Two of the world's largest defense contractors, RTX and Lockheed Martin, reported better-than-expected second-quarter results and lifted their financial targets for 2026. The upgrades come as both companies sit on record backlogs—the value of signed orders not yet delivered—pointing to years of steady work ahead.
What the numbers show
RTX, the parent company of Pratt & Whitney and Collins Aerospace, raised its 2026 earnings per share (EPS) and sales guidance after beating analyst estimates for the quarter. Lockheed Martin, the maker of the F-35 fighter jet and other military systems, did the same. Both companies cited strong demand across their key business segments, including aerospace, missiles, and defense electronics.
A backlog is a critical metric for defense contractors because it represents future revenue that is already under contract. Unlike consumer goods companies that sell products quickly, defense firms often work on multi-year programs where revenue recognition can be uneven. A growing backlog signals that demand is robust and that the company has a clear line of sight to future earnings.
Why backlogs are surging
The record backlogs at RTX and Lockheed reflect a broader trend of increased global defense spending. Geopolitical tensions, including the war in Ukraine and rising competition with China, have prompted many governments to boost their military budgets. This has led to a surge in orders for everything from fighter jets and missiles to radar systems and cybersecurity tools.
For example, Lockheed Martin's backlog reached new highs as international customers placed orders for F-35s and other systems. RTX similarly saw strong demand for its missile defense systems and aircraft engines. The companies' ability to convert these backlogs into revenue will depend on supply chain stability and production efficiency, but the sheer size of the orders provides a strong foundation.
This trend is not limited to the U.S. As Thales orders surged 21% to €12.47 billion, Europe's defense spending acceleration is adding to the global picture of rising military investment.
What it means for investors
For everyday investors, the raised targets and record backlogs at RTX and Lockheed are positive signals. They suggest that these companies have a multi-year pipeline of work already locked in, which can support stable earnings growth even if the broader economy slows. Defense spending is often considered a defensive sector because it is less tied to consumer demand and more driven by government budgets and national security priorities.
However, investors should be aware that defense stocks can face risks from political changes, budget negotiations, and export restrictions. A shift in government priorities or a peace deal that reduces tensions could slow order growth. Still, the current backlogs provide a buffer against near-term volatility.
RTX and Lockheed are not alone in benefiting from this environment. Other companies in the defense supply chain, such as those making components or providing services, may also see similar tailwinds. For context, Norfolk Southern beat Q2 estimates on fuel surcharges and stronger freight demand, showing that industrial demand is also picking up in other sectors.
Looking ahead
Both RTX and Lockheed will need to execute on their production plans to turn backlogs into revenue. Supply chain issues, labor shortages, and inflation have been challenges for the industry, but the companies have been working to improve efficiency. The raised 2026 targets suggest management is confident in their ability to deliver.
Investors will watch for updates on key programs, such as the F-35 and Pratt & Whitney's geared turbofan engine, as well as any new contract wins. The broader defense spending environment remains supportive, with many countries committing to increase military budgets as a percentage of GDP.
In summary, RTX and Lockheed Martin's strong quarter and raised targets underscore the strength of the defense sector. For investors, the record backlogs offer a rare combination of visibility and growth potential, making these stocks worth monitoring as part of a diversified portfolio.
