Defense companies are traditionally known for their resilience across a range of economic conditions. The main customer of Lockheed Martin (LMT +3.65%) and others is the U.S. government and its defense agencies, closely followed by the governments of U.S. allies. They are highly reliable payers, and demand for defense tends to remain stable across economic cycles.
As such, analyzing Lockheed Martin's backlog tells you a lot about where the company is heading, and it's good news.
Image source: Getty Images.
Lockheed Martin's backlog matters
Lockheed Martin's current backlog stands at $230 billion, a figure nearly $37 billion higher than at the end of 2025. To put that figure into context, the midpoint of management's 2026 revenue guidance is $80.75 billion, so the backlog represents 2.8 times estimated 2026 revenue. It clearly implies strong growth ahead.
LMT Lockheed Martin
NYSE · As of 4:00 PM ET 10/16/26
I've broken out the backlog at the end of 2025 and the end of June. The table shows how the backlog increase is nearly entirely in the missiles and fire control (MFC) segment. This matters for two reasons, which I will outline below.
|
Segment |
End of 2025 Backlog |
End of June 2026 Backlog |
Operating Profit 2025 |
Operating Margin 2025 |
|---|---|---|---|---|
|
Aeronautics |
$59.44 billion |
$54.36 billion |
$2.09 billion |
6.9% |
|
Missiles and Fire Control |
$46.65 billion |
$87.89 billion |
$1.99 billion |
13.8% |
|
Rotary and Mission Systems |
$47.72 billion |
$48.45 billion |
$1.32 billion |
7.6% |
|
Space |
$39.82 billion |
$39.72 billion |
$1.36 billion |
10.3% |
Data source: Lockheed Martin presentations.
Why the increase in the missiles and fire control backlog matters
First, as the table indicates, the segment carries the highest profit margin for the company, and a relative increase in the backlog from MFC implies an improving backlog profit margin. Second, and arguably more importantly, it's worth noting that many defense companies, including Lockheed Martin, have suffered from delays, cost overruns, and multibillion-dollar charges on highly complex fixed-price development programs in recent years.
These issues led Lockheed's management to say at the start of 2024 that "we just are employing a lot more pricing discipline than we have more recently" regarding contracts.
That appears to be the case, because the increase in the MFC backlog has been driven by orders for mature systems where the main risk is manufacturing at scale rather than research and development. For example, the $35 billion award for Terminal High Altitude Area Defense (THAAD) interceptors in June and the $4.7 billion contract for Patriot Advanced Capability-3 (PAC-3) interceptors.
Moreover, the $230 billion backlog figure doesn't include the $53.86 billion PAC-3 order made after the second quarter ended.
Lockheed Martin's backlog is a plus
Not only is the company's backlog improving, but it's arguably lower-risk than in previous years and potentially higher-margin, too. These factors help support the investment case for the stock.
