Lockheed Martin has secured a U.S. Army contract worth up to $1.2 billion to produce the second-generation Precision Strike Missile, strengthening the company’s position in the U.S. military’s long-range precision weapons program. The award comes as the Pentagon expands missile production capacity and seeks faster replacement of munitions used in recent conflicts, making long-range strike systems an increasingly important part of defense procurement.

PrSM Increment 2 Moves Into Production

The contract covers initial procurement, future orders, follow-on production and continued development of PrSM Increment 2. The Army expects production under the agreement to continue through September 13, 2031. Work will be carried out at Lockheed Martin facilities and across the company’s broader U.S. industrial base.

The Increment 2 version adds a multimode seeker that allows the missile to engage moving maritime targets, expanding the mission set beyond the fixed targets associated with earlier versions. The capability was demonstrated during the missile’s second successful flight test in August, following an initial test in March. Both tests provided data needed to advance the system toward early operational capability.

Production Capacity Is Becoming a Strategic Priority

The new contract arrives as Lockheed Martin works to substantially increase PrSM production. In March, the company signed a seven-year agreement with the U.S. Department of War aimed at expanding annual manufacturing capacity to 550 missiles. That effort builds on a $4.94 billion Army contract awarded last year and follows the weapon’s first combat use during Operation Epic Fury.

The production expansion reflects broader pressure on the U.S. defense industry to replenish missile inventories while meeting rising demand from the United States and international customers. Increasing output requires investment across manufacturing facilities, specialized suppliers, skilled labor and testing infrastructure, making production capacity as important as the underlying missile technology.

PrSM Strengthens Lockheed’s Position in Long-Range Weapons

PrSM is designed as the Army’s next-generation long-range precision strike weapon and is intended to replace the Army Tactical Missile System, or ATACMS. The program gives Lockheed Martin an important position in a segment where demand is increasing for weapons capable of striking targets at long distances while operating within increasingly complex battlefield environments.

For investors, the contract adds visibility to Lockheed Martin’s missile business while highlighting the broader shift toward replenishing precision-munitions inventories. The financial impact will depend on the pace of Army orders, production efficiency and the company’s ability to expand capacity without allowing supply-chain constraints to slow deliveries.

Going forward, investors will watch additional PrSM orders, the pace of production expansion and further flight testing of Increment 2. The Army’s ability to deploy the new missile at scale will also be important. For Lockheed Martin, the contract provides another indication that long-range precision weapons are becoming a sustained area of defense spending rather than a short-term procurement cycle.