Third Quarter 2026
Filed Oct 20, 2026Northrop Grumman Reports Third Quarter 2026 Financial Results
Third quarter sales increased 7 percent to $11.1 billion, net earnings increased 2 percent to $1.1 billion, adjusted free cash flow increased 44 percent to $1.8 billion, and backlog reached $109.6 billion. Margin rate declined, Mission Systems operating income declined, and the company cited mix pressure at Defense Systems.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total sales, three months ended September 30, 2026GAAP | $11.12B | – | 7 % |
| Product sales, three months ended September 30, 2026GAAP | $9.10B | – | – |
| Service sales, three months ended September 30, 2026GAAP | $2.02B | – | – |
| Operating income, three months ended September 30, 2026GAAP | $1.27B | – | 2 % |
| Operating margin rate, three months ended September 30, 2026GAAP | 11.4 % | – | (50) bps |
| Segment operating income, three months ended September 30, 2026non-GAAP | 1,345 | – | 5 % |
| Segment operating margin rate, three months ended September 30, 2026non-GAAP | 12.1 % | – | (20) bps |
| FAS/CAS operating adjustment, three months ended September 30, 2026other | 15 | – | (78) % |
| Interest expense, three months ended September 30, 2026GAAP | (158) | – | (2) % |
| Non-operating FAS pension benefit, three months ended September 30, 2026GAAP | 167 | – | 23 % |
| Other, net, three months ended September 30, 2026GAAP | 20 | – | (81) % |
| Earnings before income taxes, three months ended September 30, 2026GAAP | 1,298 | – | (2) % |
| Federal and foreign income tax expense, three months ended September 30, 2026GAAP | 174 | – | (22) % |
| Effective income tax rate, three months ended September 30, 2026GAAP | 13.4 % | – | (350) bps |
| Net earnings, three months ended September 30, 2026GAAP | $1.12B | – | 2 % |
| Basic earnings per share, three months ended September 30, 2026GAAP | $ 7.91 | – | – |
| Diluted earnings per share, three months ended September 30, 2026GAAP | $ 7.89 | – | 3 % |
| Weighted-average diluted shares outstanding, three months ended September 30, 2026GAAP | 142.4 | – | (1) % |
| Net cash provided by operating activities, three months ended September 30, 2026GAAP | $1.75B | – | 12 % |
| Capital expenditures, three months ended September 30, 2026GAAP | (306) | – | 2 % |
| Proceeds from sale of equipment to a customer, three months ended September 30, 2026GAAP | 371 | – | NM |
| Adjusted free cash flow, three months ended September 30, 2026non-GAAP | $1.81B | – | 44 % |
| Total sales, nine months ended September 30, 2026GAAP | 31,879 | – | 5 % |
| Operating income, nine months ended September 30, 2026GAAP | 3,354 | – | 4 % |
| Operating margin rate, nine months ended September 30, 2026GAAP | 10.5 % | – | (20) bps |
| Segment operating income, nine months ended September 30, 2026non-GAAP | 3,575 | – | 17 % |
| Segment operating margin rate, nine months ended September 30, 2026non-GAAP | 11.2 % | – | 110 bps |
| Net earnings, nine months ended September 30, 2026GAAP | $3.09B | – | 12 % |
| Diluted earnings per share, nine months ended September 30, 2026GAAP | $ 21.72 | – | 14 % |
| Net cash provided by operating activities, nine months ended September 30, 2026GAAP | $1.37B | – | 59 % |
| Adjusted free cash flow, nine months ended September 30, 2026non-GAAP | $965M | – | 1,240 % |
| Total backlog, September 30, 2026other | $109.6B | – | 15 % |
| Funded backlog, September 30, 2026other | $50.09B | – | – |
| Unfunded backlog, September 30, 2026other | $59.50B | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Aeronautics SystemsThird quarter 2026 sales increased $433 million, or 14 percent, primarily due to a $195 million increase on F-35 driven by the timing of material costs on production lots and increased sustainment volume, higher B-21 sales and an increase in B-2 sustainment volume. | $3.58B | – | 14 % |
| Defense SystemsThird quarter 2026 sales increased $248 million, or 12 percent, primarily due to a $180 million increase on Sentinel as the program continues to ramp, higher volume on the Guided Multiple Launch Rocket System Extended Range (GMLRS ER) program due to the timing of awards, and higher volume on various tactical solid rocket motor programs. | $2.31B | – | 12 % |
| Mission SystemsThird quarter 2026 sales increased $62 million, or 2 percent, primarily due to ramp-up on restricted airborne radar programs and higher volume on marine systems programs. These increases were partially offset by lower volume on restricted advanced microelectronics programs. | $3.15B | – | 2 % |
| Space SystemsThird quarter 2026 sales increased $51 million, or 2 percent, primarily due to ramp-up of programs in the restricted space portfolio, partially offset by $136 million of lower sales on Commercial Resupply Service missions due to launch timing. | $2.75B | – | 2 % |
Amounts quoted below without a unit are in millions, as in the filing’s tables. Per-share figures are as printed.
2026 Guidance As of 10/20/2026 outlook
- Revenue$43,750 — $44,250
- NoteSegment operating income 1 $4,940 — $5,040
- NoteMTM-adjusted EPS 1 $29.35 — $29.75
- NoteAdjusted free cash flow 1 $3,100 — $3,500
- NoteAeronautics Systems Sales ($B) ~$14; OM Rate % High 9%
- NoteDefense Systems Sales ($B) Mid to High $8; OM Rate % ~10%
- NoteMission Systems Sales ($B) High $12; OM Rate % Mid 15%
- NoteSpace Systems Sales ($B) ~$11; OM Rate % Low 10%
- NoteIntersegment Eliminations ~($2.7); OM Rate % Mid 13%
Capital returns
- Common stock repurchases $ (68) for the nine months ended September 30, 2026
- Cash dividends paid $ (1,035) for the nine months ended September 30, 2026
What drove it
- Third quarter sales increased $699 million, or 7 percent, driven by higher sales at all four sectors, including a 14 percent increase at Aeronautics Systems and a 12 percent increase at Defense Systems.
- Third quarter segment operating income increased $68 million, or 5 percent, primarily due to $72 million of higher operating income at Aeronautics Systems.
- Third quarter net earnings increased $24 million, or 2 percent, primarily due to a $49 million decrease in income tax expense, a $31 million increase in the non-operating FAS pension benefit and a $27 million increase in operating income.
- Third quarter net awards totaled $16.4 billion, and backlog totaled $109.6 billion.
- Significant third quarter new awards include $4.6 billion for restricted programs, $2.0 billion for Sentinel, $1.4 billion for Virginia Class submarines, $1.3 billion for F-35 at Aeronautics Systems, and $1.0 billion for E-2.
Concerns
- Operating margin rate declined to 11.4 percent from 11.9 percent principally due to the decrease in the FAS/CAS operating adjustment.
- Mission Systems operating income decreased $15 million, or 3 percent, primarily due to a lower operating margin rate.
- Defense Systems operating margin rate decreased to 10.8 percent from 11.4 percent, primarily due to changes in contract mix toward more cost-type content.
- Other, net decreased $86 million largely driven by favorable returns on marketable securities in the prior year.
- The 2026 guidance does not reflect impacts from a prolonged government shutdown, or application of spending limits or other spending cuts.
What to watch
- Execution on Sentinel, where Defense Systems reported a $180 million sales increase as the program continues to ramp.
- Aeronautics Systems margin performance following higher net contract margin adjustments on certain mature production and sustainment programs.
- Mission Systems margin comparisons following the prior year $68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio.
- Commercial Resupply Service mission timing, which reduced Space Systems sales by $136 million.
- Conversion of the $109.6 billion backlog into sales and operating income.
Balance sheet and cash flow
- Cash and cash equivalents $ 3,744 as of September 30, 2026; $ 4,403 as of December 31, 2025
- Long-term debt, net of current portion $ 14,433 as of September 30, 2026; $ 15,162 as of December 31, 2025
- Accounts receivable, net 2,080 as of September 30, 2026; 1,375 as of December 31, 2025
- Unbilled receivables, net 7,899 as of September 30, 2026; 6,544 as of December 31, 2025
- Net cash provided by operating activities 1,369 for the nine months ended September 30, 2026; 860 for the nine months ended September 30, 2025
- Capital expenditures (775) for the nine months ended September 30, 2026; (788) for the nine months ended September 30, 2025
- Net cash used in investing activities (314) for the nine months ended September 30, 2026; (491) for the nine months ended September 30, 2025
- Net cash used in financing activities (1,714) for the nine months ended September 30, 2026; (2,765) for the nine months ended September 30, 2025
- Decrease in cash and cash equivalents (659) for the nine months ended September 30, 2026; (2,396) for the nine months ended September 30, 2025
Analysis
Northrop Grumman delivered broad third quarter sales growth, with total sales increasing 7 percent to $11.1 billion. Aeronautics Systems and Defense Systems were the principal growth engines, rising 14 percent and 12 percent, respectively. Aeronautics benefited from F-35 material-cost timing and sustainment volume, higher B-21 sales and increased B-2 sustainment. Defense Systems benefited from the Sentinel ramp, GMLRS ER award timing and tactical solid rocket motor volume. Mission Systems and Space Systems each grew 2 percent, reflecting a more modest contribution to consolidated growth.
Profit growth lagged sales growth. Operating income increased 2 percent to $1.3 billion and operating margin rate declined 50 basis points to 11.4 percent, principally because the FAS/CAS operating adjustment decreased. Segment operating income increased 5 percent to $1.3 billion, while segment operating margin rate decreased 20 basis points to 12.1 percent. Aeronautics segment operating income increased 24 percent and Space Systems operating income increased 5 percent, but Mission Systems operating income fell 3 percent. Defense Systems margin declined to 10.8 percent as contract mix shifted toward more cost-type content.
Net earnings increased 2 percent to $1.1 billion and diluted EPS increased 3 percent to $7.89. Lower income tax expense, a higher non-operating FAS pension benefit and higher operating income supported net earnings. The effective income tax rate decreased to 13.4 percent from 16.9 percent, principally due to higher research credits. These benefits were partly offset by lower Other, net, largely reflecting favorable returns on marketable securities in the prior-year quarter.
Cash flow strengthened in the quarter. Net cash provided by operating activities increased 12 percent to $1.7 billion, primarily due to improved trade working capital. Adjusted free cash flow increased 44 percent to $1.8 billion, supported by proceeds from the sale of equipment to a customer and higher operating cash flow. For the nine months ended September 30, the company paid $1.0 billion of cash dividends and repurchased $68 million of common stock. Cash and cash equivalents were $3.7 billion and long-term debt was $14.4 billion at September 30, 2026.
Demand indicators remain strong, with $16.4 billion of third quarter net awards and total backlog of $109.6 billion, up 15 percent from December 31, 2025. The company raised 2026 guidance for segment operating income to $4,940 — $5,040 and MTM-adjusted EPS to $29.35 — $29.75, while guiding sales to $43,750 — $44,250 and adjusted free cash flow to $3,100 — $3,500. Key execution points are the Sentinel ramp, Aeronautics margin performance, Mission Systems margin comparisons and the timing impact on Commercial Resupply Service missions.
Management, verbatim
In a complex world with the growing need for solutions that scale and perform, our customers continue to turn to Northrop Grumman, and we are delivering with urgency and innovation. Our investments provide the capacity necessary to deliver durable growth as we expand our product offerings and scale our operations.
Kathy Warden, chair, chief executive officer and president
I’m confident our new record backlog, well-positioned portfolio and investments, and industry-leading performance will continue to drive sales and earnings growth as reflected in our 2027 outlook.
Kathy Warden, chair, chief executive officer and president
Not in the filing
stated, not guessed- Gross margin and gross-margin guidance
- Quarterly share repurchases and quarterly cash dividends paid
- Prior-quarter comparisons for reported metrics
- Prior-year figures and changes for product sales and service sales
- MTM-adjusted EPS actual result for the third quarter of 2026
- Reconciliation of forward-looking non-GAAP guidance to GAAP measures
- Previous-release outlook needed to assess actual results versus prior guidance
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.