Lockheed Martin Won 850 F-35s and Raised Its Forecast — but Only 94 Jets Shipped in Nine Months and the Raise Was Mostly Cash

The framework tells suppliers what the government intends to buy and when. The factory has not caught up. Lockheed Martin delivered 43 F-35s in the third quarter and 94 over nine months, against 143 a year earlier — cutting deliveries 34% in the same quarter it promised a decade of steady production.

Two things are true at once: the Pentagon says it will buy at least 850 aircraft over ten years, and it says execution remains subject to congressional authorization and appropriations. Neither chamber has passed the multi-year authority the F-35 needs, and the House has attached conditions that must be certified before a contract can be written.

Sales rose 11% to $20.71 billion in the third quarter, but gross profit rose only 8.7%, leaving gross margin at 11.8% against 12.0% a year earlier. Aeronautics — the segment that holds the F-35 line — grew sales 13% to $8.21 billion while its operating margin fell to 9.0% from 9.4%. The guidance lift is therefore a cash event: cash accounts for $800 million of the raise and profit for $25 million.

Lockheed Martin also disclosed that costs on the Lot 20 advance acquisition contract began to exceed the government's contractual authorization and funding during the quarter, and that it is still negotiating production contracts for Lot 20 and beyond. Third-quarter free cash flow of $2.999 billion leaned on a $1.249 billion working-capital inflow — the jets are being built ahead of the money that pays for them.

Missiles and Fire Control absorbed a $52.5 billion multiyear award for PAC-3 interceptors and now carries 48.8% of the record $292.0 billion backlog, at five percentage points more operating margin than Aeronautics. The fighter line that anchors the announcement is 19.6% of backlog and the lower-margin half of the mix — leaving the record backlog looking like a missile story.

Two payment mechanics split the chain. Airframe suppliers are paid per aircraft delivered; spares and depot suppliers are paid per engine hour flown and per maintenance visit — and the installed fleet's mission-capable rate fell from 67% in FY2021 to 44% in FY2025 on Government Accountability Office data cited in Japanese defense analysis. A decade of sustainment therefore matters more to the aftermarket than another 850 airframes.

The 850-jet floor underwrites 85 U.S. aircraft a year; the framework's promise of international customer orders across Lots 21-30 is what fills the remaining 71. Lockheed Martin says contract terms, pricing and schedule will be set through the normal award process — the framework caps volume, not price.

In exchange for that volume, the prime must self-fund at least $7 billion in F-35 industrial-base initiatives. That is roughly nine-tenths of a year of the free cash flow it now guides to, and more than the $5.96 billion of cash it held when the quarter closed — a decade of capacity being financed before a single Lots 21-30 foreign order is definitized.

For investors the sequence matters more than the announcement. The rate card is fixed — 850 U.S. jets, 156 a year, a decade of spares, modification kits and sustainment — while the money is not: Congress has not authorized it, Lot 20 costs already exceed appropriated funding, and the prime must fund $7 billion of its own capacity. That splits the trade, because suppliers paid per aircraft or per engine hour have a cleaner claim on this decade than the prime does — the tier-1s that sell into flight hours and depot visits capture the decade the prime is still financing.