For the U.S. Army, it's yet another step toward putting great power competition back on the agenda, and Lockheed Martin is getting the message. The defence giant said on Monday it had secured an indefinite-delivery, indefinite-quantity contract to produce the Increment 2 of the Precision Strike Missile, the weapon that will eventually supersede the aging Army Tactical Missile System that is at the heart of America's thirty-year deep-strike force. Managed by Army Contracting Command, the award takes the missile off the test range and onto full production, which will continue through 2030 and sees about 120 missiles roll off the production line each in 2026 and 2027.

The new multi-mode seeker combines radio-frequency and infrared imaging which is what makes this version different, and worthwhile for the price. The earlier versions of the missile had the ability to only strike fixed coordinates. This one can catch something that's moving a truck convoy moving from one strike to another, or, more directly, a warship in action.

The ability was demonstrated in the flight test, the second successful demonstration of Increment 2 to engage a moving maritime target, following a initial 350-kilometre validation test in February, in which Lockheed says the missile's guidance package was tested for engagement, protected targets correctly opened its missile protection covers and captured the performance data that the engineers required to clear production. The range of the weapon is listed as exceeding 500 kilometres, well beyond the reach of most coastal air defence networks and it can be launched from existing HIMARS and M270A2 launchers already deployed throughout US and allied forces holdings.

Take away all of the technical jargon and the strategic logic becomes apparent. For years, the Pentagon has been grappling with the issue of how a land based military can conduct a naval war against China, which has more shore based missile batteries and a growing naval fleet that threaten the safety of American vessels operating near contested waters.

If hundreds of kilometres can be used to sink or disable a moving vessel without exposing a single warship, then the Army has something to offer in the field of sea denial, given that they are spread out and mobile. That's exactly the purpose of the Pentagon's Multi-Domain Task Forces, which are being established in each of the Indo-Pacific regions. Lockheed has made no bones about it: the intent is to degrade enemy air defense and gain access for the remainder of the combined force, which is what this seeker upgrade does to make it possible, instead of just theory.

All of these are not happening separately. The offers come as part of an existing contract with the Department of War to quadruple the annual production of PrSMs from 125 to 550 missiles per year, over a March contract signed last year for $4.94 billion of missiles for the Army. Think of the roughly $17 billion Next Generation Interceptor deal, a $35 billion contract to quadruple THAAD production, and a separate agreement to scale Patriot PAC-3 interceptor output from around 600 per year up to 2,000 you get the idea: America's missile-industrial base is being rebuilt on a scale not seen since the Cold War. Lockheed's figures tell the tale.

The company ended its Q2 2026 with a record backlog of $230.4 billion, which was an increase of 38 per cent YoY, and updated its full-year revenue outlook to $79.75 billion to $81.75 billion, while earnings per share were expected to be in the range of $30. The division responsible for making PrSM, Missiles and Fire Control, grew almost 20 per cent in the quarter. The analysts have cited the planned 2027 defence budget of USD 1.5 trillion which is likely to sharply increase base research and procurement expenditures, with PAC-3 budget expected to increase by approximately eight times and THAAD budget to increase by around nine times. The direction of travel is clear, although that budget will have to await House approval and the politics of the mid-term elections could complicate the process.

But there's a fighting history to the confidence as well. The Army has already been using the base Increment 1 missile, reportedly in recent Middle East strikes, providing it with real world data to feed back into the Increment 2 design while it is still being tested. The launch of the newer variant is planned for 2028, and the missile which is now in production will not enter service on frontline units for some years, as it does take a while to develop and produce defence equipment it's not a news cycle.

The impact is felt beyond Washington. Australia has been a formal partner of the PrSM programme since 2021, and already pledged to purchase successive increments with extended range. The United Kingdom is considering buying one, but the request from Norway was rejected. In countries like India, observers have a keen eye on the contract, given the intensifying difference between countries that are developing indigenous long range strike systems like BrahMos and Pralay, and those who have the option of buying access to a fast-developing American production line.

It also provides an example of the economics of scale to which indigenous programmes do not easily match: Lockheed's seven-year munitions contracts, which are tied to inflation, reduce the risk of its munitions investment, compared with the lack of that kind of risk with smaller defence industrial bases.

Risks remain. Strain in the supply chain, exposure to tariffs and rare earth shortages as a result of Strait of Hormuz disruptions have already pushed margins in the sector to the limit, and even as the order book starts to fill up, Lockheed has been more than 20 per cent from its 52-week peak.