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The Story
You’re Lockheed Martin, one of America’s biggest defense contractors. You’ve just lost a massive $20 billion contract to build the next-generation F-47 fighter jet to your rival Boeing. Your stock is trading at $480, down from highs of $618. European allies are suddenly saying “thanks, but we’ll make our own weapons now.”
Then Donald Trump walks back into the White House.
Suddenly, he’s talking about a $175 billion “Golden Dome of America” missile defense system. He wants you to build not one, but TWO new fighter jets—the F-55 and the F-22 Super. The defense budget that was supposed to be cut by 50% but is now increasing by 13% to over $1 trillion.
Is this the comeback story Lockheed Martin desperately needs? Or is it too good to be true?
The Context: From Budget Cuts to Budget Bonanza
Let’s rewind to understand how we got here. Earlier this year, the aerospace and defense industry was in panic mode. President Trump had initially talked about slashing the defense budget by half. Defense stocks were getting hammered as investors feared the worst.
But here’s the thing about defense spending—it’s really hard to cut when you’re facing an increasingly hostile world. China is expected to have 1,000 nuclear weapons by 2030. Russia has around 1,500 operational nuclear weapons. North Korea keeps firing missiles into the ocean like it’s the Fourth of July.
So what happened? Reality set in. Those 50% cuts became 8% cuts, which then became a 13% increase to $1.01 trillion in FY26. As one analyst noted, “there is no realistic base to cut defense budgets” when adversaries are rapidly expanding their capabilities.
This is classic Trump—make a bold initial statement, watch everyone scramble, then land somewhere that’s actually more favorable than the starting position.
Enter the Golden Dome: A $175 Billion Moonshot
Now, let’s talk about the crown jewel of Trump’s defense agenda—the Golden Dome of America. Think of it as Israel’s Iron Dome, but supersized for a country that’s 400 times bigger and facing much more sophisticated threats.
But here’s where it gets interesting. The Iron Dome cost about $4 billion to develop and deploy. If you scale that up for America’s size and the complexity of modern threats, $175 billion suddenly sounds… optimistic.
The Congressional Budget Office did their own math and came up with some eye-watering numbers. Just the space-based interceptor component alone could cost between $160.7 billion and $830.6 billion over 20 years, depending on launch costs and the number of interceptors needed.
So either Trump’s $175 billion budget is wildly unrealistic, or we’re getting “Golden Dome Light”—a scaled-down version that might not actually protect against the full range of threats it’s supposed to handle.
What Exactly Is the Golden Dome?
The Golden Dome isn’t just one system—it’s a “system of systems” that would integrate at least 30 different components across land, sea, air, and space. Here’s how it would work:
Phase 1 – Boost Phase (Up to 5 minutes): Infrared satellites detect the heat signature of missile launches and track initial trajectories.
Phase 2 – Mid-Course Phase (20-30 minutes): A combination of space-based, ground-based, and sea-based sensors track the missile through space, identify decoys, and determine the exact trajectory.
Phase 3 – Terminal Phase (1 minute): Final tracking and interception using the most appropriate weapon system.
All of this gets coordinated through a Command & Control, Battle Management & Communications (C2BMC) system that decides which interceptor should take the shot.
It’s incredibly complex, which is why nearly 200 companies are drooling over the potential contracts. But it’s also why the three-year timeline Trump wants is probably impossible.
The Fighter Jet Revival: F-55 and F-22 Super
As if the Golden Dome wasn’t enough, Trump has also floated two new fighter jet programs that could be music to Lockheed’s ears.
First, there’s the F-55—essentially a twin-engine version of the F-35 stealth fighter. The F-35 has been Lockheed’s cash cow, with 13 European countries already signed up to buy it. A more powerful version could extend that gravy train for decades.
Then there’s the F-22 Super—a modernized version of the F-22 Raptor, arguably the most expensive fighter jet ever built at $400 billion per unit (yes, billion with a ‘b’). The original F-22 program was canceled over a decade ago because it was just too expensive. But now Trump wants to bring it back.
The beauty of these programs from Trump’s perspective is that they help maintain competition in the defense industry. Boeing got the F-47 contract, so maybe Lockheed gets the F-55 and F-22 Super. Keep everyone fed, keep everyone competing, keep prices reasonable.
Why Lockheed Martin Desperately Needs This
Here’s the uncomfortable truth about Lockheed Martin right now—they need a win, badly.
The company is currently projecting low single-digit growth in sales and free cash flow. Among major defense contractors, Lockheed ranks dead last in expected free cash flow growth. Everyone else is expecting double-digit growth; Lockheed is looking at maybe 1-3%.
Their shareholder returns tell an even more concerning story. In 2023 and 2024, Lockheed returned over 100% of its free cash flow to shareholders through dividends and buybacks. They’re projecting to do the same through 2027.
Think about that for a second. They’re literally paying out more money than they’re generating. That’s not sustainable unless new contracts start flowing in.
The Golden Dome project alone could completely transform this picture. As the prime contractor and integrator, Lockheed could see their free cash flow growth jump from single digits to double digits, putting them back in line with their peers.
Lockheed’s Secret Weapon: They’re Already Building the Pieces
Here’s why Lockheed is the frontrunner for the Golden Dome contract—they’re already building most of the components.
They won the Next-Generation Interceptor contract. They make THAAD interceptors. They build interceptors for the Patriot system. Their radar portfolio includes the Long-Range Discrimination Radar and AN/TPY-4 Radar. They’re already the prime contractor for the C2BMC system that would serve as the “brain” of the Golden Dome.
Most importantly, they’ve proven they can integrate complex systems. The AEGIS naval combat system? That’s Lockheed. It’s basically a smaller version of what the Golden Dome would need to do.
From a risk perspective, Lockheed is the safe choice. They have the experience, the existing contracts, and the desperate need to win that might make them willing to take on more financial risk than their competitors.
The European Problem: When Your Best Customers Want to Break Up
But here’s where things get complicated. While Trump is showering Lockheed with potential domestic contracts, their European customers are basically saying “it’s not you, it’s us… actually, it is you.”
The European Commission has proposed a new loan mechanism to help EU countries ramp up weapons production, with rules that effectively exclude U.S. manufacturers in most cases. France has long pushed for European defense independence, but now Portugal is questioning whether to buy Lockheed’s F-35 jets, and other countries are quietly expressing similar concerns.
This “Buy European” movement has emboldened Lockheed’s competitors. Dassault Aviation is pushing their Rafale fighter. Saab is marketing the Gripen. The Eurofighter consortium (BAE Systems, Airbus, and Leonardo) is promoting the Typhoon.
For Lockheed, this represents a real threat to future revenues. They currently have contracts to sell F-35s to 13 European countries, including 10 EU members. If that pipeline dries up, it could offset some of the gains from domestic programs.
Lockheed’s Counter-Strategy: If You Can’t Beat Them, Join Them
Rather than fighting the European trend, Lockheed is embracing it with a clever strategy: become European.
Last month, they announced a partnership with German defense group Rheinmetall to set up a missile and rocket manufacturing center in Germany. This facility will produce advanced missiles including ATACMS, GMLRS, and Hellfires—some of which could potentially be exported back to the U.S.
It’s a brilliant move. By manufacturing in Europe, Lockheed can participate in the European defense ecosystem rather than being excluded from it. Plus, it helps solve supply chain bottlenecks back home.
They’re also expanding their Polskie Zaklady Lotnicze Mielec subsidiary in Poland—already their largest production facility outside the U.S. and Poland’s largest defense exporter. More jobs, more local production, more integration into the European defense supply chain.
Raymond Piselli, Lockheed’s VP for international business, put it perfectly: “What we’re trying to do is put work in a country where it’s value added to our supply chain, value added to our platforms and what we want to build, in the United States and in Europe.”
The Numbers Game: Is Lockheed Fairly Valued?
Let’s talk money. Lockheed currently trades at 20 times earnings and 22 times free cash flow. That’s slightly more expensive than Northrop Grumman (19 times earnings, 38 times free cash flow) and much more reasonable than… well, Boeing doesn’t even make profits right now, so they’re not in the conversation.
The company has a decent 2.8% dividend yield and projects 13% long-term earnings growth—twice as fast as Northrop Grumman.
But here’s the key question: are these numbers based on winning the Golden Dome contract, or do they assume business as usual?
If Lockheed wins the Golden Dome as prime contractor, along with one or both of the fighter jet programs, the current valuation could look cheap in hindsight. If they don’t, and European sales continue to decline, the stock could be fairly valued or even overvalued.
The Risks: What Could Go Wrong?
Let’s be honest about the risks here. The Golden Dome project is incredibly ambitious—perhaps too ambitious.
A three-year timeline for a system involving 30+ components across multiple domains? That sounds like a recipe for cost overruns and delays. The defense industry is littered with programs that promised the moon and delivered significantly less.
The budget is also questionable. $175 billion sounds like a lot until you realize the Congressional Budget Office thinks just one component could cost $160-830 billion over 20 years. Either the scope is going to be dramatically reduced, or taxpayers are in for sticker shock.
From a competitive standpoint, nearly 200 companies want a piece of this pie. That level of competition could turn into a race to the bottom on pricing, with companies underbidding to win contracts and then struggling to deliver profitably.
There’s also the political risk. Defense programs that span multiple administrations often get modified, delayed, or canceled entirely. What happens to the Golden Dome if Trump doesn’t win reelection in 2028?
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