By Pratyush Thakur and Mike Stone

(Reuters) -Defense contractor Lockheed Martin (LMT) on Tuesday joined rival RTX in lifting annual profit and sales forecasts, driven by strong demand for military equipment amid escalating global tensions.

The Bethesda, Maryland-based company now expects per-share profit of $26.65 for 2024, above its earlier forecast of $26.10 to $26.60.

It also sees full-year sales of $71.25 billion, slightly above the midpoint of its earlier forecast of $70.50 billion to $71.50 billion.

Conflicts in the Middle East and the protracted Russia-Ukraine war have resulted in nations boosting their defense spending, which has benefited arms manufacturers.

However, Lockheed's flagship F-35 program is facing challenges, particularly due to delays in rolling out an upgrade intended to enhance the fighter jet's processing capabilities.

The US military, which had stopped accepting deliveries due to the delay, resumed deliveries earlier this year with a truncated upgrade, but is withholding the final $5 million payment for each jet until the completion of the upgrade.

In the absence of reimbursements, Lockheed is forced to pay for the parts of the F-35 jets to be delivered in 2026 and 2027, diminishing returns for the company's investors.

"Had the program been fully funded over this period of time in the third quarter, we would have had sales closer to about 5% growth." Lockheed CFO Jay Malave told Reuters in an interview.

The business that makes the F-35 jet posted a 3% decline in sales in the third quarter. Lockheed's overall revenue of $17.10 billion missed analysts' estimates of $17.35 billion, according to LSEG data.

However, Lockheed's per-share profit stood at $6.80, beating expectations of $6.50.

(Reporting by Pratyush Thakur in Bengaluru; Editing by Shinjini Ganguli)