Lockheed Martin reported fourth-quarter 2025 results Thursday morning from a position of strength few companies can match: a record $179 billion backlog, rising global defense spending, and the potential for a landmark F-35 fighter jet sale to Saudi Arabia that could reshape the company's international business for years to come.

The Earnings Picture

Analysts entered Thursday expecting strong results from the world's largest defense contractor:

  • EPS expectations: Approximately $5.81 to $6.38 per share
  • Revenue expectations: Between $18.68 billion and $20 billion
  • Record backlog: $179 billion, providing unprecedented revenue visibility
  • Full-year 2025 outlook: Sales increased 9% year-over-year through Q3

The company's third-quarter performance set expectations high: sales grew 9% year-over-year, or 5% normalized for F-35 lot timing, while free cash flow exceeded $3 billion.

"Our record backlog of $179 billion provides confidence in our ability to deliver sustained growth. The demand environment for our products has never been stronger across all business segments."

— Lockheed Martin leadership during Q3 earnings

The F-35 Saudi Arabia Opportunity

The most closely watched development for Lockheed Martin isn't in the earnings report—it's in Washington. Reports suggest the Trump administration is moving to clear the way for F-35 sales to Saudi Arabia, a deal that has been blocked for years due to concerns about regional stability and human rights.

What a Saudi Deal Would Mean

Saudi Arabia has long sought the F-35, the world's most advanced fighter jet, as the centerpiece of its military modernization. A potential order could include:

  • Aircraft: Potentially 100+ F-35s over multiple years
  • Value: Tens of billions of dollars in aircraft, training, and support
  • Timeline: Deliveries extending through the 2030s
  • Support contracts: Decades of maintenance and upgrade revenue

For Lockheed Martin's Aeronautics division, which relies heavily on F-35 production, a Saudi deal would provide a significant new revenue stream just as European allies are accelerating their own F-35 purchases in response to the Ukraine conflict.

Geopolitical Context

The potential Saudi sale reflects broader shifts in Middle East policy. The Trump administration has prioritized defense sales as tools of both economic and foreign policy, and Saudi Arabia's importance in the region—particularly regarding Iran—has elevated its status as a potential F-35 customer.

However, no formal announcement has been made, and Congressional approval would be required. Investors are watching for any confirmation in Thursday's earnings call commentary.

Business Segment Performance

Lockheed Martin operates across four major segments, each with distinct growth drivers:

Aeronautics

The largest segment, dominated by F-35 production. Lot 18-19 deliveries have boosted near-term revenue, while international demand provides long-term growth runway. The segment also includes F-16 production, which has accelerated for international customers.

Missiles and Fire Control

Benefiting from weapons stockpile replenishment following Ukraine-related drawdowns. HIMARS, Javelin, and other precision weapons systems are seeing surge demand as NATO allies rebuild inventories.

Rotary and Mission Systems

Includes Sikorsky helicopters and various mission systems. The segment has faced some headwinds from delayed programs but remains a steady contributor.

Space

Growing segment driven by national security space programs and commercial partnerships. The Space Development Agency's satellite constellation programs and hypersonic defense systems provide growth catalysts.

The Defense Spending Tailwind

Lockheed Martin operates in perhaps the most favorable demand environment since the Cold War. Multiple factors are driving sustained defense spending increases:

  • European rearmament: NATO members are accelerating defense investment following Russia's Ukraine invasion
  • Pacific deterrence: Taiwan tensions are driving increased U.S. and allied spending in the Indo-Pacific
  • Middle East instability: Ongoing conflicts support demand for weapons and aircraft
  • U.S. budget increases: Bipartisan support for defense spending despite fiscal constraints elsewhere

The $831 billion Defense appropriation for fiscal 2026—assuming the government shutdown is avoided—represents continued growth in the company's primary market.

Valuation and Investment Thesis

Lockheed Martin shares have been volatile in recent months, falling approximately 6% over six months despite strong operational performance. The disconnect reflects broader market rotation away from defensive stocks toward growth names.

Why Investors Own Lockheed

  • Backlog visibility: $179 billion provides years of predictable revenue
  • Dividend growth: Consistent dividend increases with current yield around 2.5%
  • Defensive characteristics: Demand less sensitive to economic cycles than most industrials
  • Technological moat: F-35 and other programs have limited competition

Investor Concerns

  • Program execution: Large defense programs carry cost overrun and delay risks
  • Political risk: Defense budgets are subject to political priorities
  • Labor costs: Skilled labor shortages are increasing costs across the defense industrial base
  • Valuation: The stock trades at premiums to historical averages

What to Watch in the Call

Beyond the headline numbers, investors will focus on several key topics in Thursday's earnings call:

  • F-35 commentary: Any updates on international sales pipeline, including Saudi Arabia
  • 2026 guidance: Full-year expectations for revenue and earnings
  • Supply chain: Status of supplier health and any ongoing constraints
  • Cash deployment: Plans for dividends, buybacks, and potential acquisitions

Lockheed Martin enters 2026 with momentum that few companies can match—a record backlog, favorable demand trends, and potentially transformative international opportunities. Thursday's results will show whether that momentum is translating into the financial performance investors expect.