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July 24, 2025 • 4 min read
Delving into the financial performance of a global defense giant like Lockheed Martin (LMT) offers a unique glimpse into the intricate world of aerospace and security. By examining their latest quarterly report filed with the SEC, we can see how the company is navigating a complex global landscape. For the second quarter of 2025, the results show stable revenue overshadowed by a significant squeeze on profitability, primarily due to major cost revisions in key business segments.
For the quarter ending June 29, 2025, Lockheed Martin reported total sales of $18.16 billion, a figure that's almost perfectly flat compared to the $18.12 billion from the same period last year. While steady revenue might seem reassuring, the real story emerges further down the income statement.
The company's net income took a substantial hit, falling to $342 million from $1.64 billion in the second quarter of 2024. This translates to diluted earnings per share (EPS) of just $1.46, a sharp drop from last year's $6.85. To better understand how revenue flowed through the company's various costs to arrive at this much lower profit, the following chart illustrates the journey from sales to net earnings.
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As the chart shows, while revenue was high, the costs associated with generating that revenue were also exceptionally high this quarter, leaving a much smaller slice of the pie as profit.
The overall numbers mask a dramatic divergence in performance across Lockheed Martin's four main business divisions. The source of the profitability decline becomes clear when we look at the segment-level results, which were hit by significant negative contract adjustments.
Aeronautics: This division, which includes the flagship F-35 fighter jet program, saw a slight revenue increase to $7.4 billion. However, it swung from a hefty $751 million operating profit last year to a $98 million operating loss this quarter. This reversal was driven by a massive $730 million negative profit adjustment. This "cumulative catch-up" adjustment means the company revised its estimates of future profitability downward on certain long-term contracts, forcing it to recognize those anticipated lower earnings in the current quarter's results.
Rotary and Mission Systems (RMS): The issues were not confined to Aeronautics. RMS, responsible for Sikorsky helicopters and various combat systems, saw revenue fall 12% to just under $4 billion. It also suffered from a $550 million negative profit adjustment, leading to a $172 million operating loss—a stark contrast to the nearly $500 million profit it generated a year ago.
The Bright Spots: Fortunately, not all news was bad.
Lockheed Martin's second-quarter results paint a picture of a company facing significant execution and cost-estimation challenges in its two largest divisions. These large, negative profit-booking adjustments suggest that the expected costs to complete major programs are higher than previously anticipated. While the growth in Missiles and Fire Control and the steady performance from Space are encouraging, they weren't enough to offset the deep operating losses in Aeronautics and RMS.
As the company notes in its filing, it faces risks "related to the development, production, sustainment, performance, schedule, cost and requirements of complex and technologically advanced programs." The struggles in the F-35 and helicopter businesses appear to be a materialization of these very risks. Investors and industry observers will be watching closely to see if management can steer these critical segments back to profitability in the coming quarters.
Last updated: July 24, 2025