Defence contractor Lockheed Martin (NYSE: LMT) will sharply expand production of its Patriot missile interceptors under a long-term agreement with the U.S. Department of War (DOW), reflecting surging global demand for air defence systems amid rising geopolitical tensions.
Lockheed Martin said on Tuesday it had signed a seven-year framework agreement to increase annual production capacity of its PAC-3 Missile Segment Enhancement (MSE) interceptors to about 2,000 units, up from roughly 600 today.
The deal is expected to underpin a future supply contract, subject to congressional approval and funding in the final fiscal year 2026 appropriations.
Demand for the PAC-3 interceptor - used to defend against ballistic and cruise missiles - has accelerated as the U.S. and its allies bolster air and missile defences.
The Patriot system has been widely deployed by Western nations and supplied to Ukraine as it resists Russia’s invasion.
Lockheed Martin supplies PAC-3 interceptors to the U.S. military and 16 other countries, including Japan, Poland, Sweden and Qatar.
The company delivered 620 PAC-3 MSE missiles in 2025 and has increased production by more than 60% over the past two years, according to company data.
The agreement is understood to represent a shift in how the Pentagon contracts for critical munitions.
It stems from the DOW’s Acquisition Transformation Strategy, which aims to provide defence manufacturers with longer-term demand certainty in exchange for higher output, faster delivery and shared cost savings.
Under the framework, Lockheed Martin will help finance investments needed to scale production, while benefiting from predictable, multi-year demand.
Pentagon officials said the new approach was designed to strengthen the U.S. defence industrial base by encouraging suppliers to expand capacity and reduce bottlenecks across the supply chain.
The department plans to extend similar models to other munitions programs, pending congressional approval.
The expansion comes after Lockheed Martin secured a US$9.8 billion contract in September 2025 to deliver 1,970 Patriot missiles, the largest order ever placed for the system.
The company said the increased capacity would support U.S. forces and allied and partner nations facing growing missile threats.
Industry analysts believe the move underscores how sustained conflicts and heightened tensions are reshaping defence procurement, pushing governments to prioritise stockpile replenishment and industrial resilience over short-term purchasing cycles.
Lockheed Martin expects to negotiate an initial production contract under the framework agreement once funding is approved.
The company expects the higher output to support thousands of jobs across its manufacturing and supplier network in the U.S.
“This framework agreement marks a fundamental shift in how we rapidly expand munitions production and how we collaborate with our industry partners,” DOW’s Undersecretary for Acquisition and Sustainment Michael Duffey said.
Lockheed Martin shares closed on Tuesday (Wednesday AEDT) at US$522.04, up $10.47 (2.05%).