Lockheed Martin Corporation (NYSE:LMT)’s backlog reached a record $230 billion at the end of the second quarter, up 38.3% from the prior year, and an increase of $36.8 billion from December 2025.
The jump was enabled by $65 billion in new orders during the quarter, including a $35 billion multi-year contract from the Missile Defense Agency for THAAD interceptors, which has nearly doubled the Missiles and Fire Control segment’s backlog from six months ago.
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Sales for Q2 came in at $20.1 billion, increasing 11% year-over-year. The defense contractor reported net earnings per share of $7.94, compared with $1.46 last year.
Given the momentum, the company lifted its sales and profit guidance for the year as the Pentagon looks to replenish weapons stockpiles.
The question now is whether Lockheed Martin Corporation can sustain the backlog growth ahead, or was the recent quarter’s spike just a one-time occurrence that investors should not extrapolate?
Bull Case
The $35 billion THAAD order should not be seen as a fluke. Multi-year contract awards continue coming for the company. It is part of a broader pattern stemming from countries strengthening their defense capacity years in advance. More deals of this magnitude are plausible as military expenditure keeps rising worldwide.
The defense contractor recorded a book-to-bill ratio of 3.2:1 in Q2. This is exceptionally good and means that for every $1 of sales recognized, the company is receiving over $3 of new orders. This ratio would have to significantly slump for the backlog growth to reverse.
Structural tailwinds for Lockheed Martin Corporation are expected to persist for the foreseeable future and are not cyclical. NATO and allied member nations are continuing to expand their defense expenditure, given the ongoing geopolitical conflicts.
This also reaffirms that Foreign Military Sales are a major growth driver for the company and are independent of the debate around U.S. military budgets, which helps in diversifying the sources of new backlog.
Bear Case
The math is against the thesis of backlog growth sustaining. The figure has increased by $36.8 billion over the past six months, and that includes one $35 billion THAAD contract. The sequential growth is bound to decrease if there is no contract similar to this size ahead.
There is also the aspect of high base effect. The backlog stands at a record $230 billion. This is approximately three times the company’s annual revenue guidance for 2026. Sustaining the same backlog growth rate over a higher base requires proportionally much larger contracts than even the THAAD award in Q2. A major chunk of the backlog relies on U.S. defense budgets. A shift in the Pentagon’s spending priorities could slow down new contract awards ahead, even if the overall demand for weapons remains high.
Lastly, defense contract awards are often large and in irregular tranches. These are not linear over time. A strong quarter in terms of backlog growth could be followed by a quieter one, which is primarily due to the timing of the contract, rather than a slowdown in demand.
Hedge Fund Sentiment
According to Insider Monkey, hedge fund sentiment in the stock declined 10% sequentially during the second quarter to 75 funds, down from 83 funds at the end of Q1. AQR Capital Management is the largest stakeholder in the company with shares worth $701 million as of June 30. This is despite the fund trimming its stake by 23% during Q2.
Citadel Investment Group was second with holdings of $342 million, while Holocene Advisors had the third-biggest stake valued at nearly $291 million.
Closing Take
Lockheed Martin Corporation’s record backlog of $230 billion represents strong demand across segments, especially in Missiles and Fire Control. However, the outsized THAAD contract at the end of the second quarter makes it hard to repeat. The uncertainty around government spending also adds to the equation.
Therefore, investors should anticipate backlog growth to stabilize in the quarters ahead from the spike in Q2, despite the fact that the broader demand for weapons remains robust. The company is expected to report third quarter results during the fourth week of October.
That said, LMT’s business fundamentals continue to be strong. The stock’s valuation also offers an attractive entry point for investors. It trades at a forward price-to-earnings ratio of 17.20, as of September 23, which remains below the sector median of 19.35.
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