Northrop Grumman raises 2026 guidance as third-quarter sales rise 7% to $11.1 billion

Northrop Grumman Corporation (NOC) reported third-quarter 2026 sales of $11.1 billion on Tuesday, up 7% from a year earlier, and raised its 2026 guidance for segment operating income and MTM-adjusted EPS. The company said in an earnings release furnished with a filing to the SEC that the results cover the quarter ended Sept. 30.

Net earnings for the quarter totaled $1.1 billion, or $7.89 per diluted share, the company said.

Here's how the company did:

• Revenue: $11.1 billion vs. $10.4 billion a year earlier
• Diluted earnings per share: $7.89 vs. $7.67 a year earlier
• Operating income: $1,269 million vs. $1,242 million a year earlier
• Backlog: $109.6 billion vs. $95.7 billion at Dec. 31, 2025

Operating income rose 2%, but operating margin fell to 11.4% from 11.9%. The company said the decline was principally due to the decrease in the FAS/CAS operating adjustment, which fell $52 million.

Segment operating income rose 5% to $1,345 million. The segment operating margin was 12.1%, down from 12.3%, principally because of a prior-year $68 million favorable estimate-at-completion, or EAC, adjustment in the restricted advanced microelectronics portfolio at Mission Systems.

Net cash provided by operating activities rose 12% to $1,745 million, which the company attributed to improved trade working capital. Adjusted free cash flow, a non-GAAP measure, meaning one not defined by generally accepted accounting principles, was $1,810 million, up 44%. That figure includes $371 million of proceeds from the sale of equipment to a customer.

For the nine months ended Sept. 30, the company repurchased $68 million of common stock, compared with $1,168 million a year earlier. It paid $1,035 million in cash dividends, up from $964 million.

Net awards totaled $16.4 billion in the quarter, and the book-to-bill ratio was 1.5x. Backlog reached $109.6 billion, up 15% from $95.7 billion at Dec. 31, 2025. Awards included $4.6 billion for restricted programs, primarily at Aeronautics Systems, Space Systems and Mission Systems, $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.

“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,” chair, chief executive officer and president Kathy Warden said. “Our investments provide the capacity necessary to deliver durable growth as we expand our product offerings and scale our operations.”

Warden said she is 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.

2026 guidance

The company raised segment operating income guidance to $4,940 million to $5,040 million, from $4,850 million to $5,000 million. The company said the change increased the figure by $65 million at the midpoint.

MTM-adjusted EPS guidance rose to $29.35 to $29.75, from $28.60 to $29.10. The company said the figure increased by $0.70 at the midpoint. MTM-adjusted EPS excludes the per-share impact of mark-to-market pension benefit or expense and related tax effects.

Sales guidance is $43,750 million to $44,250 million, and adjusted free cash flow guidance is $3,100 million to $3,500 million. The release gives no prior range for either figure.

The company expects Aeronautics Systems sales of about $14 billion with a high 9% operating margin, after a prior outlook of mid to high 9%. It expects Mission Systems sales of high $12 billion with a mid 15% margin, up from about 15%. Defense Systems is expected at mid to high $8 billion in sales with a margin of about 10%, and Space Systems at about $11 billion with a low 10% margin.

Segment results

Aeronautics Systems sales rose 14% to $3,575 million, driven by a $195 million increase on F-35 and higher B-21 sales. Operating income rose 24% to $377 million, and the margin was 10.5%, up from 9.7%. The company attributed the margin increase primarily to higher net contract margin adjustments.

Defense Systems sales rose 12% to $2,307 million, primarily because of a $180 million increase on Sentinel. Operating income rose 7% to $250 million, but the margin fell to 10.8% from 11.4%, primarily due to contract mix toward more cost-type content.

Mission Systems sales rose 2% to $3,155 million. Operating income fell 3% to $500 million, and the margin was 15.8%, down from 16.7% a year earlier, partly because of the prior-year EAC adjustment.

Space Systems sales rose 2% to $2,749 million, although $136 million of lower sales on Commercial Resupply Service missions, due to launch timing, offset some of the growth. Operating income rose 5% to $312 million, and the margin was 11.3%, up from 11.0%.

General and administrative expenses rose to $1,083 million from $985 million. Interest expense fell to $158 million from $161 million. The effective tax rate dropped to 13.4% from 16.9%, principally due to higher research credits. Weighted-average diluted shares fell to 142.4 million from 143.5 million. The release does not give headcount figures.