Lockheed Martin to Triple PAC-3 Missiles in Pentagon Deal

Lockheed Martin said Tuesday it will more than triple annual production of its PAC-3 Missile Segment Enhancement interceptors under a new seven-year agreement with the U.S. War Department — strengthening long-term revenue visibility against a backdrop of rising demand for missile defense systems, The Wall Street Journal reports.

The Bethesda, Maryland-based defense giant said the pact will lift PAC-3 MSE production capacity to about 2,000 interceptors per year, up from roughly 600, backed by sustained investment in manufacturing and supply chains.

In response to the announcement, LMT shares were trading higher mid-morning Tuesday, up about 2.7% to the mid-$500s, reflecting investor optimism on the production ramp and defense spending tailwinds.

The deal is aligned with the Pentagon’s acquisition transformation strategy, which aims to give defense contractors predictable, multiyear demand to support larger capital investment, increased production rates, and improved operating efficiency.

Lockheed said it is well positioned to meet the expanded output target, having already boosted PAC-3 MSE production by more than 60% over the past two years, and expects to sustain elevated deliveries through continued capacity build-out.

The PAC-3 MSE is a hit-to-kill interceptor used in the Patriot air-and-missile defense system, designed to counter ballistic and cruise missiles as well as aircraft. Demand for the system has grown sharply amid heightened geopolitical tensions and significant U.S. weapons transfers to allied nations.

In September, the U.S. Army awarded Lockheed roughly $10 billion to produce nearly 2,000 PAC-3 missiles between fiscal years 2024 and 2026.

Pentagon officials have indicated they ultimately want suppliers to reach that annual output level—approximately three to four times current production rates—highlighting strong future revenue potential for Lockheed Martin.

Previous reporting has pointed to Pentagon concerns about stretched missile inventories in a prolonged major-power conflict, particularly with China.

For investors, the larger contract and production scale-up underscore Lockheed’s positioning as a major beneficiary of elevated U.S. defense spending and a shift toward longer, more stable procurement cycles.