The second-quarter 2025 earnings report released on July 22 by Lockheed Martin prompted strong reactions from Wall Street. The company’s operating profit decreased by 65% to $748 million, which is significantly lower than its previous forecast of $2.15 billion. Revenue also fell short of expectations, at $18.16 billion. This disappointment resulted in Lockheed’s stock price plummeting by 9%, the most significant decline of the year. Additionally, the stock values of Lockheed’s subcontractors experienced a decline.
The report disclosed substantial losses aggregating $1.6 billion, which were the result of a classified Aeronautics program and other contract failures. Lockheed Martin was compelled to reduce its annual earnings per share forecast from $27.30 to a range of $21.70 to $22.00.
Noah Poponak, an analyst at Goldman Sachs, maintained a “Sell” rating on Lockheed Martin and reduced his 12-month price target from $406 to $398. Poponak anticipates that ongoing operational issues will reduce profits, disrupt cash flow, and render future earnings less predictable. He also noted that investments in classified aviation and helicopter programs have the potential to reduce free cash flow beyond 2025. Additionally, he emphasized the uncertainty that has been introduced by the sixth-generation NGAD fighter initiative and the uncertainty surrounding future F-35 funding, which remains a critical component of Lockheed’s revenue. The IRS is requesting an additional $4.6 billion in outstanding taxes from Lockheed, which has further complicated the situation, according to the company’s Chief Financial Officer.
In the midst of these challenges, CEO James Taiclet disclosed that Lockheed Martin is currently in discussions with U.S. officials regarding the proposed $175 billion missile defense system similar to the “Iron Dome,” which had been put forward by President Trump. However, Lockheed Martin has not finalized any contracts. Using technology developed for the NGAD project, which Lockheed lost to Boeing in March 2025, Taiclet reiterated plans for an ambitious F-35 modernization program on July 22. He characterized this modernization attempt as a critical step in the transition to the next-generation F-47 fighter, which is named after the 47th U.S. president. In his previous statements, Taiclet described the upgrade as a “Ferrari-style” overhaul, asserting that it could offer 80% of the sixth-generation capabilities at half the cost. Despite not winning the NGAD contract, he argued that Lockheed remains committed to facilitating the most efficient transition from fifth- to sixth-generation fighter technology. He also suggested that the government may benefit from applying NGAD technologies to the F-35.
At a critical juncture for the F-35 program, which has become central to the company’s future, Lockheed’s leadership is under intense scrutiny. The 2026 budget proposal from the Pentagon reduces the number of F-35 orders for all U.S. service branches to a mere 47 units. Delays in software updates have suspended the Air Force’s deliveries for an entire year. Lockheed’s chief executive openly discussed the financial setbacks of its advanced aerodynamic programs, managed by its secretive Skunk Works division. He expressed doubts about profitability before 2028.
It has also experienced a decline in its reputation in other regions. The F-22 Raptor, which was previously the most expensive fifth-generation fighter, began being phased out in 2022 as a result of chronic maintenance issues, software errors, and accidents. The Air Force suspended the F-22 production in July 2009, leading to the aircraft’s subsequent nickname, the “Technological Nightmare.”
Analysts are questioning the feasibility of CEO Taiclet’s pledge to upgrade the F-35 to sixth-generation standards. The Air Force contracted five aerospace leaders, including Lockheed, Boeing, and Northrop Grumman, to develop a next-generation adaptive turbofan engine. In August 2022, the Air Force awarded $975 million to each aerospace leader. Nevertheless, the rejection of the existing GE Aviation and Pratt & Whitney prototypes resulted in a restart with the same companies, although Boeing, Lockheed, and Northrop had never previously built engines. This action was interpreted by defense experts as a lack of confidence in the industry veterans GE and Pratt. In March 2025, Boeing was awarded a $20 billion contract to lead the NGAD sixth-generation F-47 fighter effort, effectively eliminating Lockheed. Taiclet responded by restating his commitment to a more affordable upgrade path to near-sixth-generation capability that involves the F-35. Nevertheless, there is a degree of skepticism surrounding such commitments, particularly in light of the fact that GE Aviation and Pratt & Whitney continue to collaborate directly with the Air Force on engines, while the outcomes of significant taxpayer-funded initiatives by Lockheed and others are still uncertain.
Amidst the ongoing government’s support for contractors, there is increasing apprehension that the promised capabilities of enormous contracts may not be delivered, and the United States could be left with more unreliable military aircraft fleets and larger budget deficits. The significant decline in Lockheed Martin shares may be attributed to the current market outlook.