How LMT (Lockheed Martin) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a defense and aerospace leader like LMT (Lockheed Martin) makes money is essential for investors and anyone interested in the business of advanced technology and security. In this post, we break down LMT's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick LMT Overview

Lockheed Martin (LMT) operates as a global security and aerospace company, specializing in the research, design, development, manufacture, integration, and sustainment of advanced technology systems, products, and services. Revenue comes primarily from contracts with the U.S. government and allied nations, spanning aeronautics, missiles, rotary systems, and space technologies.
The company is organized into four main business segments: Aeronautics, Rotary & Mission Systems, Missiles & Fire Control, and Space.

Revenue Breakdown

• Total Revenue (Q3 2025): $18.6B (+8.8% YoY)
  • Aeronautics Revenue: $7.26B (39.0% of total, +11.9% YoY)
  • Rotary & Mission Systems Revenue: $4.37B (23.5% of total, +0.1% YoY)
  • Missiles & Fire Control Revenue: $3.62B (19.5% of total, +14.1% YoY)
  • Space Revenue: $3.36B (18.0% of total, +9.1% YoY)
• Growth is powered by robust demand for defense systems, increased government spending, and technological innovation across all segments.

Gross Profit and Margins

• Gross Profit: $2.24B (12.0% gross margin)
  • Cost of Revenue: $16.4B (+9.2% YoY)
  • LMT maintains moderate margins due to the scale of government contracts and operational efficiencies in manufacturing and integration.
• Most costs come from materials, labor, subcontracting, and program execution across its major defense projects.

Operating Income and Expenses

• Operating Income: $2.28B (+6.5% YoY, 12.3% margin)
• Operating Expenses: $40.0M (+73.9% YoY)
  • R&D: Not separately disclosed for Q3 2025; typically focused on next-generation aircraft, missile systems, and space technologies.
  • SG&A: Not separately disclosed for Q3 2025; includes sales, marketing, and administrative costs supporting global operations.
• LMT continues to prioritize innovation and expand operations while maintaining cost discipline and efficiency.

Net Income

• Pre-Tax Income: $1.94B (+1.0% YoY, 10.4% margin)
• Income Tax: $319M (16.5% effective tax rate)
• Net Income: $1.62B (-0.2% YoY, 8.7% net margin)
• LMT converts a significant portion of sales into profit due to its scale, contract stability, and pricing power in defense markets.

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What Drives LMT's Money Machine?

• Aeronautics: 39% of revenue, led by F-35 fighter jets and military aircraft programs.
• Missiles & Fire Control: Fastest-growing segment (+14.1% YoY), driven by demand for advanced missile systems and integrated defense solutions.
• Space: Strategic investments in satellite systems and space exploration, supporting future growth.
• Future growth areas: Hypersonics, autonomous systems, and next-gen space technologies, though not yet major profit contributors.

Visualizing LMT's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially cost of revenue) taking the largest chunk.
• Even after large investments and significant costs, 8.7% of revenue drops to the bottom line.

Key Takeaways

• LMT's money comes overwhelmingly from government contracts in aeronautics, missiles, and space
• High gross and net margins illustrate the power of LMT's scale and contract stability
• Heavy investment in R&D and advanced technologies, balanced by efficiency in operating costs
• Ongoing growth is driven by defense spending, innovation, and expansion into new domains

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FAQ About LMT's Income Statement

1. What is the main source of LMT's revenue in 2025?

LMT generates over 39% of its revenue from Aeronautics, primarily through military aircraft programs like the F-35. Other significant sources include Missiles & Fire Control 19.5%, Rotary & Mission Systems 23.5%, and Space 18%.

2. How profitable is LMT in Q3 2025?

LMT reported net income of $1.62B in Q3 2025, with a net margin of approximately 8.7%, reflecting moderate profitability driven by scale, contract stability, and operational efficiency.

3. What are the largest expense categories for LMT?

The biggest expenses on LMT's income statement are cost of revenue (materials, labor, subcontracting) and operating expenses. R&D and SG&A are not separately disclosed for Q3 2025, but R&D typically focuses on next-gen defense technologies.

4. Why does Space operate at a loss?

Space, despite generating $3.36B in revenue, faces high investment costs in satellite systems and exploration. LMT aggressively invests in future technologies, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does LMT's effective tax rate compare to previous years?

LMT's effective tax rate in Q3 2025 was 16.5%, consistent with prior years. This moderate rate is primarily due to tax benefits from international structuring and share-based compensation.