LOCKHEED MARTIN CORP

Previous wording

We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During thesix months ended June 29, 2025, 73% of our $36.1 billion in sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 63% from the Department of Defense (DoD)), 27% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government).

Current wording

We are a global aerospace and defense company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services. We also provide a broad range of management, engineering, technical, scientific, logistics, system integration and cybersecurity services. Our main areas of focus are in defense, space, intelligence, homeland security and information technology, including cybersecurity. We serve both U.S. and international customers with products and services that have defense, civil and commercial applications, with our principal customers being agencies of the U.S. Government. During the nine months ended September 28, 2025, 72% of our $54.7 billion in sales were from the U.S. Government, either as a prime contractor or as a subcontractor (including 63% from U.S. Department of War (DoW), also known as the Department of Defense under 10 U.S.C. § 111(a)), and 28% were from international customers (including foreign military sales (FMS) contracted through the U.S. Government).

Previous wording

We operate in a complex and evolving global security environment. Conflicts or tensions in areas such as Europe, the Middle East, and the Pacific region have heightened tensions and highlighted security requirements globally, including these regions as well as the U.S. Although these tensions and conflicts may drive interest in specific products or services as countries seek to improve their security posture, our business primarily operates on a long-cycle basis. As a result, the U.S. Government has been broadly focused on increasing industry capacity to meet long-term demand. We continue to work with the U.S. Government, international partners, and our supply chain to increase capacity and enhance our ability to scale our operations to anticipate potential demand, deliver critical capabilities, and replenish depleted U.S. and allied stockpiles of products that have been used over the past several years.

Current wording

We operate in a complex and evolving global security environment. Conflicts or tensions in areas such as Europe, the Middle East, and the Pacific region have heightened tensions and highlighted security requirements globally, including in these regions as well as the U.S. Although these tensions and conflicts may drive interest in specific products or services as countries seek to improve their security posture, our business primarily operates on a long-cycle basis. As a result, the U.S. Government has been broadly focused on increasing industry capacity to meet long-term demand. We continue to work with the U.S. Government, international partners, and our supply chain to increase capacity and enhance our ability to scale our operations to anticipate potential demand, deliver critical capabilities, and replenish depleted U.S. and allied stockpiles of products that have been consumed over the past several years.

Previous wording

Our business and financial performance are impacted by general economic conditions including inflationary pressures, delays and disruptions in supply chains, business slowdowns or shutdowns, workforce challenges and labor shortfalls, and market volatility. These macroeconomic factors have contributed, and may continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.

Current wording

Our business and financial performance are impacted by general economic conditions including inflationary pressures, delays and disruptions in supply chains, business slowdowns or shutdowns, workforce challenges and labor shortfalls, impacts from technological change, and market volatility. These macroeconomic factors have contributed, and may continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.

Previous wording

We continue to experience supply chain challenges, including supplier shortages and performance issues. These issues have delayed certain customer deliveries, limited our ability to ramp up production in response to customer demand for certain products and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency. In addition, elevated levels of inflation and macroeconomic conditions present risks for us, our suppliers and the stability of the broader defense industrial base. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. In addition, some suppliers are reducing the duration of pricing validity of their proposals to us or seeking to reopen pricing on existing agreements, which is operationally challenging and increases the risk of cost volatility. Supply chain challenges, including both the availability and cost of goods, may be further impacted due to the imposition of tariffs and the availability of rare earth minerals, as discussed below under “Recent Developments in Trade and Regulatory Policies.” We continue to work to mitigate challenges caused by the supply chain or current macroeconomic environment on our business, including by supporting small business and at-risk suppliers, deploying resources to work with our supply chain, securing materials and support by executing long-term contracts, enforcing existing contract terms, identifying alternative sources, collaborating with our customers to address industry-wide challenges, and optimizing our supply chain organization through digital transformation and workforce development. If we experience significant supply chain issues or high rates of inflation, and are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected. Inflation and higher interest rates can also constrain the overall purchasing power of our customers for our products and services potentially impacting future orders, especially in a budget constrained environment. We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.

Current wording

We have experienced, and continue to experience, supply chain challenges, including supplier shortages and performance issues. While on-time deliveries are improving, pressures remain in certain areas, and we are proactively working with our suppliers to meet our contract commitments. In addition, macroeconomic conditions including elevated levels of inflation present risks for us, our suppliers and the stability of the broader defense industrial base. Supply chain challenges, including both the availability and cost of goods, may be further impacted due to the imposition of tariffs and the availability of raw materials including rare earth minerals, as discussed below under “Recent Developments in Trade and Regulatory Policies.” If we experience significant supply chain issues or high rates of inflation, and are unable to successfully mitigate the impact, our future profits, margins and cash flows, particularly for existing fixed-price contracts, may be adversely affected. We remain committed to our ongoing efforts to increase the efficiency of our operations and improve the cost competitiveness and affordability of our products and services, which may, in part, offset cost increases from inflation.

Previous wording

Certain materials and component parts that go into making our products are imported into the U.S. and are subject to tariffs, sanctions, embargoes, export and import controls, and other trade restrictions. The U.S. Government under the Trump Administration has increased tariffs, imposed additional tariffs, and expanded tariffs on goods imported from various countries. We also export certain products to other countries, and several countries have increased tariffs or imposed additional tariffs in response to U.S. tariffs. The tariff environment has been dynamic over the last several months, with changes occurring on an ongoing basis, and it is likely that additional developments will occur over the next several months, particularly as the U.S. negotiates with trade partners.

Current wording

Certain materials and component parts that go into making our products are imported into the U.S. and are subject to tariffs, sanctions, embargoes, export and import controls, and other trade restrictions. The U.S. Government has increased, expanded, or imposed new tariffs on goods imported from various countries. We also export certain products to other countries, and several countries have increased or imposed additional tariffs in response to U.S. tariffs. The tariff environment has been dynamic in 2025, with changes occurring on an ongoing basis, and it is possible that additional developments will occur in the future, including as a result of negotiations between the U.S. and trade partners and legal challenges to the tariffs.

Previous wording

The tariffs that have been enacted or expanded by the U.S. or other countries did not materially impact our business or financial results for the six months ended June 29, 2025. We are currently evaluating the potential future impacts of the imposition of the announced tariffs to our business and financial condition. At this time, we do not believe that the tariffs announced by the U.S. or actions taken in response to these tariffs by other countries will have a material adverse effect upon our results of operations, financial condition, or cash flows. However, the actual impact of the new tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that the target countries may take, how our Tier 1 and Tier 2 suppliers react, possible substitution effects, possible duty drawbacks, and any mitigating actions that may become available.

Current wording

The actual impact of the tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs, any countermeasures that the target countries may take, the result of negotiations between the U.S. and trade partners, how our Tier 1 and Tier 2 suppliers react, possible substitution effects, possible duty-free entry entitlements, the outcome of any legal challenges, and any mitigating actions that may become available. Tariffs that have been enacted or expanded by the U.S. or other countries had an impact of approximately $350 million on our cash flows for the nine months ended September 28, 2025. However, we expect a substantial portion of this impact to be recoverable over time. We are closely monitoring the situation and evaluating the potential future impacts of the imposition of the announced tariffs to our business and financial condition. At this time, excluding the near-term cash flow impact, we do not believe that the tariffs announced by the U.S. or actions taken in response to these tariffs by other countries will have a material adverse effect upon our results of operation or financial condition over the long term.

Previous wording

Significant changes in tax, trade, or other policies either in the U.S. or other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, could materially increase our tax burden, the price we pay for materials and component parts, the price our customers pay, and result in delays in products received or non-delivery from our vendors as well as impact the availability of materials (including rare earth minerals), which could materially impact our business and financial results. We are pursuing available options to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, including seeking exclusions, through drawbacks, refunds, recovering the costs in the pricing of our products, securing alternative sources of materials or products, or, in certain cases, qualifying for duty-free treatment. However, these actions may not be successful in fully or substantially mitigating the impact of tariffs, and, even if successful, there could be a near term impact on cash flows due to the timing of when tariffs are paid compared to when such costs may be refunded or recovered.

Current wording

Significant changes in tax, trade, or other policies either in the U.S. or other countries, as well as any fluctuation in foreign exchange rates as a result of such activity, could materially increase our tax burden, the price we pay for materials and component parts, the price our customers pay, and result in delays in products received or non-delivery from our vendors as well as impact the availability of materials (including rare earth minerals), which could materially impact our business and financial results. We are pursuing available options to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, including seeking exclusions, through drawbacks, refunds, recovering the costs in the pricing of our products, securing alternative sources of materials or products, or, in certain cases, qualifying for duty-free treatment. However, these actions may not be successful in fully or substantially mitigating the impact of tariffs, and, even if successful, there could continue to be a near-term volatility in cash flows due to the timing of when tariffs are paid compared to when such costs may be refunded or recovered.

Previous wording

In addition, recent government actions relating to rare earth minerals that are used in certain of our products, including U.S. Government sourcing prohibitions on the import of such minerals and the imposition of export controls on such minerals by China, had raised concerns about supply availability earlier this year. Although rare earth shipments have resumed under a new U.S.-China framework agreement, exports remain subject to selective licensing and review by Chinese authorities, and the rare earth supply chain continues to be vulnerable to further disruption due to increasing scarcity and constrained capacity.

Current wording

In addition, recent government actions relating to rare earth minerals that are used in certain of our products, including U.S. Government sourcing prohibitions on the import of such minerals and the imposition of export controls on such minerals by China, have raised concerns about supply availability. We are monitoring the rare earth minerals supply chain and maintaining active engagement with our suppliers as the regulatory landscape evolves. The rare earth supply chain continues to be vulnerable to disruption due to increasing scarcity and constrained capacity, and we are developing and executing mitigation plans designed to safeguard supply and meet future delivery commitments. We believe we will continue to meet our 2025 production and delivery commitments. However, if we are unable to successfully mitigate disruptions to the availability of rare earth minerals, our future profits, margins and cash flows may be adversely affected.

Previous wording

Lastly, the President has issued multiple Executive Orders, including two that are intended to (i) simplify and accelerate the procurement process through an overhaul of the Federal Acquisition Regulation (FAR), and its supplements and (ii) modernize the defense acquisition process by promoting commercial solutions, use of innovative acquisition authorities, and other existing streamlined processes. Among the actions directed by the President is a review of major defense acquisition programs that are more than 15% behind schedule or over budget, or not aligned with the Administration’s priorities, including identifying any programs for potential cancellation. While the impact of these reforms on our business is uncertain, they could potentially lead to changes in the way we interact with the U.S. Government, and we will continue to monitor and assess their effects on our business and financial results. Should the U.S. Government review one or more major defense programs in which we provide products and/or services, and this review leads to a full or partial cancellation of one of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.

Current wording

Lastly, the President has issued multiple Executive Orders, including two that are intended to (i) simplify and accelerate the procurement process through an overhaul of the Federal Acquisition Regulation (FAR), and its supplements and (ii) modernize the defense acquisition process by promoting commercial solutions, use of innovative acquisition authorities, and other existing streamlined processes. As the modernization of the FAR progresses, we continue to monitor any changes to the Defense Acquisition Regulation Supplement. Among the actions directed by the President is a review of major defense acquisition programs that are more than 15% behind schedule or over budget, or not aligned with the Administration’s priorities, including identifying programs for potential cancellation. While the full impact of these reforms on our business is uncertain, we are adapting to meet the changes in the Government buying behaviors. We continue to monitor and assess their effects on our business and financial results. As the U.S. Government continues to review defense programs in which we provide products and/or services, and if this review leads to a full or partial cancellation of one or more of these programs, this could have an adverse effect on our business, financial condition, results of operations and cash flows.

Previous wording

Our primary customer is the U.S. Government, from which we derived 73% of our sales during the six months ended June 29, 2025, including 63% from the U.S. DoD. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

Current wording

Our primary customer is the U.S. Government, from which we derived 72% of our sales during the nine months ended September 28, 2025, including 63% from the DoW. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the administration’s budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. Government domestic and international priorities. U.S. Government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

Previous wording

The Administration published its FY 2026 budget request in June 2025. The budget request includes $848.3 billion in the base budget (discretionary) funding, and $113.3 billion in reconciliation (mandatory) funding. The One Big Beautiful Bill Act passed the Senate and House, and was signed by the President on July 4, 2025. The bill provides more than $150 billion in mandatory funding (inclusive of the $113.3 billion) for DoD available until September 30, 2029.

Current wording

The Administration published its Fiscal Year (FY) 2026 budget request in June 2025. The budget request includes $848.3 billion in the base budget (discretionary) funding, and $113.3 billion in reconciliation (mandatory) funding. The One Big Beautiful Bill Act was signed by the President on July 4, 2025. The bill provides more than $150 billion in mandatory funding (inclusive of the $113.3 billion reconciliation funding) for the DoW available until September 30, 2029.

Previous wording

The legislative process has been delayed due to the late release of the FY 2026 budget request. The House Appropriations Subcommittee on Defense (HAC-D) released its FY 2026 congressional marks using the FY 2025 enacted amounts as its baseline on June 12, 2025. The bill recommends $831.5 billion in discretionary funding for the DoD. The Senate Armed Services Committee marked up its version of the FY 2026 National Defense Authorization Act (FY 2026 NDAA) on July 10, 2025 and included a topline increase of $32.1 billion. The House Armed Services Committee (HASC) also completed their markup of the FY 2026 NDAA on July 15, 2025 and held at the topline of the FY 2026 President’s budget request.

Current wording

With respect to the Appropriations Acts, the House Appropriations Subcommittee on Defense (HAC-D) released its FY 2026 congressional marks using the FY 2025 enacted amounts as its baseline on June 12, 2025. The bill recommends $831.5 billion in discretionary funding for the DoW. The Senate Armed Services Committee marked up its version of the FY 2026 National Defense Authorization Act (FY 2026 NDAA) on July 10, 2025 and included a topline increase of $32.1 billion. The House Armed Services Committee (HASC) also completed their markup of the FY 2026 NDAA on July 15, 2025 and held at the topline of the FY 2026 President’s budget request.

Previous wording

We anticipate the federal budget, debt ceiling, additional potential tax law changes and regulatory environment will continue to be subject to debate and compromise shaped by, among other things, the new Administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.

Current wording

We anticipate the federal budget, additional potential tax law changes, and regulatory environment will continue to be subject to debate and compromise shaped by, among other things, the new Administration and Congress, heightened political tensions, the global security environment, inflationary pressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs. Additionally, the administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. Those actions remain uncertain and could result in impacts to both our current and future business prospects and financial performance.

Previous wording

Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture of products and related activities with varying delivery schedules. Additionally, we close our books and records on the last Sunday of each month, except for the month of December, as our fiscal year ends on December 31, to align our financial closing with our business processes. Because of this, the number of weeks in a reporting quarter may vary slightly during the year and for comparable prior year periods. Consequently, the results of operations of a particular year, or year-to-year comparisons of sales and profits, may not be indicative of future operating results. The following discussions of comparative results should be reviewed in this context. All per share amounts cited in these discussions are presented on a “per diluted share” basis, unless otherwise noted.

Current wording

Our operating cycle is primarily long-term and involves many types of contracts for the design, development and manufacture, integration, and sustainment of products and related activities with varying delivery schedules. Additionally, we close our books and records on the last Sunday of each month, except for the month of December, as our fiscal year ends on December 31, to align our financial closing with our business processes. Because of this, the number of weeks in a reporting quarter may vary slightly during the year and for comparable prior year periods. Consequently, the results of operations of a particular year, or year-to-year comparisons of sales and profits, may not be indicative of future operating results. The following discussions of comparative results should be reviewed in this context. All per share amounts cited in these discussions are presented on a “per diluted share” basis, unless otherwise noted.

Previous wording

Product sales during the quarter ended June 29, 2025 were comparable to the same period in 2024. Higher product sales of approximately $325 million at MFC and $100 million at Space were offset by lower product sales of $375 million at RMS. Higher product sales at MFC were due to production ramp-up on Joint Air-to-Surface Standoff Missile (JASSM), Long Range Anti-Ship Missile (LRASM), and precision fires programs. Higher product sales at Space were due to higher volume on Orion and Next Generation Interceptor (NGI) programs partially offset by lower product sales due to program lifecycle on the Next Generation Overhead Persistent Infrared (Next Gen OPIR) system. Lower product sales at RMS were due to lower volume on radar and the Canadian Surface Combatant (CSC) programs, and the unfavorable cumulative adjustments to sales driven by recognizing a loss on Türkish Utility Helicopter Program (TUHP) as previously described. Product sales for Aeronautics were comparable as higher volume on F-35 production contracts was mostly offset by the unfavorable cumulative adjustment to sales driven by recognizing a loss on a classified contract in the second quarter of 2025. See “Note 10 – Other” included in our Notes to Consolidated Financial Statements for further details about program losses incurred at Aeronautics and RMS.

Current wording

Product sales increased $839 million, or 6%, during the quarter ended September 28, 2025, compared to the same period in 2024. Higher product sales of approximately $445 million at MFC, $255 million at Aeronautics and $180 million at Space. Higher product sales at MFC were due to production ramp-up on PAC-3, Joint Air-to-Surface Standoff Missile (JASSM) and Long Range Anti-Ship Missile (LRASM) programs. Higher product sales at Aeronautics were due to higher volume on F-35 production contracts and the delays in receiving additional contractual authorization and funding under the Lots 18-19 contract in the third quarter of 2024, partially offset by lower volume on classified contracts. Higher product sales at Space were due to higher volume on Fleet Ballistic Missile (FBM), Orion and Next Generation Interceptor (NGI) programs.

Previous wording

Product sales increased $780 million, or 3%, during the six months ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product sales of approximately $675 million at MFC, $145 million at Aeronautics and $80 million at Space offset by lower product sales of $120 million at RMS. Higher product sales at MFC were due to production ramp-up on JASSM, LRASM, and precision fires programs. Higher product sales at Aeronautics were due to higher volume on F-35 production contracts, partially offset by the unfavorable cumulative adjustment to sales driven by recognizing a loss on a classified contract in the second quarter of 2025. Higher product sales at Space were due to higher volume on NGI and Orion programs partially offset by lower product sales due to program lifecycle on the Next Gen OPIR system. Lower product sales at RMS were due to the unfavorable cumulative adjustment to sales driven by recognizing a loss on TUHP as previously described and lower production volume on Seahawk programs.

Current wording

Product sales increased $1.6 billion, or 4%, during the nine months ended September 28, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product sales of approximately $1.1 billion at MFC and $400 million at Aeronautics. Higher product sales at MFC were due to production ramp-up on JASSM, LRASM, precision fires and PAC-3 programs. Higher product sales at Aeronautics were due to higher volume on F-35 production contracts and the delays in the third quarter of 2024 as described above, partially offset by the unfavorable cumulative adjustment to sales driven by recognizing a loss on a classified contract in the second quarter of 2025.

Previous wording

Product costs increased $949 million, or 7%, during the quarter ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $880 million at Aeronautics and $285 million at MFC, partially offset by lower product costs of approximately $290 million at RMS. Higher product costs at Aeronautics were due to the impact of recognizing a loss on a classified contract in the second quarter of 2025 and higher volume as described above in “Product Sales”. Higher product costs at MFC were due to production ramp up as described above in “Product Sales”. Lower product costs at RMS were due to lower volume as described above in “Product Sales”.

Current wording

Product costs increased $744 million, or 6%, during the quarter ended September 28, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $395 million at MFC, $260 million at Aeronautics and $130 million at Space. Higher product costs at MFC, Aeronautics and Space were due to production ramp-up and higher volume as described above in “Product Sales”.

Previous wording

Product costs increased $1.3 billion, or 5%, during the six months ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $995 million at Aeronautics and $485 million at MFC, partially offset by lower product costs of approximately $95 million at RMS. Higher product costs at Aeronautics were due to the impact of recognizing a loss on a classified contract as described above and higher volume as described above in “Product Sales”. Higher product costs at MFC were due to production ramp up as described above in “Product Sales”. Lower product costs at RMS were due to lower production volume as described above in “Product Sales”.

Current wording

Product costs increased $2.1 billion, or 5%, during the nine months ended September 28, 2025, compared to the same period in 2024. The increase was primarily attributable to higher product costs of approximately $1.3 billion at Aeronautics and $880 million at MFC. Higher product costs at Aeronautics were due to higher volume and the impact of recognizing a loss on a classified contract as described above in “Product Sales”. Higher product costs at MFC were due to production ramp-up as described above in “Product Sales”.

Previous wording

Service costs increased $548 million, or 21%, during the quarter ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher service costs of approximately $400 million at RMS and $110 million at Aeronautics. Higher service costs at RMS were due to the impact of recognizing losses on CMHP as previously described. Higher service costs at Aeronautics were due to higher volume as described above in “Service Sales”.

Current wording

Service costs increased $599 million, or 26%, during the quarter ended September 28, 2025, compared to the same period in 2024 primarily attributable to higher service costs of approximately $475 million at Aeronautics driven by higher volume as described above in “Service Sales”.

Previous wording

Service costs increased $585 million, or 11%, during the six months ended June 29, 2025, compared to the same period in 2024. The increase was primarily attributable to higher service costs of approximately $400 million at RMS and $165 million at Aeronautics. Higher service costs at RMS were due to the impact of recognizing losses on CMHP as previously described. Higher service costs at Aeronautics were due to higher volume as described above in “Service Sales”.

Current wording

Service costs increased $1.2 billion, or 16%, during the nine months ended September 28, 2025, compared to the same period in 2024. The increase was primarily attributable to higher service costs of approximately $640 million at Aeronautics and $430 million at RMS. Higher service costs at Aeronautics were due to higher volume as described above in “Service Sales”. Higher service costs at RMS were due to the impact of recognizing a loss on CMHP as previously described.

Previous wording

Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services. Other unallocated, net reduced operating expenses by $244 million and $528 million during the quarter and six months ended June 29, 2025, compared to $197 million and $482 million during the quarter and six months ended June 30, 2024. The increase in other unallocated, net was primarily due to higher gains from the changes in the fair value of assets and liabilities related to deferred compensation plans during the quarter and six months ended June 29, 2025 compared to the same periods in 2024 and fluctuations in costs associated with various corporate items, none of which were individually significant.

Current wording

Other unallocated, net primarily includes the FAS/CAS pension operating adjustment (which represents the difference between total CAS pension cost recorded in our business segments’ results of operations and the service cost component of FAS pension (expense) income), stock-based compensation expense, changes in the fair value of assets and liabilities for deferred compensation plans, intangible asset amortization expense and other corporate costs. These items are not allocated to the business segments and, therefore, are not allocated to operating costs and expenses for products or services. Other unallocated, net reduced operating expenses by $210 million and $738 million during the quarter and nine months ended September 28, 2025, compared to $249 million and $731 million during the quarter and nine months ended September 29, 2024. The fluctuations in other unallocated, net for all periods were due to costs associated with various corporate items, none of which were individually significant.

Previous wording

Other income, net during the quarter ended June 29, 2025 was comparable to the same period in 2024. Other income, net was $63 million and $54 million during the six months ended June 29, 2025 and June 30, 2024. Other income, net, primarily includes earnings generated by equity method investees, as well as gains or losses for acquisitions, divestitures, and other items, none of which are individually significant. The increase in other income, net during the six months ended June 29, 2025 resulted primarily from an intellectual property license arrangement.

Current wording

Other income, net was $40 million and $103 million during the quarter and nine months ended September 28, 2025. Other income, net was $23 million and $77 million during the quarter and nine months ended September 29, 2024. Other income, net, primarily includes earnings generated by equity method investees, as well as gains or losses for acquisitions, divestitures, and other items, none of which are individually significant. The increase in other income, net during the quarter and nine months ended September 28, 2025 resulted primarily from an intellectual property license arrangement and the Commercial Engine Solutions divestiture net working capital true-up.

Previous wording

Interest expense was $274 million and $542 million during the quarter and six months ended June 29, 2025, compared to $261 million and $516 million during the quarter and six months ended June 30, 2024. The increase in interest expense in 2025 resulted primarily from the issuance of commercial paper and senior unsecured notes in December 2024.

Current wording

Interest expense was $286 million and $828 million during the quarter and nine months ended September 28, 2025, compared to $256 million and $772 million during the quarter and nine months ended September 29, 2024. The increase in interest expense in 2025 resulted primarily from a higher intra-period outstanding balance of commercial paper and issuance of senior unsecured notes in July 2025 and December 2024.

Previous wording

Non-service FAS pension expense was $99 million and $197 million during the quarter and six months ended June 29, 2025, compared to non-service FAS pension income of $15 million and $31 million during the quarter and six months ended June 30, 2024. The increase in expense was primarily due to higher prior service cost amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.

Current wording

Non-service FAS pension expense was $99 million and $296 million during the quarter and nine months ended September 28, 2025, compared to non-service FAS pension income of $16 million and $47 million during the quarter and nine months ended September 29, 2024. The increase in expense was primarily due to higher prior service cost amortization and a reduced asset base as detailed in “Note 6 - Postretirement Benefit Plans” included in our Notes to Consolidated Financial Statements.

Previous wording

Other non-operating income, net primarily includes gains or losses related to adjustments in valuation of early-stage company investments or gains or losses upon the sale of these investments and interest income earned on cash and cash equivalents. Other non-operating income, net was $42 million and $72 million during the quarter and six months ended June 29, 2025, compared to $46 million and $91 million during the quarter and six months ended June 30, 2024. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.

Current wording

Other non-operating income, net primarily includes gains or losses related to adjustments in valuation of early-stage company investments or gains or losses upon the sale of these investments and interest income earned on cash and cash equivalents. Other non-operating income, net was $43 million and $115 million during the quarter and nine months ended September 28, 2025, compared to $18 million and $109 million during the quarter and nine months ended September 29, 2024. See “Note 8 - Fair Value Measurements” included in our Notes to Consolidated Financial Statements for additional information.

Previous wording

Our effective income tax rates were 18.0% and 16.3% for the quarter and six months ended June 29, 2025 and 15.8% for both the quarter and six months ended June 30, 2024. The higher effective income tax rates for the quarter and six months ended June 29, 2025 were primarily attributable to increased interest expense on our uncertain tax position partially offset by changes in pre-tax earnings due to program losses previously described. The rates for all periods benefited from tax deductions for foreign derived intangible income, research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature and employee equity awards.

Current wording

Our effective income tax rates were 16.5% and 16.4% for the quarter and nine months ended September 28, 2025 and 15.4% and 15.6% for the quarter and nine months ended September 29, 2024. The higher effective income tax rates for the quarter and nine months ended September 28, 2025 were attributable to the One Big Beautiful Bill Act (the Tax Act) primarily driven by lower tax deductions for foreign derived intangible income partially offset by the favorable resolution of certain federal income tax audit items with the Internal Revenue Service (IRS). The rates for all periods benefited from research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income and employee equity awards.

Previous wording

As a result of an IRS tax audit related to our adoption of Accounting Standards Codification (ASC) 606 for certain manufacturing contracts and the associated changes to the income recognition rules enacted in the 2017 Tax Cuts and Jobs Act, the IRS has proposed adjustments that could result in significant additional federal income tax. We are pursuing administrative and potentially judicial remedies to resolve this matter. We believe our reserves for tax contingencies are adequate; however, the outcome of this matter is uncertain, and if this matter is resolved unfavorably, there could be a material impact on our profitability and future cash flows. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.

Current wording

As a result of an IRS tax audit related to our adoption of Accounting Standards Codification (ASC) 606 for certain manufacturing contracts and the associated changes to the income recognition rules enacted in the 2017 Tax Cuts and Jobs Act, the IRS has proposed adjustments that could result in significant additional federal income tax. We are in ongoing discussions with the IRS in an effort to resolve the matter. See “Note 10 - Other” included in our Notes to Consolidated Financial Statements for additional information.

Previous wording

We reported net earnings of $342 million ($1.46 per share) and $2.1 billion ($8.75 per share) during the quarter and six months ended June 29, 2025 and $1.6 billion ($6.85 per share) and $3.2 billion ($13.24 per share) during the quarter and six months ended June 30, 2024. Net earnings and earnings per share for the quarter and six months ended June 29, 2025 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 5.3 million and 5.8 million weighted average common shares outstanding during the quarter and six months ended June 29, 2025, compared to the same periods in 2024. The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuances under our stock-based awards and certain defined contribution plans.

Current wording

We reported net earnings of $1.6 billion ($6.95 per share) and $3.7 billion ($15.69 per share) during the quarter and nine months ended September 28, 2025 and $1.6 billion ($6.80 per share) and $4.8 billion ($20.05 per share) during the quarter and nine months ended September 29, 2024. Net earnings and earnings per share for the quarter and nine months ended September 28, 2025 were affected by the factors mentioned above. Earnings per share also benefited from a net decrease of approximately 5.8 million weighted average common shares outstanding during both the quarter and nine months ended September 28, 2025, compared to the same periods in 2024. The reduction in weighted average common shares was a result of share repurchases, partially offset by share issuances under our stock-based awards and certain defined contribution plans.

Previous wording

Business segment operating profit excludes the FAS/CAS pension operating adjustment described below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance. See “Note 3 - Information on Business Segments – Unallocated Items” included in our Notes to Consolidated Financial Statements for additional information.

Current wording

Business segment operating profit excludes the FAS/CAS pension operating adjustment detailed below, a portion of corporate costs not considered allowable or allocable to contracts with the U.S. Government under the applicable U.S. Government Cost Accounting Standards (CAS) or federal acquisition regulations (FAR), and other items not considered part of management’s evaluation of segment operating performance. See “Note 3 - Information on Business Segments – Unallocated Items” included in our Notes to Consolidated Financial Statements for additional information.

Previous wording

Management evaluates performance on our contracts by focusing on sales and operating profit and not by type or amount of operating expense. Consequently, our discussion of business segment performance focuses on sales and operating profit, consistent with our approach for managing the business. This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on sales and operating profit and monitors performance on our contracts in a similar manner through their completion.

Current wording

Management evaluates performance on our contracts by focusing on sales and operating profit and not by type or amount of operating expense. Consequently, our discussion of business segment performance focuses on sales and operating profit, consistent with our approach for managing the business. This approach is consistent throughout the life cycle of our contracts, as management assesses the bidding of each contract by focusing on sales and operating profit and monitors performance on our contracts in a similar manner through their completion. This method and assumptions used to evaluate contracts and recognize revenue, including the use of percentage-of-completion accounting for contracts with continuous transfer of control to the customer, are consistent with those described in our 2024 Form 10-K under

Previous wording

The following table presents the effect of our consolidated net profit booking rate adjustments on segment operating profit (in millions):

Current wording

The following table presents the effect of our consolidated net profit booking rate adjustments on segment operating profit (loss) (in millions):

Previous wording

During the quarter ended June 29, 2025, we recorded losses of $950 million on an ongoing classified program at our Aeronautics business segment, and $570 million on CMHP and $95 million on TUHP at our RMS business segment. During the six months ended June 29, 2025, in addition to the losses above, we recorded $125 million of adjustments resulting from favorable performance upon completion on certain commercial civil space programs at Space and an $80 million favorable adjustment upon completion of a classified program at Aeronautics. During the six months ended June 30, 2024 we recognized a reach-forward loss of $100 million on a classified program at our MFC business segment.

Current wording

During the nine months ended September 28, 2025, we recorded losses of $950 million on an ongoing classified program at our Aeronautics business segment, $570 million on Canadian Maritime Helicopter Program (CMHP) and $95 million on Türkish Utility Helicopter Program (TUHP) at our RMS business segment, and $105 million of unfavorable profit adjustments on C-130 programs at our Aeronautics business segment. In addition to these losses and unfavorable profit adjustments, we also recorded $130 million of favorable adjustments upon completion on certain commercial civil space programs at Space, and $80 million favorable adjustments upon completion of a classified program at Aeronautics. During the nine months ended September 29, 2024, we recognized reach-forward losses of $145 million on the same ongoing classified program at our Aeronautics business segment ($80 million was recognized during the quarter ended September 29, 2024) and of $100 million on a classified program at our MFC business segment.

Previous wording

Aeronautics’ sales during thequarter ended June 29, 2025 increased $143 million, or 2%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $470 million on the F-35 program due to higher volume on production contracts. This increase was partially offset by a $360 million unfavorable cumulative adjustment to sales driven by the loss on a classified contract as previously described.

Current wording

Aeronautics’ sales during thequarter ended September 28, 2025 increased $769 million, or 12%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $965 million on the F-35 program due to higher volume on production and sustainment contracts and the delays in receiving additional contractual authorization and funding under the Lots 18-19 contract in the third quarter of 2024. This increase was partially offset by lower sales of $140 million on classified contracts due to lower volume.

Previous wording

Aeronautics’ sales during thesix months ended June 29, 2025 increased $355 million, or 3%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $685 million on the F-35 program due to higher volume on production contracts. This increase was partially offset by a $360 million unfavorable cumulative adjustment to sales driven by the loss on a classified contract as previously described.

Current wording

Aeronautics’ sales during the nine months ended September 28, 2025 increased $1.1 billion, or 5%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $1.6 billion on the F-35 program due to higher volume on production and sustainment contracts and the delays in receiving additional contractual authorization and funding under the Lots 18-19 contract in the third quarter of 2024. This increase was partially offset by a decrease of $515 million on classified programs due to an unfavorable cumulative adjustment to sales driven by the loss on a classified contract recorded in the second quarter of 2025 and lower volume.

Previous wording

MFC’s sales during the quarter ended June 29, 2025 increased $331 million, or 11%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $330 million on tactical and strike missile programs due to production ramp-up on JASSM, LRASM and precision fires programs.

Current wording

MFC’s sales during the quarter ended September 28, 2025 increased $449 million, or 14%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $280 million on tactical and

Previous wording

MFC’s sales during the six months ended June 29, 2025 increased $711 million, or 12%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $700 million on tactical and strike missile programs due to production ramp-up on JASSM, LRASM, and precision fires programs.

Current wording

MFC’s sales during the nine months ended September 28, 2025 increased$1.2 billion, or 13%, compared to the same period in 2024. This increase was primarily attributable to higher sales of $980 million on tactical and strike missile programs due to production ramp-up on JASSM, LRASM and precision fires programs; and $270 million for integrated air and missile defense programs due to production ramp-up on PAC-3.

Previous wording

MFC’s operating profit during the six months ended June 29, 2025 increased $183 million, or 24%, compared to the same period in 2024. This increase was attributable to two primary factors: a $110 million increase in profit booking rate adjustments and a $60 million volume increase driven by production ramp-up as described above. The increase in profit booking rate adjustments was primarily due to a $100 million loss recognized on a classified program and an unfavorable profit adjustment on Hellfire in the first quarter of 2024 that did not recur, partially offset by lower favorable profit adjustments on PAC-3 in 2025.

Current wording

MFC’s operating profit during the nine months ended September 28, 2025 increased $237 million, or 19%, compared to the same period in 2024. This increase was attributable to two primary factors: a $105 million increase in profit booking rate adjustments and a $105 million volume increase driven by production ramp-up as described above. The increase in profit booking rate adjustments was primarily due to a $100 million loss recognized on a classified program in 2024 that did not recur and an unfavorable profit adjustment on Hellfire in the first quarter of 2024 that did not recur, partially offset by lower favorable profit adjustments on PAC-3 in 2025.

Previous wording

Space’s operating profit during the quarter ended June 29, 2025 increased $16 million, or 5%, compared to the same period in 2024. This increase was attributable to a $20 million increase in profit booking rate adjustments primarily due to favorable performance at completion on certain commercial civil space programs.

Current wording

RMS’ operating profit during the quarter ended September 28, 2025 increased $23 million, or 5%, compared to the same period in 2024. This increase was primarily attributable to favorable contract mix at Sikorsky.

Previous wording

The decrease was primarily attributable to lower net sales of $370 million on Sikorsky helicopter programs due to the unfavorable cumulative adjustments to sales driven by recognizing losses on CMHP and TUHP as previously described, and lower production volume on Seahawk programs; and a $145 million decrease on integrated warfare systems and sensors (IWSS) programs due to lower volume on radar and the CSC programs.

Current wording

RMS’ sales during the nine months ended September 28, 2025 decreased $307 million, or 2%, compared to the same period in 2024. The decrease was primarily attributable to lower sales of $150 million on IWSS programs due to lower volume within the laser systems portfolio and Littoral Combat Ship (LCS); $100 million for various TLS programs due to lower volume; and $50 million on Sikorsky helicopter programs primarily due to the unfavorable cumulative adjustments to sales driven by recognizing losses on CMHP and TUHP in the second quarter of 2025, as previously disclosed, and lower production volume on Seahawk programs, partially offset by higher production volume on Black Hawk programs.

Previous wording

RMS’ operating profit during thesix months ended June 29, 2025 decreased$576 million, or 62%, compared to the same period in 2024. This decrease was attributable to a $565 million decrease in profit booking rate adjustments primarily due to a $570 million loss recognized on CMHP and a $95 million loss recognized on TUHP as previously described, partially offset by unfavorable profit adjustments on Seahawk programs in the first quarter of 2024 that did not recur.

Current wording

RMS’ operating profit during the nine months ended September 28, 2025 decreased $553 million, or 39%, compared to the same period in 2024. This decrease was attributable to a $570 million decrease in profit booking rate adjustments primarily due to the losses recognized on CMHP and TUHP in the second quarter of 2025, as previously disclosed, partially offset by unfavorable profit adjustments on Seahawk programs in the first quarter of 2024 that did not recur.