Defense contractors record backlogs as military spending increases

What happened: Defense contractors Lockheed Martin, Northrop Grumman, and Raytheon Technologies (RTX) reported strong Q2 results, driven by elevated defense demand. Lockheed Martin's backlog reached a record $145.2 billion, reflecting both near-term missile defense and munitions demand, and long-term modernization programs. U.S.-Iran tensions and global conflicts are keeping readiness in focus.

Market impact: The defense sector is benefiting from increased military spending, with contractors amassing record backlogs. This drives growth in earnings and future work. However, investors are cautious about turning these large contracts into profitable growth, as seen in Lockheed Martin's stock performance despite its record backlog.

What to watch next: Lockheed Martin's Q3 earnings report on October 25 will provide an update on its backlog conversion and growth prospects. Additionally, U.S. defense budget developments, particularly around modernization programs, will shape future demand for these contractors.