U.S. Defense Exports and the Long-Term Growth of Lockheed Martin: A Geopolitical Engine for Shareholder Value

The global arms trade has become a barometer of geopolitical tension, and in 2025, the United States remains its dominant force. According to the latest data from the Stockholm International Peace Research Institute (SIPRI), U.S. arms exports accounted for 43% of the global market between 2020 and 2024, a sharp rise from 35% in the previous five years. This surge is not accidental—it is a direct response to the seismic shifts in global security dynamics, from Russia's invasion of Ukraine to China's assertive posturing in the Indo-Pacific. For companies like Lockheed Martin, the world's largest defense contractor, these trends are not just tailwinds; they are a blueprint for sustained growth.

Geopolitical Demand: The New Normal

The war in Ukraine has been a catalyst for a global rearmament boom. European NATO members have more than doubled their arms imports since 2015–19, with the U.S. supplying 64% of their needs. Ukraine itself became the world's largest arms importer during this period, with 45% of its arsenal sourced from the U.S. This demand has rippled across the globe. In Asia, India's procurement of U.S. systems—despite a 9.3% decline in overall imports—reflects its strategic balancing act between China and Russia. Meanwhile, the Middle East remains a critical market, with Saudi Arabia and other Gulf states relying heavily on U.S. military hardware.

For Lockheed Martin, these trends translate into a robust order book. In 2024, the company reported $71.04 billion in revenue, with 73% derived from U.S. government contracts. The U.S. Department of Defense alone accounted for 64% of its government revenue, a figure that has grown by 47% since 2010. The company's net profit surged to $7.013 billion in 2024, a 20% year-over-year increase, driven by contracts for systems like the F-35, PAC-3 missile defense, and the Javelin anti-tank system.

Production Scalability: Building for the Future

Lockheed Martin's ability to scale production is a critical differentiator. The company is ramping up output of key systems to meet surging demand. For instance, PAC-3 Missile Segment Enhancement (MSE) production is expected to exceed 600 units in 2025, with a target of 650 units by 2027. Similarly, the Guided Multiple Launch Rocket System (GMLRS) is on track to produce 14,000 units annually, while the High Mobility Artillery Rocket System (HIMARS) has doubled its output to 96 launchers per year. These figures are not just numbers—they represent a strategic alignment with the U.S. military's emphasis on long-range precision fires and integrated air and missile defense.

The company is also investing heavily in automation and supply chain resilience. A $2.8 billion investment from the U.S. Army is accelerating the production of HIMARS and GMLRS, while a new 20,000-square-foot smallsat processing facility in Colorado enables the delivery of 180 spacecraft annually. These initiatives are part of a broader push to digitize manufacturing, reduce lead times, and maintain cost efficiency in an era of rapid technological obsolescence.

Shareholder Value: Balancing Growth and Returns

Despite its focus on growth, Lockheed Martin remains disciplined in its capital allocation. In Q2 2025, the company returned $1.3 billion to shareholders through dividends and share repurchases, even as it invested $800 million in infrastructure and innovation. This balance is crucial for sustaining long-term value. The company's free cash flow, though temporarily pressured by program losses (notably a $1.6 billion charge in Q2 2025), remains robust due to its high-margin defense contracts and strong order backlog.

The FY2025 National Defense Authorization Act (NDAA), which authorizes $895.2 billion for defense programs, further underpins this strategy. With a focus on hypersonic weapons, space resilience, and AI-driven systems, the NDAA aligns with Lockheed's core competencies. The company's $1.5 billion contract for the Conventional Prompt Strike (CPS) hypersonic system and GPS III Follow-On satellites exemplifies its ability to secure high-impact, long-duration projects.

Risks and Considerations

While the geopolitical tailwinds are strong, investors should not ignore headwinds. Rising tensions between the U.S. and its allies over issues like the F-35 program (with Canada and Portugal reconsidering purchases) highlight the fragility of international partnerships. Additionally, the diversification of defense procurement—evidenced by France's 9.6% global arms export share and China's 5.9%—could erode U.S. dominance over time. However, Lockheed's technological edge, industrial base, and strategic alignment with U.S. defense priorities position it to outperform peers in this evolving landscape.

Conclusion: A Strategic Bet for the Long Haul

For investors, Lockheed Martin represents a rare combination of geopolitical tailwinds, operational scalability, and disciplined capital management. The company's ability to translate global instability into sustained revenue growth—while maintaining strong returns to shareholders—makes it a compelling long-term holding. As the world grapples with an increasingly fragmented security environment, Lockheed Martin's role as a cornerstone of U.S. and allied defense capabilities is unlikely to diminish.

In an era where defense spending is no longer a cyclical concern but a structural one, Lockheed Martin's strategic positioning offers a clear path to value creation. For those seeking exposure to the intersection of geopolitics and industrial might, the company's stock remains a compelling case study in aligning with the forces that shape the modern world.