Lockheed Martin’s latest filing reveals a widening gap between reported profits and cash generation. Revenue for the twelve months to Q3 2026 reached $79.12 billion, a 7.9% increase over the prior year. This growth rate accelerated by 0.7 percentage points compared to the quarter before.

What stands out

Net income and free cash flow are diverging in speed. Net income rose 55.1% over the year, while free cash flow climbed 82.5%.

The trailing operating margin reached 11.8%, up 3.5 percentage points from a year earlier. Consequently, net income over the twelve months totaled $6.51 billion, representing a 55.1% increase on the year before. The trailing gross margin stood at 11.7% during this period.

Cash flow

Cash generation from operations accelerated sharply. Operating cash flow over the twelve months was $10.11 billion, up 59.0% on the year before. Capital spending remained modest at $1.73 billion, or 2.2% of revenue. Subtracting capital spending from operating cash flow yields free cash flow of $8.38 billion, an 82.5% increase on the year before. This results in a free-cash-flow margin of 10.6% of revenue, which is up 4.3 percentage points from a year earlier. Meanwhile, the average diluted share count fell 1.5% over the year.

In context

Current performance metrics sit above the company’s historical averages. Today’s free-cash-flow margin of 10.6% is higher than 86% of the company’s own past quarterly readings. These historical readings have ranged from 1.3% to 13.2%. The current operating margin of 11.8% is higher than 47% of past quarterly readings, which have ranged from 8.3% to 14.3%. Additionally, the twelve-month revenue growth rate of 7.9% is higher than 77% of past quarterly readings, which have ranged from −11.1% to 16.6%.

Guidance

The company adjusted its outlook for the current fiscal year. It raised its 2026 guidance for Sales to a range of $80,000.0 million to $82,000.0 million. It also raised its 2026 guidance for Diluted earnings per share to a range of $30.35 to $30.75. The company provided 2026 guidance for Total FAS/CAS pension adjustment at $1,365.0 million. Guidance for Capital expenditures stands at a range of $2,100.0 million to $2,300.0 million.

What it means for value

Our model shows high sensitivity to growth assumptions. If growth is 5 percentage points lower, the value decreases by 27.2%. If growth is 5 percentage points higher, the value increases by 35.4%. A free-cash-flow margin 1 percentage point lower would reduce the value by 9.4%.

What to watch

The next filing will show whether the divergence between net income and free cash flow persists. It will also reveal if the operating margin expansion continues or stabilizes. Investors should monitor how capital spending trends align with the updated guidance for the remainder of the year.