With $57.5 billion in annual revenue, Lockheed Martin (NYSE:LMT) is a gigantic defense company -- by some measures the world's largest pure-play defense contractor. And yet with an estimated total program cost of $1.5 trillion, equivalent to about 26 years of revenue at current run rates, it's probably not overstating the case to say that the F-35 Lightning II stealth fighter program will make or break Lockheed Martin (NYSE:LMT)

Lately, there seems to be a lot more "making" than "breaking" going on.

F-35 stealth fighter in flight

Image source: Getty Images.

Poland steps up

Take last week's news, for example. On September 11, 2019, the U.S. Defense Security Cooperation Agency informed Congress that the government of Poland would like to buy 32 "Conventional Take-Off and Landing" (CTOL) F-35A fighter jets from Lockheed. 

Poland, as the DSCA explains, is looking to replace its Soviet-era fleets of MiG-29 and Su-22 combat jets with new fifth-generation stealthy warbirds from the West, the better to "deter aggression in the region and ensure interoperability with U.S. forces."

In total, and including the cost of 32 F-135 engines from United Technologies to power the airplanes (and one spare engine), Poland's proposed purchase should be worth some $6.5 billion to Lockheed and UTC, with Lockheed winning the bulk of the money. At last report, F-35A fighters sold to the U.S. Air Force were going for about $89 million apiece, with the engine making up only about 8% of the sticker price. Poland's price -- closer to $203 million per plane -- will include not just the fighter jets per se, along with their engines, but also training systems, logistics support, spare parts, and a whole host of other ancillary items and services.

What the F-35 means to Lockheed Martin

Focusing on the portion of the purchase cost that would be going to Lockheed Martin -- presumably about $6 billion after subtracting 8% from the headline price to account for UTC's engines -- this single contract could account for more than 10% of the revenue Lockheed Martin collects in a year. But for Lockheed, this deal is even more significant than these numbers suggest.

Consider that when first awarded, pundits opined that Lockheed Martin's F-35 franchise would eventually be worth some $1 trillion to Lockheed over a period of 60 years, and account for roughly 50% of the company's annual sales. With analysts now valuing the program at closer to $1.5 trillion over its duration, the size and significance of the F-35 franchise has already grown by half. Key to this increase is the expanding size of the program, as F-35 prices come down and acceptance increases -- meaning an expanding list of nations that have signed on to buy it.

To date, more than a dozen nations around the world have expressed interest in acquiring the F-35. But at last report, only eight nations were actually operating the airplane. Poland could well become the ninth -- and it wasn't even on the list of countries interested in buying the F-35 a couple years ago! 

With only 425 F-35s built to date, Lockheed still has a long runway ahead of it, even if it only ends up building the 3,100 airplanes originally anticipated to be built and sold under the program. But as more and more nations sign up to buy the F-35 over time, this program could grow even larger.

Indeed, thanks to Poland, it already is.