Northrop Grumman Corporation (NOC)

Item 1. Business

HISTORY AND ORGANIZATION

History

Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”) is a leading global aerospace and defense technology company. We deliver a broad range of products, services and solutions to U.S. and international customers, and principally to the U.S. Department of War (“DoW”) and intelligence community. Our broad portfolio is aligned to support national security priorities and our solutions equip our customers with capabilities they need to connect, protect and advance humanity.

The company is a leading provider of space systems, military aircraft, missile defense, advanced weapons and long-range fires capabilities, mission systems, networking and communications, strategic deterrence systems, and breakthrough technologies, such as advanced computing, microelectronics and cyber. We are focused on competing and winning programs that enable continued growth, performing on our commitments and affordably delivering capability our customers need. With the investments we've made in advanced technologies, combined with our talented workforce and digital transformation capabilities, Northrop Grumman is well positioned to meet our customers' needs today and in the future. For a discussion of risks associated with our operations, see “Risk Factors.”

The company originally was formed in 1939 in Hawthorne, California as Northrop Aircraft Incorporated and was reincorporated in Delaware in 1985, as Northrop Corporation. Northrop Corporation was a principal developer of flying wing technology, including the B-2 Spirit stealth aircraft. We developed into one of the largest defense technology companies in the world through organic growth and a series of acquisitions and divestitures, including the following:

•1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator. The combined company was renamed Northrop Grumman Corporation;

•1996 - Acquired the defense and electronics businesses of Westinghouse Electric Corporation, developer of sophisticated radar and other electronics systems;

•2001 - Acquired Litton Industries, Inc., a global electronics and information technology company and full service shipbuilder;

•2001 - Acquired Newport News Shipbuilding Inc., designer and builder of nuclear-powered aircraft carriers and submarines;

•2002 - Acquired TRW Inc., developer of military and civil space systems and payloads, and integrator of complex, mission-enabling systems and services;

•2011 - Completed the spin-off of Huntington Ingalls Industries, Inc., operator of our former shipbuilding business, comprised largely of a part of Litton Industries and Newport News Shipbuilding;

•2018 - Acquired Orbital ATK, Inc. (OATK), developer and producer of satellites and other space systems, launch vehicles and missile products; and

•2021 - Completed the sale of our IT and mission support services business to Veritas Capital.

Organization

From time to time, we acquire or dispose of businesses and realign contracts, programs or businesses among and within our operating segments. Internal realignments are typically designed to leverage existing capabilities more fully and to enhance efficient development and delivery of products and services. At December 31, 2025, the company was aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.

Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. This realignment is reflected in the financial information contained in this report.

AERONAUTICS SYSTEMS

Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization of military aircraft systems for the U.S. Air Force, the U.S. Navy, other U.S. government agencies, and international customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft;

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airborne battle management and command and control systems; and uncrewed autonomous aircraft systems, including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR) systems. Approximately 40 percent of this business is performed through restricted programs. Key programs include:

•Development and production of the U.S. Air Force B-21 Raider long-range strike aircraft that define sixth-generation technologies;

•Modernization and sustainment services for the B-2 Spirit stealth aircraft;

•Development and production of the E-130J Phoenix II nuclear command, control and communications (NC3) aircraft for the U.S. Navy’s Take Charge And Move Out (TACAMO) mission;

•Fuselage production for the F-35 Lighting II Joint Strike Fighter and F/A-18 Super Hornet for use by U.S. and international forces;

•E-2D Advanced Hawkeye battle management aircraft production for the U.S. Navy, Japan, and France;

•MQ-4C Triton, which provides wide area strategic ISR over vast ocean and coastal regions for maritime domain awareness to the U.S. Navy and Australia;

•RQ-4 Global Hawk, which provides high resolution imagery of land masses for theater awareness and strategic ISR to the U.S. Air Force, Japan, and the Republic of Korea; and

•Global system sustainment and operations support for the F-35, B-2, F/A-18, E-2, E-3, A-10, North Atlantic Treaty Organization (NATO) Alliance Ground Surveillance (AGS), Triton, Global Hawk, and restricted programs.

DEFENSE SYSTEMS

Defense Systems is a leader in the design, engineering, development, integration and production of strategic deterrent systems, advanced tactical weapons, and missile defense solutions for the U.S. military and a broad range of international customers. Major products and services include strategic missiles; integrated, all-domain command and control (C2) systems; precision strike weapons; advanced propulsion, including tactical solid rocket motors and high speed air-breathing and hypersonic systems; high-performance gun systems, ammunition, precision munitions and advanced fuzes; and weapons integration, modernization, and sustainment. Less than 5 percent of this business is performed through restricted programs. Key programs include:

•Sentinel Engineering & Manufacturing Development (EMD) program, initial phase of the modernization of the intercontinental ballistic missile (ICBM) system that will serve as the ground-based strategic deterrent for the U.S. nuclear triad;

•Integrated Battle Command System (IBCS) for the U.S. Army and Poland, which is an open architecture system that seamlessly integrates sensors and effectors to deliver among the most advanced C2 systems for joint and coalition forces;

•Medium (30mm and 20mm) and Large (120mm) caliber tactical and training ammunition production;

•Guided Multiple Launch Rocket System (GMLRS) propulsion and warhead subsystems for a surface-to-surface system used to defeat targets using indirect precision fires;

•U.S. Navy’s Advanced Anti-Radiation Guided Missile (AARGM), a medium-range, air-to-surface missile, and its extended range variant, AARGM-ER;

•Medium caliber cannons for air, land, sea and counter unmanned aircraft systems (C-UAS) applications, ranging from 20mm to 50mm configurations;

•U.S. Air Force’s Stand-In Attack Weapon (SiAW), an advanced capability air-to-surface tactical missile for the F-35;

•Hypersonic Attack Cruise Missile (HACM) air-breathing, scramjet propulsion subsystem for the hypersonic air-launched cruise missile to travel at speeds of Mach 5 or greater;

•Precision Guidance Kit (PGK), replaces conventional fuzes for artillery and mortar munitions and transforms them into Global Positioning System (GPS) enabled precision guided weapons; and

•Production of solid rocket motors for the Precision Strike Missile (PrSM) program and Third Stage Rocket Motor (TSRM) for the Standard Missile (SM-3) program.

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MISSION SYSTEMS

Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense and intelligence community, and international customers. Major products and services include radar, electro-optical/infrared (EO/IR) and acoustic sensors; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR) systems; electronic warfare systems; advanced communications and network systems; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload launch systems; full spectrum cyber solutions; and intelligence processing systems. Approximately 30 percent of this business is performed through restricted programs. Key programs include:

•Large Aircraft and Common Infrared Countermeasures (LAIRCM, DoN LAIRCM, CIRCM) systems, which protect large aircraft as well as rotary wing and medium fixed wing aircraft from infrared missiles using advanced laser technology;

•F-35 fire control radar and Distributed Aperture System (DAS), which provides 360 degree field of view tracking, identifying, missile warning and night vision capabilities;

•F-35 Communications, Navigation and Identification (CNI) integrated avionics system, which provides secure communications and interoperability capabilities;

•Scalable Agile Beam Radar (SABR), an active electronically scanned array fire control radar system for F-16 aircraft;

•Ground/Air Task Oriented Radar (G/ATOR), a mobile multi-mode active electronically scanned array;

•Surface Electronic Warfare Improvement Program (SEWIP) Block III, which protects surface ships from anti-ship missiles, provides early detection, signal analysis and threat warning;

•Power generation and propulsion systems for Virginia and Columbia class submarines;

•Airborne Early Warning & Control (AEW&C). The centerpiece of the E-7 AEW&C aircraft is the Multi-role Electronically Scanned Array (MESA) radar which enables 360 degree long range advanced air moving target indicator (AMTI) capabilities for Battle Management, Command and Control, and Maritime Surveillance;

•Battlefield Airborne Communications Node (BACN), one of the first airborne gateway systems that allows platforms to communicate and securely share data;

•LITENING Advanced Targeting Pod, an electro-optical infrared sensor system for targeting and surveillance that enables aircrews to detect, acquire, identify and track targets at long ranges;

•APR-39 DV(2) and EV(2) Radar Warning Receiver programs, which provide a digital radar warning receiver for the U.S. Army, Navy and Marines;

•Exploitation and cyber programs, which provide cyber and intelligence domain support through unique intelligence and cyber capabilities;

•Embedded GPS / Inertial Navigation Systems-Modernization (EGI-M) program, which provides state-of-the-art airborne navigation capabilities with an open architecture that enables rapid responses to future threats; and

•AC/MC 130J Radio Frequency Countermeasures system, which provides superior situational awareness and better enables aircraft survivability in operationally relevant environments.

SPACE SYSTEMS

Loading financial statements...

Financial statements

data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .

From 10-Q filed 2026-07-21 (period ending 2026-06-30).

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

The following discussion should be read along with the financial statements included in this Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Liquidity and Capital Resources,” “Quantitative and Qualitative Disclosures About Market Risks” and “Risk Factors” in our 2025 Annual Report on Form 10-K, which provides additional information on our business, the environment in which we operate and our operating results.

Divestiture of Training Services Business

On May 24, 2025 (the “Divestiture date”), the company completed its previously announced sale of substantially all of the Immersive Mission Solutions (IMS) operating unit of Defense Systems (the “training services” business or “divestiture”) for $333 million in cash and recorded a pre-tax gain on sale of $231 million. IMS is a provider of mission training and satellite ground network communications software for U.S. government customers. 2025 operating results include sales and operating income for the training services business prior to the Divestiture date.

Global Security Environment

The U.S. and its allies continue to face a dynamic global security environment of heightened tensions and instability, threats from state and non-state actors, including in particular major global powers, as well as terrorist organizations, increasing nuclear tensions, diverse regional security concerns, political instability and uncertainty concerning global strategic alliances. The market for defense products, services and solutions globally is driven by these complex and rapidly evolving security challenges, considered in the broader context of political and socioeconomic circumstances and priorities. Our operations and financial performance, as well as demand for our products and services, are impacted by these events, including global unrest. The same is true for our suppliers and other business partners.

The ongoing conflicts in Ukraine and Iran and threats elsewhere, particularly in the Middle East and the Western Pacific region, have increased global tensions and instability and highlighted security requirements globally. These conflicts have resulted in and may continue to result in increased demand for defense products and services from allies and partner nations, particularly in those regions. We continue to monitor developments in these regions, but have not experienced, and do not anticipate experiencing, significant adverse financial impacts directly from these conflicts.

We believe the current global security environment, characterized by significant national security threats to the U.S. and its allies, continues to highlight the need for strong deterrence and robust defense capabilities. We are actively evaluating both opportunities and risks associated with this environment and are moving with speed and at scale to deliver innovative solutions to our customers. We believe our capabilities, particularly in space, C4ISR, air and missile defense, battle management, solid rocket motors, advanced weapons, strategic deterrence, survivable aircraft, autonomous aircraft systems and mission systems should help our customers in the U.S. and globally defend against current and future threats and, as a result, continue to position us for long-term profitable business growth.

Global Economic Environment

Over the past several years, the global economic environment has experienced challenges, including inflationary pressures; widespread delays and disruptions in supply chains; constraints on the availability of critical materials, including rare earth minerals and metals; business slowdowns or shutdowns; workforce challenges and labor shortfalls; and market volatility. These macroeconomic factors have contributed, and could continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as increased competing demands for

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limited resources to address such increased costs and other challenges, for our company, suppliers and partners, and customers.

In addition, if interest rates increase or otherwise fluctuate, it could impact government spending priorities (in the U.S. and allied countries, in particular), including the demand for defense products. Economic tensions and changes in international trade policies, including, for example, widespread tariffs announced since last year by the U.S. on its major trading partners, higher tariffs on imported goods and materials and actions taken in response (such as retaliatory tariffs or other trade protectionist measures or the renegotiation of free trade agreements), could also further impact the global market for defense products, services and solutions. In addition, following the first quarter 2026 U.S. Supreme Court decision that invalidated tariffs imposed pursuant to the International Emergency Economic Powers Act (“IEEPA”), the U.S. announced tariffs under different statutory authorities, including a 10% global tariff. The full impact of these governmental actions on macroeconomic conditions and on our business is uncertain, difficult to predict and depends on a number of factors, including the extent and duration of tariffs, the availability of exemptions, changes in the amount and scope of tariffs, any reversal or temporary suspension of announced tariffs, the availability of refunds for tariffs paid under IEEPA, the imposition of new tariffs and other measures that target countries may take in response to U.S. trade policies, and possible resulting general inflationary pressures in the global economy. We are continuing to monitor the impact on our business, suppliers and customers, but do not believe that the tariffs, including the IEEPA tariffs, have had or will have a material adverse effect on our business.

U.S. Political, Budget and Regulatory Environment

The U.S. continues to face an uncertain and evolving political, budget and regulatory environment. In particular, it is difficult to predict the specific course of future defense budgets. Current and future requirements related to the conflicts in Ukraine and Iran and threats in the Middle East, the Western Pacific and Latin America and other security priorities, as well as the macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S. and globally, will continue to impact our customers’ budgets, spending and priorities, and our industry. The U.S. political environment may also impact defense budgets and priorities, issues related to the national debt, and government spending more broadly. We anticipate that issues related to budgetary priorities, defense spending levels and the debt ceiling will continue to be subjects of considerable debate, with a potentially significant impact on our programs and the company.

On July 4, 2025, the FY 2025 reconciliation bill titled the One Big Beautiful Bill Act (the “OBBBA”) was enacted. The OBBBA allocated approximately $150 billion in mandatory defense funding, including funding for air and missile defense, munitions, strategic deterrence, shipbuilding and supply chains and other military capabilities. The appropriated funds will remain available to be obligated until September 30, 2029 and expended through FY 2034. Funding from the OBBBA has allowed for increased investments by the DoW in defense modernization projects, homeland missile defense capabilities, and increased production capacity across a number of key programs. See Note 4 to the financial statements for additional information on key income tax provisions of the OBBBA.

On February 3, 2026, annual appropriations to fund a vast majority of the federal government for FY 2026, including approximately $859 billion for defense, were enacted. Appropriations to partially fund the Department of Homeland Security were enacted on April 30, 2026, with the remaining appropriations enacted on June 10, 2026. On April 3, 2026, the Trump Administration (the “Administration”) released its FY 2027 budget request. The request includes $1.45 trillion for defense, with $1.1 trillion in the base budget (discretionary funding) and $350 billion in reconciliation (mandatory) funding. The total defense budget request reflects an increase of 44% ($441 billion) above the FY 2026 enacted levels (including $153 billion in FY 2026 reconciliation funding). Congress is evaluating the Administration’s budget request as it drafts authorization and appropriations legislation for FY 2027. Additionally, the Administration recently transmitted an $88 billion supplemental funding request for FY 2026, of which $67 billion is intended to address the operational costs associated with the Iran conflict and other defense priorities. There is uncertainty as to when Congress will act on the reconciliation funding and supplemental request.

The Administration has issued numerous executive orders, including orders to undertake a comprehensive overhaul of the Federal Acquisition Regulation, to reform the DoW defense acquisition process and, more recently, to promote the use of fixed price contracts where appropriate and to address underperformance and insufficient prioritization of government contracts, insufficient investment in production and production speed and incentive compensation metrics applicable to defense contractors. See “Risk factors” for further discussion regarding risks associated with executive orders and regulatory changes. Some of the Administration’s executive orders are subject to ongoing court challenges. Implementation of certain of these executive orders could adversely affect our business or create a more challenging or costly regulatory, operating and economic environment.

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In light of the ongoing conflicts and heightened global instability as well as political tensions and related legal challenges, we expect continued uncertainty in the global security, U.S. political, budget and regulatory environment. Initiatives to reduce governmental spending, federal budget and debt ceiling action, and further changes in U.S. government policy positions, including trade and foreign policy, tax policy and DoW policies or priorities, could materially impact defense spending broadly and the company’s programs in particular.

B-21 Program

In 2015, the U.S. Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for EMD and five low-rate initial production (LRIP) options for a baseline total of 21 aircraft. The EMD phase of the program is largely cost type and began at contract award. The LRIP options are largely fixed price and are expected to continue to be awarded and executed through approximately the end of the decade. We have previously recognized and disclosed cumulative losses of approximately $2.0 billion on the LRIP phase of the program. Northrop Grumman and the U.S. Air Force have also established not to exceed (NTE) pricing for two additional lots. Final terms, quantity, and pricing for the NTE lots are not fully negotiated; however, the average value for these NTE lots is above the average unit price of the five LRIP lots, and the NTE lots include an economic price adjustment clause to help protect against certain inflationary pressures.

During the first quarter of 2026, we reached an agreement with the U.S. Air Force to expand production capacity for the B-21 program and increase the aircraft production rate. We continue to expect to invest approximately $2.5 billion over a multi-year period to expand production capacity; in return, we have the opportunity to earn improved returns on the LRIP and NTE phases of the program.

During the second quarter of 2026, we again reviewed our estimated profitability on the LRIP phase of the program and made no significant changes to the previously recognized loss. As we finalized certain details associated with the first quarter 2026 agreement with the U.S. Air Force described above, certain costs shifted between LRIP lots resulting in favorable EAC adjustments on the first four LRIP lots and an increase in the loss contingency accrual on the remainder of the program. The company’s second quarter 2026 results reflect our current best estimate of cost to complete the LRIP and NTE aircraft, as well as the outcome of ongoing discussions with our suppliers. If our estimated cost to complete the aircraft changes, or if our assumptions regarding contract performance, quantities, or supplier negotiations are resolved more or less favorably than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.

Sentinel Program

In 2020, the U.S. Air Force awarded Northrop Grumman a $13.3 billion contract for the EMD phase of the Sentinel program. In January 2024, the U.S. Air Force provided congressional notification that the Sentinel program was under a Nunn-McCurdy breach review, which is required when total program cost estimates exceed certain defined thresholds. This notification, which had been driven primarily by increases in cost estimates for the Production and Deployment phases, commenced the process to achieve certification for continuance of the program and update its baseline cost estimates. We are currently executing under a cost-type contract for the EMD phase, and the Production and Deployment phases are yet to be priced and negotiated.

In July 2024, the Sentinel program was certified for continuation by the DoW upon completion of the Nunn-McCurdy breach review. In connection with the certification, the DoW directed that the program be restructured, including plans for infrastructure related to the command and launch segment, which was the main driver of the increased cost estimates for the Production and Deployment phases.

During the second quarter of 2025, we partnered with the U.S. Air Force in defining the preliminary execution framework necessary for successful restructure of the program. The program restructure will include a revision to the acquisition strategy, joint establishment of a new program baseline, and other critical preparation activities necessary to re-accomplish Milestone B approval.

During the second quarter of 2026, we continued to make progress on joint activities with the U.S. Air Force. These efforts, which included requirements and design maturation, risk reduction activities, and evaluation of options to accelerate fielding of initial capability, have resulted in further definition and authorization of elements of the program execution plan, resulting in a $7.6 billion increase in program backlog. We also reviewed our estimated profitability on the program and recognized a favorable earnings adjustment related to our recent achievement of certain contract incentives. If our estimated cost to complete the restructured EMD effort or our achievement of future contract incentives is more or less favorable than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.

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Operating Performance Assessment and Reporting

In evaluating our operating performance, we primarily focus on changes in sales and operating margin rates. Where applicable, significant fluctuations in operating performance attributable to individual contracts or programs, or changes in a specific cost element across multiple contracts, are described in our analysis. Based on this approach and the nature of our operations, the discussion of results of operations below first focuses on our four segments before distinguishing between products and services. Changes in sales are generally described in terms of volume, while changes in operating margin rates are generally described in terms of performance and/or contract mix. For purposes of this discussion, volume generally refers to increases or decreases in sales or cost from production/service activity levels and performance generally refers to non-volume-related changes in profitability, which are typically described in terms of changes in net EAC adjustments. Contract mix generally refers to changes in the ratio of contract type and/or life cycle (e.g., cost-type, fixed-price, development, production, and/or sustainment). Contract mix can also refer to differences in the profitability of the programs that drive changes in sales (e.g., sales growth or decreases on programs with accretive or dilutive margin rates).

CONSOLIDATED OPERATING RESULTS

Selected financial highlights are presented in the table below:

	Three Months Ended June 30						%		Six Months Ended June 30						%
$ in millions, except per share amounts	2026			2025			Change		2026			2025			Change
Sales	$	10,876		$	10,351		5	%	$	20,757		$	19,819		5	%
Operating costs and expenses	9,780			9,157			7	%	18,672			18,052			3	%
Operating costs and expenses as a % of sales	89.9		%	88.5		%			90.0		%	91.1		%
Gain on sale of business	—			231			NM		—			231			NM
Operating income	1,096			1,425			(23)	%	2,085			1,998			4	%
Operating margin rate	10.1		%	13.8		%			10.0		%	10.1		%
Federal and foreign income tax expense	74			253			(71)	%	229			350			(35)	%
Effective income tax rate	6.3		%	17.7		%			10.4		%	17.5		%
Net earnings	1,094			1,174			(7)	%	1,969			1,655			19	%
Diluted earnings per share	$	7.68		$	8.15		(6)	%	$	13.83		$	11.45		21	%

Sales

Current Quarter

Second quarter 2026 sales increased $525 million, or 5 percent, driven by higher sales at all four sectors, including a 13 percent increase at Aeronautics Systems.

Year to Date

Year to date 2026 sales increased $938 million, or 5 percent, primarily due to higher sales of $874 million at Aeronautics Systems, $196 million at Defense Systems and $147 million at Mission Systems. These increases were partially offset by $298 million of higher intercompany eliminations.

See “Segment Operating Results” below for further information by segment and “Product and Service Analysis” for product and service detail. See Note 10 to the financial statements for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments.

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Operating Income and Margin Rate

Current Quarter

Second quarter 2026 operating income decreased $329 million, or 23 percent, primarily driven by the prior year $231 million gain on the training services divestiture, as well as $61 million of lower segment operating income and a $56 million decrease in the FAS/CAS operating adjustment. Operating margin rate declined to 10.1 percent from 13.8 percent reflecting the items above.

Second quarter 2026 G&A costs as a percentage of sales decreased to 9.4 percent from 9.8 percent in the prior year period primarily due to higher sales.

Year to Date

Year to date 2026 operating income increased $87 million, or 4 percent, primarily due to $443 million of higher segment operating income largely driven by the prior year B-21 loss provision at Aeronautics Systems, partially offset by the prior year $231 million gain on the training services divestiture and a $112 million decrease in the FAS/CAS operating adjustment. Operating margin rate of 10.0 percent was comparable with the prior year.

Year to date 2026 G&A costs as a percentage of sales decreased to 9.6 percent from 10.2 percent in the prior year period primarily due to higher sales.

See “Segment Operating Results” below for further information by segment. For information regarding product and service operating costs and expenses, see “Product and Service Analysis” below.

Federal and Foreign Income Taxes

Current Quarter

Second quarter 2026 income tax expense decreased $179 million, or 71 percent, due to a lower ETR and $259 million of lower earnings before income taxes. The second quarter 2026 ETR decreased to 6.3 percent from 17.7 percent principally due to the remeasurement of UTPs given recent developments with the IRS towards resolving our previously filed federal income tax returns and refund claims.

Year to Date

Year to date 2026 income tax expense decreased $121 million, or 35 percent, due to a lower ETR, partially offset by $193 million of higher earnings before income taxes. The year to date 2026 ETR decreased to 10.4 percent from 17.5 percent primarily due to the remeasurement of UTPs described above, as well as higher research credits, including a benefit related to CAMT guidance recently issued by the IRS.

See Note 4 to the financial statements for additional information.

Net Earnings
Current Quarter

Second quarter 2026 net earnings decreased $80 million, or 7 percent, primarily due to the $329 million decrease in operating income described above, partially offset by a $179 million decrease in income tax expense, a $29 million increase in the non-operating FAS pension benefit and a $29 million increase in Other, net largely driven by favorable returns associated with an investment sold during the quarter.

Year to Date

Year to date 2026 net earnings increased $314 million, or 19 percent, primarily due to a $121 million decrease in income tax expense, an $87 million increase in operating income, a $65 million increase in the non-operating FAS pension benefit and a $35 million increase in Other, net largely driven by favorable returns associated with an investment sold during the second quarter.

Diluted Earnings Per Share

Current Quarter

Second quarter 2026 diluted earnings per share decreased $0.47, or 6 percent, reflecting a 7 percent decrease in net earnings and a 1 percent reduction in weighted-average diluted shares outstanding.

Year to Date

Year to date 2026 diluted earnings per share increased $2.38, or 21 percent, reflecting a 19 percent increase in net earnings and a 1 percent reduction in weighted-average diluted shares outstanding.

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SEGMENT OPERATING RESULTS

Basis of Presentation

The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.

For purposes of the operating results discussion below, we assess our performance using certain financial measures that are not calculated in accordance with GAAP.

Organic Sales
In the operating results discussion below, we present the performance of our Defense Systems sector using organic sales, a financial measure that is not calculated in accordance with GAAP. Organic sales is defined as total sales excluding sales attributable to the company's former training services business. This measure may be useful to investors and other users of our financial statements as a supplemental measure in evaluating the company’s underlying sales growth as well as in understanding our ongoing business and future sales trends by presenting the company’s sales adjusted for the impact of the divestiture. We reconcile this non-GAAP financial measure to its most directly comparable GAAP financial measure below. This non-GAAP measure may not be defined and calculated by other companies in the same manner and should not be considered in isolation or as an alternative to operating results presented in accordance with GAAP.

Segment Operating Income and Margin Rate

Segment operating income, as reconciled in the table below, and segment operating margin rate (segment operating income divided by sales) are non-GAAP measures that reflect the combined operating income of our four segments less the operating income associated with intersegment sales. Segment operating income includes pension expense allocated to our sectors under FAR and CAS and excludes FAS pension service expense and unallocated corporate items (certain corporate-level expenses, which are not considered allowable or allocable under applicable FAR and CAS requirements, and costs not considered part of management’s evaluation of segment operating performance). These non-GAAP measures may be useful to investors and other users of our financial statements as supplemental measures in evaluating the financial performance and operational trends of our sectors. These measures may not be defined and calculated by other companies in the same manner and should not be considered in isolation or as alternatives to operating results presented in accordance with GAAP.

	Three Months Ended June 30						%		Six Months Ended June 30						%
$ in millions	2026			2025			Change		2026			2025			Change
Operating income	$	1,096		$	1,425		(23)	%	$	2,085		$	1,998		4	%
Operating margin rate	10.1		%	13.8		%			10.0		%	10.1		%
Reconciliation to segment operating income:
CAS pension expense	(60)			(117)			(49)	%	(120)			(234)			(49)	%
FAS pension service expense	53			54			(2)	%	106			108			(2)	%
FAS/CAS operating adjustment	(7)			(63)			(89)	%	(14)			(126)			(89)	%
Gain on sale of business	—			(231)			NM		—			(231)			NM
Training services divestiture – unallowable state taxes and transaction costs	—			19			NM		—			20			NM
Intangible asset amortization and PP&E step-up depreciation	17			21			(19)	%	38			42			(10)	%
Other unallocated corporate expense	52			48			8	%	121			84			44	%
Unallocated corporate expense (income)	69			(143)			NM		159			(85)			NM
Segment operating income	$	1,158		$	1,219		(5)	%	$	2,230		$	1,787		25	%
Segment operating margin rate	10.6		%	11.8		%			10.7		%	9.0		%

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NORTHROP GRUMMAN CORPORATION

Current Quarter

Second quarter 2026 segment operating income decreased $61 million, or 5 percent, primarily due to $97 million of lower operating income at Defense Systems and $44 million of lower operating income at Space Systems, partially offset by $60 million of higher operating income at Mission Systems and $41 million of higher operating income at Aeronautics Systems. Segment operating margin rate decreased to 10.6 percent from 11.8 percent primarily due to a lower operating margin rate at Defense Systems and Space Systems, partially offset by a higher operating margin rate at Mission Systems.

Year to Date

Year to date 2026 segment operating income increased $443 million, or 25 percent, primarily due to $529 million of higher operating income at Aeronautics Systems and $132 million of higher operating income at Mission Systems, partially offset by $92 million of lower operating income at both Defense Systems and Space Systems. Segment operating margin rate increased to 10.7 percent from 9.0 percent primarily due to a higher operating margin rate at Aeronautics Systems and Mission Systems, partially offset by a lower operating margin rate at Defense Systems and Space Systems.

FAS/CAS Operating Adjustment

The second quarter 2026 and year to date 2026 FAS/CAS operating adjustment reflects lower CAS pension expense largely driven by favorable plan asset returns in prior years.

Unallocated Corporate Expense (Income)

Current Quarter

The change in second quarter 2026 unallocated corporate expense (income) is primarily driven by the prior year $231 million gain on the training services divestiture and $19 million of unallowable state taxes and transaction costs associated with the divestiture.

Year to Date

The change in year to date 2026 unallocated corporate expense (income) is primarily due to the prior year $231 million gain on the training services divestiture and $20 million of unallowable state taxes and transaction costs associated with the divestiture.

Net EAC Adjustments - We record changes in estimated contract earnings at completion (net EAC adjustments) using the cumulative catch-up method of accounting. Net EAC adjustments can have a significant effect on segment operating income and margin rate.

The aggregate favorable and unfavorable EAC adjustments are presented in the table below:

	Three Months Ended June 30				Six Months Ended June 30
$ in millions	2026		2025		2026		2025
Favorable EAC adjustments	$	565	$	404	$	1,225	$	728
Unfavorable EAC adjustments	(471)		(278)		(1,211)		(702)
Net EAC adjustments	$	94	$	126	$	14	$	26

Net EAC adjustments by segment are presented in the table below:

	Three Months Ended June 30				Six Months Ended June 30
$ in millions	2026		2025		2026		2025
Aeronautics Systems	$	157	$	30	$	50	$	(159)
Defense Systems	(40)		83		(25)		106
Mission Systems	69		5		120		42
Space Systems	(91)		13		(129)		42
Eliminations	(1)		(5)		(2)		(5)
Net EAC adjustments	$	94	$	126	$	14	$	26

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Table of Contents

NORTHROP GRUMMAN CORPORATION

AERONAUTICS SYSTEMS	Three Months Ended June 30						%		Six Months Ended June 30						%
$ in millions	2026			2025			Change		2026			2025			Change
Sales	$	3,519		$	3,114		13	%	$	6,802		$	5,928		15	%
Operating income	362			321			13	%	667			138			383	%
Operating margin rate	10.3		%	10.3		%			9.8		%	2.3		%

Sales

Current Quarter

Second quarter 2026 sales increased $405 million, or 13 percent, primarily due to higher volume on B-21 and other restricted programs, a $106 million increase on the E-130J TACAMO (“TACAMO”) program as it ramps up, and higher volume on the B-2, F-35 and E-2 programs. These increases were partially offset by a decrease on F/A-18 as final production deliveries have completed.

Year to Date

Year to date 2026 sales increased $874 million, or 15 percent, primarily due to higher sales on B-21 and other restricted programs, a $193 million increase on the TACAMO program as it ramps up, as well as higher volume on the B-2 and F-35 programs. The higher B-21 sales reflect the company’s first quarter 2026 agreement with the U.S. Air Force to expand production capacity and increase the aircraft production rate, including the sale of a company-owned test asset. The sales increases were partially offset by a decrease on F/A-18 as final production deliveries have completed.

Operating Income

Current Quarter

Second quarter 2026 operating income increased $41 million, or 13 percent, due to higher sales. Operating margin rate of 10.3 percent was comparable with the prior year period.

Year to Date

Year to date 2026 operating income increased $529 million, or 383 percent, primarily due to a higher operating margin rate. Operating margin rate increased to 9.8 percent primarily due to the absence of the prior year B-21 loss provision.

DEFENSE SYSTEMS	Three Months Ended June 30				%		Six Months Ended June 30				%
$ in millions	2026		2025		Change		2026		2025		Change
Sales	$	2,093	$	1,991	5	%	$	3,992	$	3,796	5	%
Less: Training services sales	—		(40)				—		(112)
Organic sales	$	2,093	$	1,951	7	%	$	3,992	$	3,684	8	%

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Held by

holders ( registered funds via N-PORT, institutional investors via 13F). Showing top by dollar value.

Holder	Type	ETF	MF	Position ($)	% of holder	Δ % of holder	Holder AUM

Recent insider activity

Last 90 days. Open-market trades (purchases & sales) by directors, officers, and 10%+ owners. 1 transaction across 1 insider. Net: -95 shares, -$54,310.

Date	Insider	Role	Action	Shares	Price	Value
2026-05-04	WELSH MARK A III	Director	Sell	-95 ×11	$571.68	-$54,310

Source: SEC Form 4 filings.

Next expected filings

~2026-10-20 10-Q expected by 2026-11-05 (in 82 days)
~2027-01-26 10-K expected by 2027-02-28 (in 180 days)
~2027-04-20 10-Q expected by 2027-05-06 (in 264 days)
~2027-07-20 10-Q expected by 2027-08-05 (in 355 days)

Predicted from historical filing cadence; not an SEC commitment.

Recent SEC filings

2026-07-21 8-K Earnings Release; Financial Statements and Exhibits
2026-07-21 10-Q Quarterly Report
2026-04-21 8-K Earnings Release; Financial Statements and Exhibits
2026-04-21 10-Q Quarterly Report
2026-04-21 S-3ASR S-3ASR
2026-02-13 8-K Officer/Director Change; Financial Statements and Exhibits
2026-01-27 10-K Annual Report
2026-01-27 8-K Earnings Release; Financial Statements and Exhibits
2025-11-06 8-K Officer/Director Change; Financial Statements and Exhibits
2025-10-21 10-Q Quarterly Report
2025-10-21 8-K Earnings Release; Financial Statements and Exhibits
2025-09-02 8-K Material Agreement Entered; Financial Statements and Exhibits
2025-07-22 10-Q Quarterly Report
2025-07-22 8-K Earnings Release; Financial Statements and Exhibits
2025-05-29 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits

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