Lockheed Martin (LMT) Financials

Lockheed Martin’s Q1 2026 results show a company that remains highly profitable, but the latest quarter also highlights pressure on margins, weakening liquidity, and continued cash outflows. Revenue declined slightly year over year, while earnings held up better than sales. At the same time, cash fell sharply from the prior quarter and balance sheet equity stayed relatively thin compared with liabilities.

• Profitability remains solid: Q1 2026 net income was $1.49 billion on $18.02 billion of revenue, with diluted EPS of $6.44.
• Operating income stayed strong: Operating income reached $2.06 billion, showing the core business is still generating healthy earnings power.
• Gross profit margin is still respectable: Gross profit of $2.08 billion implies the company is still converting a meaningful portion of revenue into profit, even with higher costs.
• Cash generation was positive from operations: Operating cash flow was $220 million in Q1 2026, which helped offset some investing and financing outflows.
• Debt appears manageable relative to earnings power: Long-term debt was $20.53 billion, but Lockheed Martin’s recurring profitability gives it the capacity to service obligations.
• Backed by strong retained earnings: Retained earnings were $14.72 billion, reflecting a long track record of accumulated profits.
• Revenue was down modestly from Q1 2025: Q1 2026 revenue of $18.02 billion was slightly below $17.96 billion? Actually, it was roughly flat to slightly above the prior-year quarter, suggesting stable demand rather than rapid growth.
• Share count was essentially unchanged: Basic and diluted weighted average shares both came in at 230.6 million, so earnings growth was not being driven by meaningful share count changes.
• Capital spending remains moderate: Capex was $511 million in the quarter, a manageable level for a defense contractor with large program needs.
• The business still relies heavily on contract timing and working capital: Quarterly cash flow can swing materially based on receivables, inventory, and deferred revenue movements.
• Margins compressed versus prior periods: Q1 2026 revenue of $18.02 billion produced only $2.08 billion of gross profit, and gross margin was noticeably lower than the stronger periods seen in 2024 and parts of 2025.
• Free cash flow pressure is evident: After capex, investing cash flow was negative $541 million, and financing cash flow was negative $1.91 billion, driven by debt repayment and dividends.
• Cash balance dropped sharply: Cash and equivalents fell to $1.89 billion from $3.47 billion at the end of Q3 2025, and from $2.48 billion at year-end 2024.
• Equity remains thin: Total common equity was just $7.49 billion against $51.75 billion of liabilities, leaving the balance sheet highly leveraged.
• AOCI remains a drag on equity: Accumulated other comprehensive loss was $(7.50) billion, which continues to weigh on book value.
• Dividends remain a large cash use: Lockheed Martin paid $816 million in dividends in Q1 2026, a heavy commitment when cash balances are falling.

Longer-term trend: Over the last four years, Lockheed Martin has remained consistently profitable and cash-generative, but the pattern has shifted from stronger cash conversion in 2023–2024 to more uneven operating cash flow in 2025–2026. Revenue has been relatively steady, which is a positive sign for defense demand, but margins and cash balances have become less comfortable. For investors, the stock still looks like a high-quality defense franchise, but the latest numbers suggest the balance sheet and cash flow deserve closer attention.