Lockheed Martin entered into a seven‑year framework agreement with the U.S. Department of War on January 6 2026 that will lift annual production of PAC‑3 Missile Segment Enhancement (MSE) interceptors from about 600 to 2,000 units. The framework establishes the basis for a future supply contract that could be worth roughly $2.5 billion, based on a unit price of $4.2 million and the projected volume over the term.
The deal gives Lockheed Martin long‑term demand certainty, allowing the company to invest in new tooling, expanded test equipment, and a broader supplier base. Those investments are expected to generate operational efficiencies that will lower per‑unit costs, improve margins, and create a more resilient supply chain for the Patriot air‑defense system used by the U.S. and allied nations.
Lockheed’s production ramp‑up has already been underway: the company delivered 620 PAC‑3 MSE rounds in 2025, a 20 % increase over the previous year, and it secured a $9.8 billion contract in September 2025 for 1,970 interceptors. The new framework builds on that momentum and is part of the Department of War’s acquisition‑transformation strategy, which seeks to replace traditional, short‑term contracts with longer‑term, commercial‑style agreements that incentivize industry investment.
The agreement is subject to Congressional authorization and appropriations, a condition that introduces a headwind but does not diminish the strategic value of the long‑term visibility it provides. The potential for a $2.5 billion franchise and the tripling of output capacity are viewed as significant tailwinds that will strengthen Lockheed Martin’s position in the growing global market for air‑and‑missile‑defense systems.
Market reaction to the announcement was positive: Lockheed Martin shares rose over 4 % in mid‑morning trade, reaching a new 52‑week high of $537.00. The rally reflected investor confidence in the expanded production capacity, the long‑term demand certainty, and the company’s ability to achieve cost efficiencies under the new acquisition model.
Jim Taiclet, Lockheed Martin’s chairman, president, and CEO, said the agreement “builds on years of advocacy and collaboration to bring commercial practices to major acquisition programs. We will create unprecedented capacity for PAC‑3 MSE production, delivering at the speed our nation and allies demand while providing value for taxpayers and shareholders.”
Michael Duffey, Under Secretary of War for Acquisition and Sustainment, noted the framework “marks a fundamental shift in how we rapidly expand munitions production and magazine depth, and how we collaborate with our industry partners.”
The agreement is expected to add thousands of American jobs across Lockheed Martin’s supply chain and to reinforce the company’s competitive edge in a sector where demand is rising amid geopolitical tensions. The long‑term visibility also positions Lockheed Martin to capture a larger share of the Patriot system market, which is critical to U.S. and allied defense postures.
Overall, the agreement represents a material expansion of Lockheed Martin’s core missile business, a strategic shift toward longer‑term, commercial‑style contracts, and a clear signal of sustained demand for advanced air‑defense capabilities.
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