Defense Watch: Strong Q3 Earnings, New Military Contracts, But Democrats’ Sweep Poses Spending Hurdles

Leidos Holdings reported Q3 2026 revenue of $4.63B, up 4% YoY, with net income of $413M. The company secured $5.5B in new bookings and increased its full-year adjusted earnings guidance. Leidos' backlog reached $49.6B, driven by defense, cybersecurity, and health record contracts. The company also completed a joint venture transaction and updated its 2026 outlook, raising non-GAAP EPS guidance to $12.50-$12.70.

Lockheed Martin received a $694M contract to produce hypersonic missiles for the US Air Force, amid a global arms race involving the US, China, and Russia. China and Russia lead in hypersonic weapons, with China's arsenal expected to reach 4,000 by 2035. The US plans to spend $37.9B on hypersonic programs from 2027 to 2031 to catch up. China's advantages include early deployment, advanced testing infrastructure, and high production rates.

Sikorsky, a Lockheed Martin company, was selected to deliver the S-92A+ helicopter to the Republic of Korea Air Force for its Presidential Helicopter II program. The contract includes four helicopters, with local mission equipment completion by KAEMS, and additional special mission equipment and sustainment support. The S-92A+ features upgraded engines and increased payload or fuel capacity.

Russia extended a policy allowing airlines to retain Boeing and Airbus aircraft leased from foreign owners until 2028, according to government reports. The measure, initially set to expire in 2024, has been extended twice. As of now, 407 aircraft remain in Russia, with 202 settled with foreign lessors. The U.S. has permitted Boeing to resume cooperation with Belarusian airline Belavia, which received a Boeing aircraft despite sanctions.

The South Korean military selected Lockheed Martin's S-92A+ helicopter for a presidential transport project, costing 873 billion won. The new model will be operational from 2031. Additionally, the government approved a nuclear submarine project, exempting it from a feasibility study to expedite development, aiming for a launch in the late 2030s.

The U.S. Navy plans to integrate Lockheed Martin's PAC-3 MSE interceptor onto warships by 2029, expanding combat capabilities. Lockheed received a $93M contract for integration and invested $120M for maritime adaptation. Tests are planned for 2028, with full integration by 2029. The PAC-3 MSE can counter various missiles and aircraft, and the Army recently awarded Lockheed a $58B contract to boost production.