Northrop Grumman Corporation
NOC · NYSE
Next quarter
Expected to report Oct 20, 2026 — estimated from last year’s reporting date.
Consensus is $7.26 EPS for Sep 2026 across 6 estimates, ranging $7.02 to $7.49.
NOC Jun 2026
- 12.28%
- +2.54%
- $6.84
- $7.68
- —
- $10.88B
Reported results
- $10.88B
- $1.10B
- 10.08%
- $1.09B
- $7.68
Highlights
- Earnings beat: Diluted EPS was $7.68, 12.28% above the $6.84 consensus, despite declining 6% year over year from $8.15.
- Revenue growth: Sales rose 5% year over year to $10.88 billion and 10% sequentially from $9.88 billion, with all four sectors contributing.
- Backlog record: Net awards reached $20.0 billion, including $7.6 billion for Sentinel, lifting backlog 9% from December to a company-record $104.7 billion.
- Guidance raised: 2026 sales guidance increased by $250 million to $43.75-$44.25 billion, while MTM-adjusted EPS guidance rose $1.20 to $28.60-$29.10; segment operating income and adjusted free cash flow guidance were reaffirmed.
- Margin pressure: Operating income fell 23% year over year to $1.10 billion and margin declined to 10.1% from 13.8%, reflecting the prior-year $231 million divestiture gain, lower segment income and a smaller FAS/CAS benefit.
- Segment split: Aeronautics sales increased 13% with a 10.3% margin, while Mission Systems income rose 14% to $501 million and margin expanded to 15.4%; Defense and Space margins fell to 7.5% and 8.6%, respectively.
- Program costs: Defense recorded a $68 million unfavorable SiAW EAC adjustment, while Space recorded a $91 million unfavorable GEM 63XL adjustment; aggregate net EAC adjustments were still favorable by $94 million.
- Cash and tax: Second-quarter adjusted free cash flow increased 54% to $978 million, helped by lower tax payments, while the effective tax rate fell to 6.3% from 17.7% on IRS-related uncertain-tax-position remeasurement.
Analysis
Northrop Grumman’s second quarter was a demand and backlog quarter with a strong EPS beat, but not a clean operating-margin quarter. Revenue of $10.88 billion increased 5% year over year and 10% from the prior quarter, while diluted EPS of $7.68 exceeded the $6.84 consensus by 12.28%. Operating income was $1.10 billion, down 23% from the year-ago period but up from $989 million in Q1. Net earnings declined 7% year over year to $1.09 billion, versus $875 million in Q1. The year-ago comparison included a $231 million gain from the training-services divestiture and a $1.04 per-share benefit.
The defining positive was demand visibility: $20.0 billion of net awards, led by a $7.6 billion Sentinel award, lifted backlog to a record $104.7 billion. Aeronautics grew 13% and Mission Systems expanded its margin to 15.4%, offsetting weakness in Defense and Space, where SiAW and GEM 63XL cost revisions weighed on profitability. A 6.3% effective tax rate, versus 17.7% last year, also supported EPS. Management raised full-year sales and MTM-adjusted EPS guidance, but reaffirmed operating-income and cash-flow targets, suggesting the upside is concentrated in growth, tax and pension-related items rather than broad-based margin expansion.
Backlog and guidance
- Record demand: Second-quarter net awards were $20.0 billion, taking year-to-date awards to $29.8 billion and total backlog to $104.7 billion, up 9% from $95.7 billion at December 31, 2025.
- Award composition: Major awards included $7.6 billion for Sentinel, $4.3 billion for restricted programs, $1.0 billion for F-35, $0.8 billion for Glide Phase Interceptor and $0.7 billion for MESA.
- Revenue visibility: The company expects to recognize approximately 35% of backlog over the next 12 months and 55% over the next 24 months.
- Raised outlook: Sales guidance moved to $43.75-$44.25 billion from $43.50-$44.00 billion, and MTM-adjusted EPS to $28.60-$29.10 from $27.40-$27.90. Segment operating income remains guided to $4.85-$5.00 billion and adjusted free cash flow to $3.10-$3.50 billion.
Operating results
Sales increased $525 million year over year to $10.876 billion, with growth across Aeronautics, Defense, Mission and Space. Operating income declined $329 million to $1.096 billion, and operating margin fell 370 basis points to 10.1%. The comparison was distorted by the $231 million training-services divestiture gain recorded in the second quarter of 2025, but underlying segment operating income also fell $61 million to $1.158 billion and the FAS/CAS operating adjustment declined $56 million to $7 million. Sequentially, revenue rose from $9.88 billion and operating income from $989 million, reflecting stronger volume and the absence of first-quarter effects rather than a broad margin recovery.
Segment performance
- Aeronautics Systems: Sales rose 13% to $3.519 billion and operating income rose 13% to $362 million, with a steady 10.3% margin. B-21, restricted programs and TACAMO drove volume growth, while F/A-18 deliveries wound down.
- Mission Systems: Sales increased 3% to $3.250 billion, while operating income rose 14% to $501 million. Margin expanded to 15.4% from 14.0% on improved performance and higher net EAC adjustments.
- Defense Systems: Sales grew 5% to $2.093 billion, or 7% organically excluding the divested training business, but operating income fell 38% to $156 million. Margin contracted to 7.5% from 12.7% as the prior-year Sentinel benefit did not repeat and the company invested in missile programs.
- Space Systems: Sales increased 4% to $2.753 billion, helped by CRS, GPI and GMD WS, but operating income fell 16% to $236 million and margin declined to 8.6% from 10.6%.
Program cost revisions
- SiAW and missile investment: Defense recorded a $68 million unfavorable EAC adjustment on SiAW as projected costs rose for design, qualification and system architecture; additional costs are expected to mature AARGM-ER production.
- GEM 63XL: Space recorded a $91 million unfavorable EAC adjustment, largely due to higher projected material costs and quantities needed to complete the program. The first-quarter adjustment was $71 million, bringing the six-month unfavorable adjustment to $162 million.
- Sentinel: A favorable EAC adjustment related to recently achieved contract incentives partly offset Defense weakness, alongside the $7.6 billion backlog addition tied to program execution activities.
- Aggregate effect: Favorable EAC adjustments of $565 million exceeded $471 million of unfavorable adjustments, producing a $94 million net benefit to operating income, versus $126 million in the year-ago quarter.
Tax and cash flow
The quarter’s EPS benefited materially from below-normal taxes. Tax expense fell 71% to $74 million as the effective tax rate declined to 6.3% from 17.7%, principally because of a $115 million remeasurement of uncertain tax positions following developments with the IRS, alongside research credits. The company also recorded a $166 million non-operating FAS pension benefit and a $35 million gain on the sale of an investment within other income. Second-quarter operating cash flow was $1.280 billion, up 47% year over year, and adjusted free cash flow rose 54% to $978 million after $302 million of capital expenditures. For the first half, however, operating cash flow remained negative at $376 million and adjusted free cash flow at negative $845 million, reflecting working-capital investment.
