While the markets are busy with the question of whether the AI revolution will justify the valuation, another sector is quietly gaining momentum: defense. We broke down the thesis in our defense-supercycle piece. Today we got a rare opportunity to test it - two of the world's largest giants reported the same morning, Lockheed Martin (NYSE: LMT) and RTX (NYSE: RTX) - and both told the same story: beat expectations, record backlogs, and raised guidance.
About the Companies: Two Models of the Same Sector
Lockheed Martin is the "pure" one - a nearly exclusive defense contractor, centered on the F-35 fighter jet, missile systems (PAC-3, THAAD) and space activity. The model: long-term government projects with an enormous backlog that gives visibility for years.
RTX (formerly Raytheon) is more diversified: alongside the air-defense and missile systems, it has a large civilian arm - Pratt & Whitney (aircraft engines) and Collins Aerospace (avionics and components). So RTX's report is both a defense barometer and a window into commercial aviation.
The distinction matters: Lockheed = pure defense; RTX = defense + civil aerospace. A joint read separates what is happening in the defense sector from aviation in general.
Lockheed Martin: A Record $230 Billion Backlog
The report was strong on all fronts. Sales of $20.1 billion, up 11%, and EPS of $7.94 - above expectations (about $7.22-7.28). It is important to be precise in the comparison: the comparable quarter last year was loaded with program losses ($1.6 billion), so the jump in profit is optically exaggerated - but even in clean terms, this is a strong quarter. Free cash flow jumped to $2.9 billion (versus minus $150 million last year).
The real headline: a record order backlog of $230 billion, including a multi-year contract of $35 billion to produce THAAD interceptors for the Missile Defense Agency, and $65 billion of new orders in the quarter. And management raised guidance: sales growth of about 8%, a 28% jump in segment operating profit, and free cash flow of over $7 billion. CEO Jim Taiclet tied this to the company's "21st Century Security" strategy.
RTX: A $289 Billion Backlog, and All Three Segments Expanding Margins
RTX told a similar story, even larger in size. Sales of $24.7 billion, up 14% (16% organic), and adjusted EPS of $1.89 - up 21%, above expectations (about $1.66). Free cash flow: $2.9 billion (versus minus $72 million last year).
The backlog: $289 billion, up 22% - $170 billion commercial and $119 billion defense. And RTX too raised guidance: adjusted sales of $95-96 billion (from $92.5-93.5), organic growth of 8-9%, and adjusted EPS of $7.10-7.25. An interesting point: RTX announced the sale of Raytheon's Blue Canyon Technologies business for $620 million - a sign of focusing on the core. CEO Chris Calio emphasized "double-digit growth in both the commercial aftermarket and defense," and margin expansion in all three segments.
And here is the civilian window: at RTX, the Collins division showed a 26% jump in commercial original-equipment (OE) sales, and Pratt & Whitney grew 16% - meaning not only is defense strong, but commercial aviation continues to recover.
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
I read this quarter through a wider lens: we are inside a decade of rearmament. This is not a passing storm - it is a structural change. Entire nations, which for years cut their defense budgets, are now required to rearm - NATO countries are setting new budget targets, the Middle East and the U.S. are increasing procurement - and this channels capital into the sector at a scale we have not seen in a generation. The backlogs we saw today, hundreds of billions, are exactly the economic expression of this trend.
But there is a nuance I want to stress, because it is easy to get carried away. The exploding demand for drones, autonomous systems and cheap munitions is not expected to fundamentally change the structure of the industry in the coming decade. Per research by BCG and Vertical Research Partners, even in 2033 the large and complex systems - aircraft, tanks, defense systems - will account for more than 80% of the market studied. The reason is simple: the cheap systems start from a small base, and cannot replace the full capabilities of the traditional platforms. What does change is the pace - the speed at which one must invent, innovate and deliver. And at that pace, it is precisely the giants with the capital and infrastructure that can run the fastest.
A Sector Read: What the Two Together Tell
And here is the value of the dual report. When the two largest giants in the world report the same morning, and both show record backlogs, strong cash flow, and guidance raises - this is no longer a story of one company. This is a sector confirmation of the thesis we wrote: the defense-spending supercycle is real, and it is translating into numbers. Defense budgets around the world are rising, NATO countries are increasing procurement, and the backlogs - $230 and $289 billion - give revenue visibility for years ahead.
The difference between the two illustrates a point: RTX benefits from two engines (defense and a recovering civil aviation), while Lockheed is a focused bet on pure defense. Whoever believes commercial aviation will keep recovering will prefer RTX's diversification; whoever wants clean exposure to defense - Lockheed.
The Bull Case
Those who read it positively will point to the rare picture: two giants beating, expanding margins, generating strong cash flow and raising guidance simultaneously. The backlogs are at records and give visibility for years; global defense budgets are heading one way; and the THAAD contract ($35 billion) shows the large orders keep flowing.
The Bear Case
Those who read it critically will note that the stocks already trade after a significant rally, so part of the good news is priced in. At Lockheed, the year-over-year comparison is inflated by last year's program losses. Supply-chain inflation continues to pressure, dependence on government budgets and politics remains, and in the long run the threat of cheap defense-tech looms - drones and autonomous munitions - which we elaborated on in the supercycle piece.
The debate in one line
The bulls see a perfect sector confirmation: two giants beating, record backlogs of $230 and $289 billion, and rising guidance - a supercycle translating into numbers. The bears see stocks that already priced in the news, inflated comparisons, and a long-term defense-tech threat. Both sides read the same two reports.
And yet, let us not forget the other side. While the giants celebrate record backlogs, the defense-tech wave - drones, autonomy and cheap mass munitions - is growing at a far faster pace, even if from a small base. AeroVironment (AVAV) and Kratos (KTOS) suffered negative sentiment in 2026 precisely as their backlogs swelled, and on the Israeli scene Nextvision and Aryt Industries represent that same force at a small and volatile scale.
And here I want to say something the numbers today do not show: defense-tech is going to change the battlefield from end to end. True, today the complex systems are still over 80% of the market - but the shift to AI-integrated systems, autonomous drone swarms and cheap smart munitions is not just a fast- growing category; it is a change in military doctrine itself. The recent wars already showed that a drone costing thousands of dollars can disable a platform worth millions. The giants understand this, and that is exactly why they are acquiring and integrating autonomy capabilities - but the question of who will lead this revolution, the veterans or the disruptors, is still completely open. The bet on the giants is a bet on the moat; the bet on defense-tech is a bet on the pace and on changing the rules. Both are part of the same story - and we covered both in the supercycle piece.
Summary
The dual report of Lockheed and RTX is one of those moments when you can read not just a company but a whole sector. And the message is clear: the defense supercycle is not a future thesis - it is already in the reports. Record backlogs, strong cash flow, and guidance raises at both giants confirm that the demand is real and ongoing. The question for the investor is not whether the sector is strong - it is - but how much of it is already priced in, and which model (pure defense versus defense-plus-aviation) fits their thesis. And we have an Israeli angle too: Elbit, which we covered in the supercycle piece, operates in exactly the same tailwind.
Sources: the official Q2 2026 results of Lockheed Martin and RTX as filed with the SEC (Forms 8-K, July 23, 2026), including backlog data, segment breakdown, cash flow and guidance. The charts are shown in real time via TradingView.