Lockheed Martin’s second quarter was marked by program-related losses and operational challenges that led to a significant shortfall versus Wall Street’s expectations. Management attributed these results primarily to $1.8 billion in charges across several legacy programs, including classified aeronautics and helicopter contracts. CEO James Taiclet described the financial impact as “disconcerting,” noting that unexpected cost growth on long-term contracts required a comprehensive reassessment of program assumptions and management oversight. These actions reflect Lockheed Martin’s effort to address technical and contractual challenges while maintaining a focus on supporting key defense priorities.
Is now the time to buy LMT? Find out in our full research report (it’s free).
Lockheed Martin (LMT) Q2 CY2025 Highlights:
- Revenue: $18.16 billion vs analyst estimates of $18.59 billion (flat year on year, 2.3% miss)
- EPS (GAAP): $1.46 vs analyst expectations of $6.42
- Adjusted EBITDA: $970 million vs analyst estimates of $2.53 billion (5.3% margin, 61.6% miss)
- The company reconfirmed its revenue guidance for the full year of $74.25 billion at the midpoint
- EPS (GAAP) guidance for the full year is $21.85 at the midpoint, missing analyst estimates by 19.7%
- Operating Margin: 4.1%, down from 11.9% in the same quarter last year
- Backlog: $166.5 billion at quarter end, up 5.2% year on year
- Market Capitalization: $98.37 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Lockheed Martin’s Q2 Earnings Call
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Myles Walton (Wolfe Research) pressed on whether problematic development programs have truly been derisked. CEO James Taiclet emphasized new oversight teams and recurring senior management reviews, while CFO Evan Scott committed to continued transparency and active risk monitoring.
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Ronald Epstein (Bank of America) questioned why it took large charges to change review processes and how these charges affect cash flow. Taiclet explained that new cost risks were identified only after updated monitoring, and Scott detailed the cash flow impact, noting a $500 million usage this year and step-down in future years.
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Rob Stallard (Vertical Research) asked about reduced F-35 procurement in government requests and the flexibility to fill slots with export orders. Taiclet described the congressional process and highlighted the strength of the F-35 backlog and flexibility to adjust production to international demand.
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Sheila Kahyaoglu (Jefferies) sought clarity on a $4.6 billion IRS tax claim and its effect on future cash flow. Scott stated the company disputes the tax position, has reserved $100 million, and expects little impact on long-term cash flows due to new legislation and pension assumptions.
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Peter Arment (Baird) inquired about the Golden Dome missile defense opportunity and its timing for backlog growth. Taiclet said the opportunity remains unquantified until contracts are issued but highlighted ongoing architectural discussions and readiness to invest in capacity.
Catalysts in Upcoming Quarters
In coming quarters, our team will watch (1) progress on restructuring or derisking legacy contracts, especially in classified programs and helicopter platforms, (2) the pace of new contract awards for missile and aircraft systems that could drive backlog growth, and (3) margin stabilization as production scales and operational improvements take hold. Developments in government defense budgets and the resolution of tax matters will also be important to track.
Lockheed Martin currently trades at $423, down from $461.34 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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