Companies

Northrop Grumman Lifts 2026 Profit Outlook After Record Backlog

The Tip Desk · October 22, 2026 · 5 min read

Third-quarter sales rose 7% to $11.1 billion as the company raised MTM-adjusted EPS guidance to $29.35–$29.75.

Northrop Grumman Corporation (NOC) raised its 2026 outlook for segment operating income and MTM-adjusted earnings after a third quarter in which sales growth accelerated and backlog reached a new company record of $109.6 billion.

The aerospace and defense technology company now expects 2026 segment operating income of $4.94 billion to $5.04 billion, up from a prior range of $4.85 billion to $5.00 billion, and MTM-adjusted EPS of $29.35 to $29.75, up from $28.60 to $29.10. Sales guidance was left unchanged at $43.75 billion to $44.25 billion. Adjusted free cash flow guidance remained $3.10 billion to $3.50 billion.

Third-quarter sales increased 7% to $11.1 billion from $10.4 billion a year earlier, after a 5% year-over-year increase to $10.9 billion in the second quarter. Diluted earnings were $7.89 a share, up 3% from $7.67 a year earlier. Net earnings totaled $1.1 billion.

Chair, chief executive officer and president Kathy Warden said customers continue to turn to the company for solutions that scale and perform, and that investments provide capacity to deliver durable growth as the company expands product offerings. She said she is confident the new record backlog, portfolio and investments will continue to drive sales and earnings growth as reflected in the 2027 outlook.

Aeronautics Systems was the main operating contributor. Sales rose 14% to $3.58 billion, after a 13% increase in the second quarter, driven by a $195 million increase on F-35 from the timing of material costs on production lots and higher sustainment volume, plus higher B-21 sales and an increase in B-2 sustainment. Operating income rose 24% to $377 million and the operating margin rate increased to 10.5% from 9.7% a year earlier, primarily due to higher net contract margin adjustments, including on certain mature production and sustainment programs.

Defense Systems sales rose 12% to $2.31 billion, after a 5% increase in the first quarter, on a $180 million increase on Sentinel as the program continues to ramp, higher volume on GMLRS ER from the timing of awards, and higher volume on various tactical solid rocket motor programs. Those increases were partially offset by lower volume on armament programs, primarily on certain military ammunition programs. Operating income rose 7% to $250 million. The operating margin rate decreased to 10.8% from 11.4% a year earlier, primarily due to changes in contract mix toward more cost-type content.

Mission Systems sales rose 2% to $3.16 billion, from ramp-up on restricted airborne radar programs and higher volume on marine systems, offset by lower volume on restricted advanced microelectronics programs. Operating income decreased 3% to $500 million and the operating margin rate fell to 15.8% from 16.7% a year earlier, in part due to a prior-year $68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio.

Space Systems sales rose 2% to $2.75 billion, after a 3% decline in the first quarter, 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. Operating income rose 5% to $312 million and the operating margin rate increased to 11.3% from 11.0% a year earlier, primarily due to changes in contract mix toward more fixed-price content.

Segment operating income increased $68 million, or 5%, to $1.35 billion, primarily due to the $72 million increase at Aeronautics Systems. Segment operating margin rate was 12.1%, down 20 basis points from 12.3% a year earlier, principally due to that prior-year Mission Systems EAC adjustment.

Consolidated operating income increased 2% to $1.27 billion. Operating margin rate declined to 11.4% from 11.9% a year earlier, principally due to a $52 million decrease in the FAS/CAS operating adjustment. The company said third-quarter sales reflected continued strong demand for its global capabilities.

Net awards totaled $16.4 billion. Significant new awards included $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. Backlog of $109.6 billion followed $20 billion of net awards that lifted backlog to a record $105 billion in the second quarter.

Adjusted free cash flow increased 44% to $1.81 billion from $1.26 billion a year earlier, due to $371 million of proceeds from the sale of equipment to a customer and higher net cash provided by operating activities. Net cash provided by operating activities increased 12% to $1.75 billion, primarily due to improved trade working capital.

For 2026, the company now guides Aeronautics Systems sales at about $14 billion with a high-9% operating margin rate, up from a prior mid-to-high 9% range. Defense Systems is guided at mid-to-high $8 billion with about a 10% margin rate. Mission Systems is guided at high $12 billion with a mid-15% margin rate, up from about 15%. Space Systems is guided at about $11 billion with a low-10% margin rate.

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