Lockheed Martin and the F-35 Joint Program Office are still aiming to declare the Technology Refresh-3 software upgrade as combat-capable in this calendar year, but cash may continue to be withheld into 2026 as the company struggles to meet stated requirements.
“Ultimately the decision to declare combat capability is the customers. It's not ours. So we work with them and coordinate with them. But we're driving hard to work with our supply partners to provide them this capability and get it right” this year, company Chief Financial Officer Jay Malave said during TD Cowen’s 46th Annual Aerospace & Defense Conference this morning.
“I would expect, as I mentioned on the [Jan. 28] earnings call, we will continue to upgrade the system, and that will go into 2026. And so we will have some withhold releases this year and I would expect there to be more withhold releases in 2026 as well,” he added.
The Pentagon resumed deliveries of F-35s with a truncated version of the software in July after temporarily pausing acceptance of the jets until Lockheed could confidently build aircraft fitted with the robust capabilities outlined in its contract.
The jets now coming off Lockheed's shelves and production line are sophisticated enough for combat training but do not yet contain the configurations in the older TR-2 software that would make them coded for real battle. The Pentagon is withholding about $3.8 million per tail as those aircraft are delivered until the company can rectify ongoing developmental issues.
In the Jan. 28 call with investors, Malave said a “number of things” still need to be finished with TR-3, including mission system integration and improving system stability.
“We continue to make really good progress in both cases,” he said today.
Although both Lockheed and the JPO are projecting a combat-capability determination in 2025 for the software upgrade -- years after it was first intended -- future upgrades to the configuration and withheld payments from the government may continue into next year, Malave added.
The lingering impact is in part because the team is still sorting through remaining developmental issues with the software. Plus, the Government Accountability Office has said it could take nearly a year for Lockheed to clear out its backlog and fulfill stalled deliveries to the Pentagon.
The JPO, meanwhile, has yet to establish a plan to test TR-3 and associated Block 4 hardware upgrades, despite F-35s enabled with the limited version of the software already being delivered to field units, according to the latest Director of Operational Test and Evaluation report.
The earliest those examinations can likely start is mid to late fiscal year 2026, the report stated. First, Lockheed and the JPO would need to ensure TR-3 software is stable and that aircraft modifications, flight test instruments and open-air battle shaping capabilities are also locked-in.
Combat capability, along with fielding decisions, may be declared before the operational tests occur. The testing program would assess “operational effectiveness in terms of lethality and survivability in mission scenarios,” per DOT&E, and could again reveal additional deficiencies or needed improvements for the software capability.