lockheed Martin Corporation is adapting to evolving U.S. Government buying behaviors and expectations. The company is investing in emerging technologies and collaborating with commercial entities to maintain its innovation edge. A multi-year business transformation initiative is being implemented to enhance digital infrastructure, increase efficiencies, and reduce costs. Supply chain risks are managed through long-term contracts, identification of alternative sources, and inventory management. The company is also pursuing strategies to mitigate the impact of tariffs and is focused on increasing industry capacity to meet long-term demand and replenish stockpiles.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• U.S. Government Dependence: Heavy reliance on U.S. Government contracts (72% of 2025 sales), exposing the company to risks from reductions, delays, or shifts in U.S. defense spending, budget uncertainty, continuing resolutions, and federal debt ceiling issues.
• F-35 Program Concentration: The F-35 program constitutes 27% of consolidated sales, making it vulnerable to spending cuts, reduced or delayed orders, and challenges related to performance, schedule, cost, and requirements.
• Geopolitical & Macroeconomic Factors: High sensitivity to geopolitical and security issues, including foreign policy actions (tariffs, sanctions, export controls) that can affect demand and supply chains. Global conflicts have increased demand but also pose risks if production cannot scale quickly enough. Macroeconomic conditions like inflation, slower growth, higher interest rates, and currency fluctuations can impact profitability and cash flows.
• Technology Disruption: Risks associated with the failure to develop or successfully integrate new technologies, or if competitors introduce more capable or faster solutions.
• Customer Concentration: Significant dependence on the U.S. Government and the F-35 program creates concentration risk.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on subcontractors and suppliers for critical materials, components, and services. Risks include non-performance, disputes over cost/quality/timeliness, financial instability of partners, and issues with lower-tier subcontractors.
• Raw Material Scarcity: Dependence on scarce raw materials (e.g., rare earth minerals, advanced microelectronics) can lead to shortages, extended lead times, and pricing escalations, exacerbated by regulatory restrictions on sourcing.
• Capacity Constraints: Potential inability to rapidly increase production to meet heightened demand due to supply chain limitations or government funding constraints.
• Intellectual Property: The U.S. Government retains certain rights in intellectual property developed under government contracts, potentially allowing competitors to use it. Third-party intellectual property infringement claims also pose a risk.
• Human Capital: Dependence on a highly skilled workforce with security clearances in a competitive market. Risks include challenges in attracting and retaining talent, unplanned attrition, loss of key personnel, and potential work stoppages from collective bargaining.
• Cybersecurity: Exposure to a multitude of cybersecurity threats, including sophisticated attacks from nation-state actors. Risks involve compromise of sensitive information, customer/employee data, and intellectual property, as well as vulnerabilities within the multi-tiered supply chain.

Financial & Regulatory Risks

Market & Financial Risks:

• Profitability & Cash Flow Volatility: Profitability and cash flow can vary significantly based on contract mix, performance, and the ability to accurately estimate and control costs, particularly on fixed-price contracts, which carry risks of cost overruns and reach-forward losses.
• Pension Funding & Costs: Pension costs and funding requirements are sensitive to changes in interest rates, actual returns on plan assets, and actuarial assumptions, which can lead to significant fluctuations in future earnings and cash flow.
• Estimates & Impairment: Accounting for significant activities relies on complex judgments and estimates (e.g., contract sales, costs, goodwill valuation). Inaccurate estimates could materially affect financial results or lead to goodwill impairment charges ($11.3 billion recorded goodwill).
• Tax Laws & Liabilities: Changes in U.S. or foreign tax laws, regulations, or interpretations, as well as the resolution of tax audits, could adversely affect financial results and cash flows.
• International Sales Risks: International sales are subject to political and economic factors, foreign government budgets, currency fluctuations, trade sanctions, regulatory requirements, and intense competition. Failure to meet offset agreements can result in significant penalties.

Regulatory & Compliance Risks:

• Government Contracts: Extensive U.S. Government procurement laws and regulations (FAR, DFARS) impose strict compliance requirements. Violations can lead to fines, penalties, contract termination (including for convenience), suspension, or debarment. Undefinitized Contract Actions (UCAs) carry risks of unilateral definitization by the government.
• Environmental: Operations are subject to federal, state, local, and foreign environmental protection laws. Environmental remediation liabilities ($659 million recorded at December 31, 2025) are ongoing, with potential for increased costs from new regulations (e.g., perchlorate, hexavalent chromium, PFAS).
• Climate & Sustainability: Increasing global regulatory focus on GHG emissions and climate change could lead to new laws or policies (e.g., carbon taxes, reporting mandates, procurement changes) that significantly increase operational and compliance burdens and costs.
• Trade & Export Controls: Compliance with U.S. and foreign laws regarding import-export controls, technology transfer restrictions, and sanctions is critical. Sanctions (e.g., on Türkish entities) can limit contract performance and sales opportunities.

Geopolitical & External Risks

Geopolitical Exposure:

• Geographic Dependencies: Operations in regions like Europe, the Middle East, and the Pacific are sensitive to geopolitical conflicts and tensions.
• Trade Relations: Foreign policy actions, such as tariffs, sanctions, and export controls, can disrupt supply chains and affect the demand for and ability to sell products and services. For example, China has placed restrictions and sanctioned Lockheed Martin Corporation executives in connection with foreign military sales to Taiwan.
• Sanctions & Export Controls: Compliance with sanctions and export controls is critical, as demonstrated by the impact on the Türkish Utility Helicopter Program (TUHP).
• Public Health: Public health crises, epidemics, or pandemics could lead to adverse impacts on the workforce, supply chain, inflationary pressures, increased costs, and schedule or production delays.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: Lockheed Martin Corporation's R&D efforts span advanced military aircraft, air and missile defense systems, and space systems. Key focus areas include the research, design, development, manufacture, integration, sustainment, support, and upgrade of combat and air mobility aircraft, unmanned air vehicles, satellites, space transportation systems, and strategic, advanced strike, and defensive systems. The company is heavily invested in emerging technologies such as artificial intelligence, autonomy, open-architecture systems, advanced networking, hypersonics, digital engineering, advanced materials, and robotics.

• Innovation Pipeline: The Advanced Development Programs (Skunk Works®) organization within Aeronautics is dedicated to developing future systems, including unmanned and manned aerial systems and next-generation capabilities for air dominance, hypersonics, intelligence, surveillance, reconnaissance, situational awareness, and air mobility.
• Investment Level: Company-funded R&D expenditures totaled $2.0 billion in 2025.

Intellectual Property Portfolio: Lockheed Martin Corporation owns a substantial number of U.S. and foreign patents and trademarks related to its products and services. The company also develops and owns other intellectual property, including copyrights, trade secrets, and research, development, and engineering know-how. It licenses intellectual property to and from third parties. The Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) grant the U.S. Government certain rights in intellectual property developed under government contracts.

Technology Partnerships: Lockheed Martin Corporation actively forges strategic partnerships, including with commercial companies, to access and integrate complementary technologies.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Lockheed Martin Corporation invests in employee development through training, apprenticeship programs, security clearance sponsorship, leadership development plans, and tuition assistance. The company monitors employee attrition and has processes in place for management transition and the transfer of critical knowledge and skills, including leadership development and succession planning.

Board Composition: The Board of Directors oversees management’s processes for identifying and mitigating risks, including cybersecurity risks, to align risk exposure with strategic objectives. The Classified Business and Security Committee of the Board of Directors receives briefings on the cybersecurity of classified programs and the security of the classified business supply chain. The full Board retains oversight of cybersecurity due to its importance to Lockheed Martin Corporation and the heightened risk in the aerospace and defense industry.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 123,000 employees as of December 31, 2025.
• Geographic Distribution: Approximately 93% of the workforce was located in the U.S. as of December 31, 2025.
• Skill Mix: The workforce includes approximately 72,000 engineers, scientists, and information technology professionals, reflecting a highly skilled composition with requisite security clearances for specialized work.
• Union Representation: Approximately 19% of employees are covered by collective bargaining agreements with various unions.

Talent Management: Acquisition & Retention:

• Hiring Strategy: In 2025, Lockheed Martin Corporation hired nearly 10,800 new employees, including approximately 1,500 college hires, and provided internship opportunities for an additional 2,000 students. The early career strategy, including university partnerships and internships, is integral to developing talent pipelines in technical and critical skill areas.
• Retention Metrics: Employee engagement surveys are regularly conducted to gauge satisfaction and intent to stay. Employee attrition is monitored, and actions are taken based on insights gained.
• Employee Value Proposition: The company offers market-competitive compensation and benefits, including incentive and recognition plans, and a distributed workforce model that supports flexible working arrangements.

Diversity & Development:

• Development Programs: Lockheed Martin Corporation invests in employee development through training, apprenticeship programs, security clearance sponsorship, leadership development plans, and tuition assistance for continuing education or industry certifications.
• Culture & Engagement: The company fosters a working environment and culture that supports all employees and reflects its core value of "Respect Others."

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Lockheed Martin Corporation is addressing the increasing global regulatory focus on greenhouse gas (GHG) emissions and climate change through a comprehensive sustainability program. This program aims to mitigate the company's environmental impact and includes targets for reducing GHG emissions. The company actively monitors developments in climate change-related regulations for their potential effects on its operations.

Supply Chain Sustainability: Lockheed Martin Corporation is collaborating with the U.S. Government, customers, and suppliers to implement regulatory requirements for transitioning supply chains for rare earth minerals and magnets to secure and compliant sources.

Social Impact Initiatives: Not explicitly detailed in the provided filing.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: No material portion of Lockheed Martin Corporation's business is considered seasonal.
• Economic Sensitivity: The distribution of sales between accounting periods can be affected by various factors, including the timing of government awards, the availability of government funding, product deliveries, and customer acceptance. The business is highly sensitive to geopolitical and security issues. While global conflicts have increased demand for some products and services, the company's business primarily operates on a long-cycle basis.

Planning & Forecasting: The U.S. Government is broadly focused on increasing industry capacity to meet long-term demand. Lockheed Martin Corporation is working with the U.S. Government, international partners, and its supply chain to increase capacity and enhance its ability to scale operations to anticipate potential demand, deliver critical capabilities, and replenish depleted U.S. and allied stockpiles.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Lockheed Martin Corporation's business is heavily regulated, with contracts primarily with U.S. Government agencies (including military branches and NASA) and foreign government authorities. The company must comply with extensive laws and regulations governing contract formation, administration, and performance, including the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS). These regulations impose requirements for cost and pricing data certification, specific cost accounting practices, security controls for classified and unclassified information, export restrictions, and prohibitions on acquiring materials from certain countries or entities. The company's business systems (e.g., accounting, estimating, purchasing) are subject to review and approval. Commercial aircraft products must also comply with U.S. and international regulations for production, quality, airworthiness, and operational safety.

Trade & Export Controls: The company's business and operations are subject to U.S. and non-U.S. government laws, regulations, and procurement policies, including import-export controls, technology transfer restrictions, foreign investment, tariffs, taxation, repatriation of earnings, sanctions, exchange controls, the Foreign Corrupt Practices Act, other anti-corruption laws, and anti-boycott provisions of the U.S. Export Control Reform Act of 2018. International sales are subject to U.S. Government stipulations such as export restrictions and technology transfer policies. Sanctions imposed by the U.S. Government on Türkish entities have affected the company's ability to perform under the Türkish Utility Helicopter Program (TUHP).

Legal Proceedings: Lockheed Martin Corporation is a party to litigation and other proceedings arising in the ordinary course of business, including environmental matters.

• Securities-Related Actions: A putative class action was filed on July 28, 2025 (amended January 12, 2026) in the U.S. District Court for the Southern District of New York, alleging misstatements about certain classified programs in the Aeronautics and Missiles and Fire Control business segments and the F-35 program. A shareholder derivative complaint was filed on September 11, 2025, in the U.S. District Court for the District of Maryland, based on similar allegations.
• Lockheed Martin Corporation v. Metropolitan Transportation Authority: A declaratory judgment action was filed on April 24, 2009, in the U.S. District Court for the Southern District of New York, alleging breach of contract by the New York Metropolitan Transportation Authority (MTA). The MTA counterclaimed for approximately $190 million, while Lockheed Martin Corporation seeks approximately $95 million in damages. The matter has been awaiting a decision since December 2014.
• Environmental Matters: As of December 31, 2025, aggregate liabilities for environmental remediation totaled $659 million, with corresponding assets for probable future recovery of $605 million. The company is monitoring potential new regulations concerning perchlorate, hexavalent chromium, and per- and polyfluoroalkyl substances (PFAS), which could increase cleanup costs.

Tax Strategy & Considerations

Tax Profile: Lockheed Martin Corporation's effective income tax rate was 15.3% for 2025, compared to 14.2% for 2024. The higher rate in 2025 was primarily attributable to the One Big Beautiful Bill Act (the Tax Act), which resulted in lower tax deductions for foreign derived intangible income, partially offset by the favorable resolution of certain federal income tax audit items with the Internal Revenue Service (IRS). The company's tax rates in all periods benefited from research and development tax credits, dividends paid to defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income, and employee equity awards.

• Geographic Tax Planning: The company is subject to income and other taxes in the U.S. and various foreign jurisdictions, including Australia, Canada, India, Italy, Japan, Poland, and the United Kingdom.
• Tax Reform Impact: The One Big Beautiful Bill Act, signed on July 4, 2025, permanently reinstated immediate expensing for domestic research expenditures, restored full expensing for qualified machinery and equipment, and included several modifications to existing international tax provisions.
• OECD Pillar 2: Lockheed Martin Corporation does not expect the OECD's Pillar 2 framework for a global minimum corporate tax of 15% to have a material impact on its effective tax rate or financial results.

Insurance & Risk Transfer

Risk Management Framework: Lockheed Martin Corporation seeks to obtain insurance coverage from established and reputable insurance carriers to cover its risks and liabilities. However, the amount of available insurance coverage may not be adequate for all claims, particularly for unusually hazardous risks, certain natural hazards (e.g., earthquakes, fires, extreme weather), or classified contracts where disclosure limitations prevent underwriting. The company also self-insures certain types of risk.

Insurance Coverage: While Lockheed Martin Corporation maintains cybersecurity insurance, the costs related to cybersecurity threats or disruptions may not be fully insured. The company is limited in the amount of insurance it can obtain for unusually hazardous risks or certain natural hazards. Under certain classified fixed-price development and production contracts, the company is unable to insure against loss to government property due to the classified nature of the contracts.

Risk Transfer Mechanisms: Lockheed Martin Corporation utilizes derivative instruments, primarily foreign currency forward contracts and interest rate swap contracts, to reduce its exposure to market risks from changes in foreign currency exchange rates and interest rates. Foreign currency hedges are designated as cash flow hedges, while interest rate swaps may be designated as fair value or cash flow hedges. The company also has cross-indemnities in place with joint venture partners to recover amounts that may be paid on their behalf.