Northrop Grumman - 10-Q quarterly report FY

Q1☒March 31, 2026☐FALSE2026December 311-16411NORTHROP GRUMMAN CORP /DE/0001133421Delaware80-06406492980 Fairview Park DriveFalls Church,Virginia22042703280-2900Common StockNOCNew York Stock ExchangeYesYesLarge Accelerated 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2026


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-16411

NORTHROP GRUMMAN CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		80-0640649
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2980 Fairview Park Drive
Falls Church,	Virginia	22042
(Address of principal executive offices)		(Zip Code)

(703) 280-2900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	NOC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer ☒ Accelerated Filer ☐

Non-accelerated Filer ☐ Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of April 16, 2026, 142,033,476 shares of common stock were outstanding.

Table of Contents

NORTHROP GRUMMAN CORPORATION

TABLE OF CONTENTS


		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Earnings and Comprehensive Income	1
	Condensed Consolidated Statements of Financial Position	2
	Condensed Consolidated Statements of Cash Flows	3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	4
	Notes to Condensed Consolidated Financial Statements
	1. Summary of Significant Accounting Policies	5
	2. Earnings Per Share, Share Repurchases and Dividends on Common Stock	8
	3. Inventoried Costs, Net	8
	4. Income Taxes	9
	5. Fair Value of Financial Instruments	9
	6. Investigations, Claims and Litigation	11
	7. Commitments and Contingencies	11
	8. Retirement Benefits	13
	9. Stock Compensation Plans and Other Compensation Arrangements	13
	10. Segment Information	15
	Report of Independent Registered Public Accounting Firm	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Overview	22
	Consolidated Operating Results	25
	Segment Operating Results	27
	Product and Service Analysis	30
	Backlog	31
	Liquidity and Capital Resources	31
	Critical Accounting Policies, Estimates and Judgments	32
	Accounting Standards Updates	32
	Forward-Looking Statements and Projections	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signatures	38

Table of Contents

NORTHROP GRUMMAN CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended March 31
$ in millions, except per share amounts		2026		2025
Sales
Product		$	7,958	$	7,521
Service		1,923		1,947
Total sales		9,881		9,468
Operating costs and expenses
Product		6,433		6,366
Service		1,488		1,522
General and administrative expenses		971		1,007
Total operating costs and expenses		8,892		8,895

Operating income		989		573
Other (expense) income
Interest expense		(162)		(156)
Non-operating FAS pension benefit		166		130
Other, net		37		31
Earnings before income taxes		1,030		578
Federal and foreign income tax expense		155		97
Net earnings		$	875	$	481

Basic earnings per share		$	6.16	$	3.33
Weighted-average common shares outstanding, in millions		142.1		144.6
Diluted earnings per share		$	6.14	$	3.32
Weighted-average diluted shares outstanding, in millions		142.5		144.9

Net earnings (from above)		$	875	$	481
Other comprehensive (loss) income, net of tax
Change in cumulative translation adjustment		(2)		2
Change in other, net		(3)		8
Other comprehensive (loss) income, net of tax		(5)		10
Comprehensive income		$	870	$	491

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

-1-

Table of Contents

NORTHROP GRUMMAN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited)


$ in millions, except par value	March 31, 2026		December 31, 2025
Assets
Cash and cash equivalents	$	2,090	$	4,403
Accounts receivable, net	1,806		1,375
Unbilled receivables, net	7,556		6,544
Inventoried costs, net	1,450		1,309
Prepaid expenses and other current assets	1,868		1,656
Total current assets	14,770		15,287
Property, plant and equipment, net of accumulated depreciation of $9,854 for 2026 and $9,648 for 2025	10,243		10,972
Operating lease right-of-use assets	1,925		1,859
Goodwill	17,439		17,437
Deferred tax assets	743		1,051
Pension and other postretirement benefit plan assets	3,307		3,167
Other non-current assets	1,580		1,604
Total assets	$	50,007	$	51,377

Liabilities
Trade accounts payable	$	2,681	$	3,240
Accrued employee compensation	1,732		2,309
Advance payments and billings in excess of costs incurred	3,697		4,086
Other current liabilities	4,711		4,247
Total current liabilities	12,821		13,882
Long-term debt, net of current portion of $758 for 2026 and $534 for 2025	14,411		15,162
Pension and other postretirement benefit plan liabilities	1,095		1,110
Operating lease liabilities	1,905		1,857
Other non-current liabilities	2,660		2,692
Total liabilities	32,892		34,703

Commitments and contingencies (Note 7)

Shareholders’ equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2026—142,033,476 and 2025—141,997,194	142		142
Paid-in capital	8		—
Retained earnings	17,096		16,658
Accumulated other comprehensive loss	(131)		(126)
Total shareholders’ equity	17,115		16,674
Total liabilities and shareholders’ equity	$	50,007	$	51,377

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31
$ in millions	2026		2025
Operating activities
Net earnings	$	875	$	481
Adjustments to reconcile to net cash used in operating activities:
Depreciation and amortization	372		337
Stock-based compensation	20		20
Deferred income taxes	308		(34)
B-21 loss provision	—		477

Net periodic pension and OPB income	(120)		(81)
Pension and OPB contributions	(33)		(28)
Changes in assets and liabilities:
Accounts receivable, net	(431)		(542)
Unbilled receivables, net	(551)		(1,069)
Inventoried costs, net	(144)		(125)
Prepaid expenses and other assets	(37)		(42)
Trade accounts payable	(559)		(93)
Advance payments and billings in excess of costs incurred	(389)		(358)
Other liabilities	(802)		(563)
Income taxes payable, net	(164)		58
Other operating activities	(1)		(3)
Net cash used in operating activities	(1,656)		(1,565)

Investing activities
Capital expenditures	(167)		(256)

Other investing activities	(1)		4
Net cash used in investing activities	(168)		(252)

Financing activities
Payments of long-term debt	(527)		(1,500)
Net borrowings on commercial paper	498		1,474
Common stock repurchases	(68)		(480)
Cash dividends paid	(333)		(302)
Payments of employee taxes withheld from share-based awards	(57)		(38)
Other financing activities	(2)		(5)
Net cash used in financing activities	(489)		(851)
Decrease in cash and cash equivalents	(2,313)		(2,668)
Cash and cash equivalents, beginning of year	4,403		4,353
Cash and cash equivalents, end of period	$	2,090	$	1,685

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


	Three Months Ended March 31
$ in millions, except per share amounts		2026		2025
Common stock
Beginning of period		$	142	$	145
Common stock repurchased		—		(1)
End of period		142		144
Paid-in capital
Beginning of period		—		—
Stock compensation		8		—
End of period		8		—
Retained earnings
Beginning of period		16,658		15,297
Common stock repurchased		(63)		(481)
Net earnings		875		481
Dividends declared		(330)		(299)
Stock compensation		(44)		(16)
End of period		17,096		14,982
Accumulated other comprehensive loss
Beginning of period		(126)		(152)
Other comprehensive (loss) income, net of tax		(5)		10
End of period		(131)		(142)
Total shareholders’ equity		$	17,115	$	14,984
Cash dividends declared per share		$	2.31	$	2.06

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Reporting

These unaudited condensed consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman Corporation and its subsidiaries and joint ventures or other investments for which we consolidate the financial results (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”). Intercompany accounts, transactions and profits are eliminated in consolidation. Investments in equity securities and joint ventures where the company has significant influence, but not control, are accounted for using the equity method.

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.

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting. The financial statements include adjustments of a normal recurring nature considered necessary by management for a fair presentation of the company’s unaudited condensed consolidated financial position, results of operations and cash flows. For classification of certain current assets and liabilities, we consider the duration of our customer contracts when defining our operating cycle, which is generally longer than one year.

During the fourth quarter of 2025, we modified our presentation of the changes in liabilities in the operating cash flow section of the consolidated statement of cash flows by disaggregating Accounts payable and other liabilities into three separate line items: Accounts payable, Advance payments and billings in excess of costs incurred, and Other liabilities. Prior period amounts have been conformed to the current period presentation. The modified presentation does not impact previously reported cash provided by operating activities.

Results reported in the financial statements are not necessarily indicative of results that may be expected for the entire year. The financial statements should be read in conjunction with the information contained in the company’s 2025 Annual Report on Form 10-K.

Quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30 and third quarter as ending on September 30. It is the company’s long-standing practice to establish actual interim closing dates using a “fiscal” calendar, in which we close our books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. This practice is only used at interim periods within a reporting year.

Accounting Estimates

Preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.

Revenue Recognition

Contract Estimates

Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), un-priced change orders, requests for equitable adjustment (REAs) and contract claims. Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled.

We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Net estimate-at-completion (EAC) adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. If it is determined that a loss is expected to result on an individual performance

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obligation, the entire amount of the estimable future loss, including an allocation of general and administrative (G&A) cost, is charged against income in the period the loss is identified.

B-21 Program

During the fourth quarter of 2023, we recognized a projected loss of $1.56 billion across the five low-rate initial production (LRIP) options of the B-21 program. During the first quarter of 2025, we recognized an additional $477 million loss across the five LRIP options. As of March 31, 2026, the remaining loss accrual on the B-21 program totaled $1.0 billion, which is included in Other current liabilities.

Net EAC Adjustments

The following table presents the effect of aggregate net EAC adjustments:


	Three Months Ended March 31
$ in millions, except per share data		2026		2025
Revenue		$	(8)	$	38
Operating income		(80)		(100)
Net earnings(1)		(63)		(79)
Diluted earnings per share(1)		(0.44)		(0.55)

(1)Based on a 21 percent federal statutory tax rate.

EAC adjustments can have a significant effect on the company’s financial statements. When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments. In most cases, EAC adjustments have an equal impact on both revenue and operating income. However, for contracts in a forward loss position, the impact of EAC adjustments on revenue is different than the impact on operating income because changes in reach forward losses also impact cost of sales.

2026 – During the first quarter of 2026, the company reached an agreement with the U.S. Air Force to expand production capacity and increase the aircraft production rate for the B-21 program at Aeronautics Systems. We made no significant changes to the previously recognized loss on the program; however, impacts from the agreement and higher estimated production costs resulted in a $157 million net unfavorable EAC adjustment on the first four LRIP lots, which was offset by a net reduction in the loss contingency accrual on the remainder of the program. The company also recorded a $71 million unfavorable EAC adjustment on the Graphite Epoxy Motor (GEM) 63XL program at Space Systems associated with the evaluation and implementation of corrective actions for a solid rocket motor anomaly that occurred during a Q1 2026 launch.

2025 – During the first quarter of 2025, the company recorded a $226 million unfavorable EAC adjustment on the first and second LRIP lots of the B-21 program at Aeronautics Systems.

Backlog

Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent to the company’s remaining performance obligations at the end of each period. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded. Backlog is converted into sales as costs are incurred or deliveries are made.

Company backlog as of March 31, 2026 was $95.6 billion. Of our March 31, 2026 backlog, we expect to recognize approximately 35 percent as revenue over the next 12 months and 60 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.

Contract Assets and Liabilities

For each of the company’s contracts, the timing of revenue recognition, customer billings, and cash collections results in a net contract asset or liability at the end of each reporting period. Contract assets are equivalent to and reflected as Unbilled receivables in the unaudited condensed consolidated statements of financial position and are primarily related to long-term contracts where revenue recognized under the cost-to-cost method exceeds amounts billed to customers. Contract liabilities are equivalent to and reflected as Advance payments and billings in excess of costs incurred in the unaudited condensed consolidated statements of financial position. The amount of revenue recognized for the three months ended March 31, 2026 that was included in the December 31, 2025 contract liability balance was $1.8 billion. The amount of revenue recognized for the three months ended March 31, 2025 that was included in the December 31, 2024 contract liability balance was $1.9 billion.

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Disaggregation of Revenue

See Note 10 for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Property, Plant, and Equipment

In connection with the company’s first quarter 2026 agreement with the U.S. Air Force to expand production capacity and increase the aircraft production rate for the B-21 program, we agreed to sell an aircraft to the U.S. Air Force that we had previously planned to utilize as a company-owned test asset. While the sale of this asset accelerates the LRIP aircraft delivery schedule, it does not change the number of aircraft we expect to deliver under the LRIP phase of the program. The test asset was under construction at the time of sale, and our construction costs prior to the agreement were recognized as capital expenditures and included in property, plant and equipment. The agreement to sell the asset resulted in a reduction of PP&E during the first quarter of 2026; we had no material cash inflows related to the sale during the quarter.

Non-cash investing activities for the three months ended March 31, 2026 and 2025 include capital expenditures incurred but not yet paid of $42 million and $44 million, respectively.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, are as follows:


$ in millions	March 31, 2026		December 31, 2025
Cumulative translation adjustment	$	(133)	$	(131)
Other, net	2		5
Total accumulated other comprehensive loss	$	(131)	$	(126)

Related Party Transactions

For all periods presented, the company had no material related party transactions.

Accounting Standards Updates

On November 4, 2024, the FASB issued ASU No. 2024-03 Disaggregation of Income Statement Expenses (Subtopic 220-40). ASU 2024-03 requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 will be effective for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and will be applied on a prospective basis with the option to apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2024-03; however, the standard will not have an impact on the company’s consolidated financial position, results of operations or cash flows.

On September 18, 2025, the FASB issued ASU No. 2025-06 Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40). ASU 2025-06 removes references to prescriptive and sequential software development stages, requiring companies to capitalize internal-use software costs when management commits to funding the software project and it is probable the project will be completed. ASU 2025-06 will be effective for annual and interim periods beginning January 1, 2028, and can be applied on a prospective, modified prospective, or retrospective basis. We do not currently expect the standard will have a material impact on the company’s consolidated financial position, results of operations or cash flows.

On December 8, 2025, the FASB issued ASU No. 2025-11 Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 clarifies the applicability of Topic 270 and the form and content of interim financial statements. In addition, ASU 2025-11 requires entities to disclose material events occurring since the last annual reporting period. ASU 2025-11 will be effective for interim periods beginning January 1, 2028, and can be applied on a prospective or retrospective basis. We are evaluating the disclosure impact of ASU 2025-11; however, the standard will not have an impact on the company’s consolidated financial position, results of operations or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after March 31, 2026, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.

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2. EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK

Basic Earnings Per Share

We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of common stock outstanding during each period.

Diluted Earnings Per Share

Diluted earnings per share include the dilutive effect of awards granted to employees under stock-based compensation plans. The dilutive effect of these securities totaled 0.4 million shares and 0.3 million shares for the three months ended March 31, 2026 and 2025, respectively.

Share Repurchases

Share Repurchase Programs

On December 6, 2023, the company’s board of directors authorized a share repurchase program of up to $2.5 billion in share repurchases of the company’s common stock (the “2023 Repurchase Program”). Repurchases under the 2023 Repurchase Program commenced in February 2024 and were completed in September 2025.

On December 11, 2024, the company’s board of directors authorized a new share repurchase program of up to an additional $3.0 billion in share repurchases of the company’s common stock (the “2024 Repurchase Program”). Repurchases under the 2024 Repurchase Program commenced in September 2025 upon completion of the 2023 Repurchase Program. As of March 31, 2026, repurchases under the 2024 Repurchase Program totaled $0.5 billion; $2.5 billion remained under this share repurchase authorization.

Share repurchases take place from time to time, subject to market and regulatory conditions and management’s discretion, in the open market or in privately negotiated transactions. The company retires its common stock upon repurchase and, in the periods presented, has not made any purchases of common stock other than in connection with these publicly announced repurchase programs.

The table below summarizes the company’s share repurchases to date under the authorizations described above:


							Shares Repurchased (in millions)
Repurchase Program Authorization Date	Amount Authorized (in millions)		Total Shares Retired (in millions)	Average Price Per Share(1)		Date Completed	Three Months Ended March 31
							2026	2025
December 6, 2023	$	2,500	5.2	$	482.41	September 2025	—	1.0
December 11, 2024	$	3,000	0.9	$	581.87		0.1	—
							0.1	1.0

(1)Excludes brokerage commissions and other costs of execution, including taxes.

Dividends on Common Stock

In May 2025, the company increased the quarterly common stock dividend 12 percent to $2.31 per share from the previous amount of $2.06 per share.

3. INVENTORIED COSTS, NET

Inventoried costs, net consisted of the following:


$ in millions	March 31, 2026		December 31, 2025
Raw materials	$	318	$	306
Work in process	1,062		945
Finished goods	70		58
Inventoried costs, net	$	1,450	$	1,309

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4. INCOME TAXES

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures under Internal Revenue Code (IRC) Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes. As part of the enactment of the OBBBA, the company became subject to the corporate alternative minimum tax (CAMT) and recorded CAMT credit carryforwards of $187 million during 2025. In February 2026, the Internal Revenue Service (IRS) issued Notice 2026-7, providing interim relief for the CAMT through a favorable adjustment related to the amortization of research and development expenditures under IRC Section 174. The company recognized the impacts of Notice 2026-7 during the first quarter of 2026, resulting in a $187 million decrease in CAMT credit carryforwards and a corresponding increase in Taxes receivable, as well as a $19 million reduction to federal income tax expense.


	Three Months Ended March 31
$ in millions		2026			2025
Federal and foreign income tax expense		$	155		$	97
Effective income tax rate		15.0		%	16.8		%

First quarter 2026 income tax expense increased $58 million, or 60 percent, due to $452 million of higher earnings before income taxes, partially offset by a lower effective tax rate (ETR). The first quarter 2026 ETR decreased to 15.0 percent from 16.8 percent primarily due to higher research credits, including a $19 million benefit related to the CAMT guidance discussed above. The first quarter 2026 ETR includes benefits of $68 million for research credits and $9 million for foreign-derived deduction-eligible income (FDDEI), partially offset by $19 million of interest expense on unrecognized tax benefits. The first quarter 2025 ETR included benefits of $34 million for research credits and $6 million for foreign derived intangible income (FDII), partially offset by $16 million of interest expense on unrecognized tax benefits.

Taxes receivable, which are included in Prepaid expenses and other current assets in the unaudited condensed consolidated statements of financial position, were $1.1 billion as of March 31, 2026 and $924 million as of December 31, 2025. Non-current unrecognized tax benefits, which are included in Other non-current liabilities, were $1.7 billion and $1.6 billion as of March 31, 2026 and December 31, 2025, respectively, with the remainder of our unrecognized tax benefits included within Other current liabilities.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. Certain matters related to the company’s 2018-2024 federal income tax returns are currently under IRS examination. Certain matters related to the company’s 2014-2017 federal income tax returns and refund claims related to its 2007-2016 federal tax returns are currently under review by the IRS Appeals Office.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The company holds a portfolio of marketable securities including investments to partially fund non-qualified employee benefit plans as well as investments in companies that are advancing or developing technologies applicable to our business. A portion of these securities are held in common/collective trust funds and are measured at fair value using net asset value (NAV) per share as a practical expedient; therefore, they are not categorized in the fair value hierarchy table below. Marketable securities are included in Other non-current assets in the unaudited condensed consolidated statements of financial position.

The company’s derivative portfolio consists primarily of foreign currency forward contracts. Where model-derived valuations are appropriate, the company utilizes the income approach to determine the fair value using internal models based on observable market inputs.

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The following table presents the financial assets and liabilities the company records at fair value identified by the level of inputs used to determine fair value:


	March 31, 2026								December 31, 2025
$ in millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial Assets
Marketable securities	$	463	$	—	$	24	$	487	$	454	$	—	$	24	$	478
Marketable securities valued using NAV							5								5
Total marketable securities	463		—		24		492		454		—		24		483
Derivatives	—		—		—		—		—		2		—		2

There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the three months ended March 31, 2026.

Unrealized gains and losses from marketable securities, which are reflected in Other, net on the unaudited condensed consolidated statement of earnings and comprehensive income, were not material for the three months ended March 31, 2026 and 2025.

The notional value of the company’s foreign currency forward contracts at March 31, 2026 and December 31, 2025 was $318 million and $308 million, respectively. The portion of notional value designated as a cash flow hedge at March 31, 2026 and December 31, 2025 was $149 million and $167 million, respectively.

The derivative fair values and related unrealized gains/losses at March 31, 2026 and December 31, 2025 were not material.

The carrying value of cash and cash equivalents and commercial paper approximates fair value.

Long-term Debt

The estimated fair value of the company’s long-term debt was $14.2 billion and $15.1 billion as of March 31, 2026 and December 31, 2025, respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the company’s existing debt arrangements. The current portion of long-term debt is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Issuance of Senior Notes

In May 2025, the company issued $1.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

•$500 million of 4.65% senior notes due 2030 (the “2030 Notes”) and

•$500 million of 5.25% senior notes due 2035 (the “2035 Notes”).

We refer to the 2030 Notes and 2035 Notes together, as the “notes.” Interest on the notes is payable semi-annually in arrears. The notes are generally subject to redemption, in whole or in part, at the company’s discretion at any time, or from time to time, prior to maturity at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed or an applicable “make-whole” amount, plus accrued and unpaid interest.

Repayment of Senior Notes

In March 2026, the company repaid $270 million of 7.875% unsecured senior notes and $257 million of 7.75% unsecured senior notes upon maturity.

In January 2025, the company repaid $1.5 billion of 2.93% unsecured senior notes upon maturity.

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6. INVESTIGATIONS, CLAIMS AND LITIGATION

For over 25 years, the company has worked closely with the United States Navy, the United States Environmental Protection Agency, the New York State Department of Environmental Conservation, the New York State Department of Health and other federal, state and local governmental authorities, to address environmental conditions allegedly resulting from historic operations at the former United States Navy and Grumman facilities in Bethpage, New York. We have incurred, and expect to continue to incur, as included in Note 7, substantial remediation costs related to these Bethpage environmental conditions, including potential costs relating to unanticipated developments such as new discoveries of potential contaminants. It is also possible that applicable remediation standards and other requirements to which we are subject may continue to change, and that our costs may increase materially. In 2022, we resolved several disputes and regulatory proceedings concerning the scope and allocation of remediation responsibilities and costs related to this site and we continue remediation consistent with agreements through which those disputes were resolved. The company continues to be involved in other remediation-related disputes, none of which are material individually or in the aggregate. We are also a party to various individual lawsuits and a putative class action in the Eastern District of New York alleging personal injury and property damage related to the legacy Bethpage environmental conditions (the “Bethpage EDNY cases”). The court had previously stayed the filed individual lawsuits and recently set an April 24 hearing on plaintiffs’ motion to lift that stay as to a subset of plaintiffs. Although the court has ordered, and the parties have submitted, supplemental briefing on pending class certification and expert motions in the putative class action, the parties remain engaged in a mediation. We are also a party, and may become a party, to other lawsuits brought by or against insurance carriers, and by other individual plaintiffs and/or putative classes, as well as other parties. We cannot at this time predict or reasonably estimate the potential outcomes or ranges of possible liability of the Bethpage EDNY cases.

The company received from the U.S. Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost accounting and controls focused on the interest rate assumptions the company used to determine our U.S. Government Cost Accounting Standards (CAS) pension expense, which we discuss in Note 7 below. The company has responded to requests and expects to continue to engage with the government as these matters progress. We cannot at this point predict the outcome of these matters.

The company is a party to various other investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, that arise in the ordinary course of our business. The nature of legal proceedings is such that we cannot assure the outcome of any particular matter. However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited condensed consolidated financial position as of March 31, 2026, or its annual results of operations and/or cash flows.

7. COMMITMENTS AND CONTINGENCIES

U.S. Government Cost Claims and Contingencies

From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed costs, plus, at times, penalties and interest. When such findings are presented, the company and U.S. government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs. Such provisions are reviewed periodically using the most recent information available. The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of March 31, 2026, or its annual results of operations and/or cash flows.

In 2019, the Defense Contract Management Agency (DCMA) raised questions about an interest rate assumption used by the company to determine our CAS pension expense. On June 1, 2020, DCMA provided written notice that the assumptions the company used during the period 2013-2019 were potentially noncompliant with CAS. We submitted a formal response on July 31, 2020, which we believed demonstrates the appropriateness of the assumptions used. On November 24, 2020, DCMA replied to the company’s response, disagreeing with our position and requesting additional input, which we provided on February 22, 2021. We subsequently continued to exchange correspondence and engage with DCMA on this matter, including responding to requests for and providing additional information. On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of noncompliance with CAS, which is an interim, non-final determination, and the parties engaged in discussions. In

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addition, as noted in Note 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information related to the interest rate assumptions at issue in our discussions with DCMA. The company has responded to requests and expects to continue to engage with the government as these matters progress. We cannot at this point predict the outcome of these matters. The sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of these matters could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.

Environmental Matters

The table below summarizes the amount of accrued and deferred costs associated with the company’s environmental remediation liabilities as of March 31, 2026 and December 31, 2025:


$ in millions	March 31, 2026		December 31, 2025
Accrued costs(1)	$	561	$	547
Deferred costs(2)	514		502

(1) As of March 31, 2026, $213 million is recorded in Other current liabilities and $348 million is recorded in Other non-current liabilities in the unaudited condensed consolidated statements of financial position. Estimated remediation costs are not discounted to present value.

(2) The company defers the portion of environmental remediation costs we expect to be recoverable through overhead charges on U.S. government contracts. As of March 31, 2026, $197 million is deferred in Prepaid expenses and other current assets and $317 million is deferred in Other non-current assets in the unaudited condensed consolidated statements of financial position. These amounts are routinely evaluated for recoverability.

Reasonably possible future costs in excess of accrued costs were $402 million and $380 million as of March 31, 2026 and December 31, 2025, respectively. We currently expect any such future costs would be recoverable through overhead charges on our U.S. government contracts in a similar proportion as the amounts deferred in the table above.

Although we cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of March 31, 2026, or its annual results of operations and/or cash flows.

Financial Arrangements

In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain obligations. At March 31, 2026, there were $597 million of stand-by letters of credit and guarantees and $271 million of surety bonds outstanding.

Commercial Paper

The company maintains a commercial paper program that serves as a source of short-term financing with capacity to issue unsecured commercial paper notes up to $3.0 billion. At March 31, 2026, the company had $500 million of outstanding commercial paper borrowings at a weighted-average interest rate of 3.96%, with original maturities of three months or less from the date of issuance. The outstanding balance of commercial paper borrowings is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.

Credit Facilities

The company maintains a five-year senior unsecured revolving credit facility in an aggregate principal amount of $3.0 billion (the “2025 Credit Agreement”) that matures in September 2030 and is intended to support the company's commercial paper program and other general corporate purposes. Commercial paper borrowings reduce the amount available for borrowing under the 2025 Credit Agreement. At March 31, 2026, there were no borrowings outstanding under this facility; however, the amount available for borrowing was reduced by the $500 million of commercial paper borrowings described above.

The 2025 Credit Agreement contains generally customary terms and conditions, including covenants restricting the company’s ability to sell all or substantially all of its assets, merge or consolidate with another entity or undertake other fundamental changes and incur liens. The company also cannot permit the ratio of its debt to capitalization (as set forth in the credit agreement) to exceed 65 percent.

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At March 31, 2026, the company was in compliance with all covenants under its credit agreements.

8. RETIREMENT BENEFITS

The cost to the company of its pension and other postretirement benefit (OPB) plans is shown in the following table:


	Three Months Ended March 31
		Pension Benefits	OPB
$ in millions			2026		2025		2026		2025
Components of net periodic benefit cost (benefit)
Service cost			$	53	$	54	$	1	$	1
Interest cost			399		403		15		16
Expected return on plan assets			(565)		(540)		(22)		(21)
Amortization of prior service credit			—		—		(1)		(1)
Other			—		7		—		—
Net periodic benefit cost (benefit)			$	(113)	$	(76)	$	(7)	$	(5)

Employer Contributions

The company sponsors defined benefit pension and OPB plans, as well as defined contribution plans. We fund our defined benefit pension plans annually in a manner consistent with the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006.

Contributions made by the company to its retirement plans are as follows:


	Three Months Ended March 31
$ in millions		2026		2025
Defined benefit pension plans		$	22	$	18
OPB plans		11		10
Defined contribution plans		229		229

9. STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS

Stock Awards

The following table presents the number of restricted stock rights (RSRs) and restricted performance stock rights (RPSRs) granted to employees under the company’s long-term incentive stock plan and the grant date aggregate fair value of those stock awards for the periods presented:


	Three Months Ended March 31
in millions	2026		2025
RSRs granted	0.1		0.1
RPSRs granted	0.1		0.1
Grant date aggregate fair value	$	139	$	100

RSRs typically vest on the third anniversary of the grant date, while RPSRs generally vest and pay out based on the achievement of certain performance metrics and market conditions over a three-year period.

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Cash Awards

The following table presents the minimum and maximum aggregate payout amounts related to cash units (CUs) and cash performance units (CPUs) granted to employees in the periods presented:


	Three Months Ended March 31
$ in millions	2026		2025
Minimum aggregate payout amount	$	—	$	35
Maximum aggregate payout amount	163		198

CUs typically vest and settle in cash on the third anniversary of the grant date, while CPUs generally vest and pay out in cash based on the achievement of certain performance metrics over a three-year period. During the three months ended March 31, 2026, there were no CUs granted to employees.

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10. SEGMENT INFORMATION

The following table presents sales, operating costs and expenses, and operating income by segment:


	Three Months Ended March 31
$ in millions		2026		2025
Aeronautics Systems
Sales		$	3,283	$	2,814
Operating costs and expenses:
Product		2,294		2,358
Service		653		601
Intersegment		31		38
Aeronautics Systems operating income (loss)		305		(183)
Defense Systems
Sales		1,899		1,805
Operating costs and expenses:
Product		1,375		1,262
Service		294		324
Intersegment		46		40
Defense Systems operating income		184		179
Mission Systems
Sales		2,861		2,807
Operating costs and expenses:
Product		1,682		1,730
Service		419		434
Intersegment		327		282
Mission Systems operating income		433		361
Space Systems
Sales		2,480		2,568
Operating costs and expenses:
Product		1,811		1,829
Service		281		362
Intersegment		153		94
Space Systems operating income		235		283
Intersegment profit eliminations		(85)		(72)
Total segment operating income		1,072		568
FAS/CAS operating adjustment		7		63
Unallocated corporate expense		(90)		(58)
Total operating income		$	989	$	573
Other (expense) income
Interest expense		(162)		(156)
Non-operating FAS pension benefit		166		130
Other, net		37		31
Earnings before income taxes		$	1,030	$	578

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FAS/CAS Operating Adjustment

For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with applicable Federal Acquisition Regulation (FAR) and CAS requirements. The FAS/CAS operating adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income.

Unallocated Corporate Expense

Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs. Unallocated corporate expense also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired through business combinations, as well as certain compensation and other costs.

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Disaggregation of Revenue


Sales by Customer Type	Three Months Ended March 31
		2026			2025
$ in millions			$		%(3)		$		%(3)
Aeronautics Systems
U.S. government(1)			$	2,694	83	%	$	2,290	83	%
International(2)			540		17	%	478		17	%
Other customers			15		—	%	5		—	%
Intersegment sales			34				41
Aeronautics Systems sales			3,283				2,814
Defense Systems
U.S. government(1)			1,591		86	%	1,451		83	%
International(2)			235		13	%	289		16	%
Other customers			21		1	%	20		1	%
Intersegment sales			52				45
Defense Systems sales			1,899				1,805
Mission Systems
U.S. government(1)			1,979		80	%	1,973		80	%
International(2)			464		19	%	475		19	%
Other customers			33		1	%	24		1	%
Intersegment sales			385				335
Mission Systems sales			2,861				2,807
Space Systems
U.S. government(1)			2,200		95	%	2,309		94	%
International(2)			42		2	%	44		2	%
Other customers			67		3	%	110		4	%
Intersegment sales			171				105
Space Systems sales			2,480				2,568
Total
U.S. government(1)			8,464		86	%	8,023		84	%
International(2)			1,281		13	%	1,286		14	%
Other customers			136		1	%	159		2	%
Total Sales			$	9,881			$	9,468

(1) Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. government. Each of the company’s segments derives a substantial percentage of its revenue from the U.S. government.

(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer to the extent that information is available to us or can be reasonably estimated. These sales include foreign military sales contracted through the U.S. government.

(3) Percentages calculated based on external customer sales.

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Sales by Contract Type	Three Months Ended March 31
		2026			2025
$ in millions			$		%(1)		$		%(1)
Aeronautics Systems
Cost-type			$	1,359	42	%	$	1,339	48	%
Fixed-price			1,890		58	%	1,434		52	%
Intersegment sales			34				41
Aeronautics Systems sales			3,283				2,814
Defense Systems
Cost-type			1,066		58	%	965		55	%
Fixed-price			781		42	%	795		45	%
Intersegment sales			52				45
Defense Systems sales			1,899				1,805
Mission Systems
Cost-type			1,181		48	%	1,163		47	%
Fixed-price			1,295		52	%	1,309		53	%
Intersegment sales			385				335
Mission Systems sales			2,861				2,807
Space Systems
Cost-type			1,330		58	%	1,540		63	%
Fixed-price			979		42	%	923		37	%
Intersegment sales			171				105
Space Systems sales			2,480				2,568
Total
Cost-type			4,936		50	%	5,007		53	%
Fixed-price			4,945		50	%	4,461		47	%
Total Sales			$	9,881			$	9,468

(1)Percentages calculated based on external customer sales.

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Sales by Geographic Region(1)	Three Months Ended March 31
		2026	2025
$ in millions			$		%(3)		$		%(3)
Aeronautics Systems
United States			$	2,709	83	%	$	2,295	83	%
Asia/Pacific			229		7	%	200		7	%
Europe			289		9	%	269		10	%
Other geographic regions			22		1	%	9		—	%
Intersegment sales			34				41
Aeronautics Systems sales			3,283				2,814
Defense Systems
United States			1,612		87	%	1,471		84	%
Asia/Pacific			81		4	%	81		5	%
Europe			125		7	%	170		9	%
Other geographic regions			29		2	%	38		2	%
Intersegment sales			52				45
Defense Systems sales			1,899				1,805
Mission Systems
United States			2,012		81	%	1,997		81	%
Asia/Pacific			114		5	%	128		5	%
Europe			252		10	%	239		10	%
Other geographic regions			98		4	%	108		4	%
Intersegment sales			385				335
Mission Systems sales			2,861				2,807
Space Systems
United States			2,267		98	%	2,419		98	%
Asia/Pacific			18		1	%	8		—	%
Europe			20		1	%	26		2	%
Other geographic regions			4		—	%	10		—	%
Intersegment sales			171				105
Space Systems sales			2,480				2,568
Total
United States			8,600		87	%	8,182		86	%
Asia/Pacific			442		4	%	417		4	%
Europe			686		7	%	704		8	%
Other geographic regions(2)			153		2	%	165		2	%
Total Sales			$	9,881			$	9,468

(1)Sales are attributed to countries based on the ultimate customer’s location to the extent that information is available to us or can be reasonably estimated. No country other than the United States represents greater than 10 percent of total company sales.

(2)Other geographic regions are principally comprised of the Middle East.

(3)Percentages calculated based on external customer sales.

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Capital Expenditures and Depreciation and Amortization

The following table presents capital expenditures and depreciation and amortization for each of our reportable segments and for Corporate:


	Three Months Ended March 31
$ in millions		2026		2025
Capital Expenditures
Aeronautics Systems		$	34	$	79
Defense Systems		16		12
Mission Systems		45		39
Space Systems		43		110
Corporate(1)		29		16
Total capital expenditures		$	167	$	256
Depreciation and Amortization
Aeronautics Systems		$	91	$	89
Defense Systems		44		43
Mission Systems		69		67
Space Systems		96		79
Corporate(1)		72		59
Total depreciation and amortization		$	372	$	337

(1)Corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations as they are not considered part of management’s evaluation of segment operating performance.

Assets
Our chief operating decision maker (“CODM”) does not use assets by segment to evaluate segment performance or allocate resources. Therefore, we do not disclose assets by segment.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Northrop Grumman Corporation

Falls Church, Virginia

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of March 31, 2026, and the related condensed consolidated statements of earnings and comprehensive income, cash flows, and changes in shareholders’ equity for the three-month periods ended March 31, 2026 and 2025, and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries as of December 31, 2025, and the related consolidated statements of earnings and comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated January 26, 2026, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2025, is fairly stated, in all material respects, in relation to the audited consolidated statement of financial position from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/			Deloitte & Touche LLP
			McLean, Virginia
			April 20, 2026

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

OVERVIEW

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.

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

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, our suppliers and partners, and our customers. We continue to work to address challenges to our business caused by the macroeconomic environment. We have seen progress in the supply chain as on-time deliveries and quality continue to improve. In remaining areas of pressure, we are proactively working with our suppliers to help meet our contract commitments.

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 recent 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 allocates 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, and the appropriated funds will remain available to be obligated until September 30, 2029 and expended through FY 2034. The OBBBA is expected to result in increased investments by the DoW in defense modernization projects and Pacific region deterrence, among other 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 were enacted. The legislation finalized 11 of the 12 regular appropriations bills for FY 2026 and includes approximately $859 billion for defense. The legislation did not fund the Department of Homeland Security (“DHS”), which was instead funded under a continuing resolution through February 13, 2026. After the DHS continuing resolution expired, the federal government entered a partial shutdown, which remains in effect. We do not believe that the ongoing partial shutdown will have a material adverse effect on our business.

The Presidential Administration (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 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.

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

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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 engineering and manufacturing development (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. Northrop Grumman and the U.S. Air Force have also established not to exceed (NTE) pricing for two additional lots. 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. Final terms, quantity, and pricing for the NTE lots are not fully negotiated.

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 currently 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 fourth quarter of 2023, we recognized a projected loss of $1.56 billion across the five LRIP options. During the first quarter of 2025, we recognized an additional $477 million loss across the five LRIP options. During the first 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. However, impacts from the recent agreement with the U.S. Air Force and higher estimated production costs resulted in a $157 million net unfavorable EAC adjustment on the first four LRIP lots, which was offset by a net reduction in the loss contingency accrual on the remainder of the program.

The company’s first 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 first quarter of 2026, we reviewed our estimated profitability on the Sentinel program and made no significant changes. If our estimated cost to complete the restructured EMD effort or our expectations for achieving contract incentives are 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

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 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.

Selected financial highlights are presented in the table below:


	Three Months Ended March 31				%
$ in millions, except per share amounts		2026			2025			Change
Sales		$	9,881		$	9,468		4	%
Operating costs and expenses		8,892			8,895			—	%
Operating costs and expenses as a % of sales		90.0		%	93.9		%

Operating income		989			573			73	%
Operating margin rate		10.0		%	6.1		%
Federal and foreign income tax expense		155			97			60	%
Effective income tax rate		15.0		%	16.8		%
Net earnings		875			481			82	%
Diluted earnings per share		$	6.14		$	3.32		85	%

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Sales

The table below reconciles sales to organic sales:


	Three Months Ended March 31			%
$ in millions		2026		2025		Change
Sales		$	9,881	$	9,468	4	%
Less: Training services sales		—		(72)
Organic sales		$	9,881	$	9,396	5	%

First quarter 2026 sales increased $413 million, or 4 percent, due to higher sales of $469 million at Aeronautics Systems, as well as higher sales at Defense Systems and Mission Systems. These increases were partially offset by $116 million of higher intercompany eliminations and lower sales at Space Systems due to the wind-down of work on the Next Generation Interceptor (NGI) program.

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.

Operating Income and Margin Rate

First quarter 2026 operating income increased $416 million, or 73 percent, largely driven by the prior year $477 million B-21 loss provision at Aeronautics Systems, partially offset by a $56 million decrease in the FAS/CAS operating adjustment. Operating margin rate increased to 10.0 percent from 6.1 percent reflecting the items above.

First quarter 2026 G&A costs as a percentage of sales decreased to 9.8 percent from 10.6 percent in the prior year period primarily due to higher sales and cost management.

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

See Note 4 to the financial statements for additional information.

Net Earnings
First quarter 2026 net earnings increased $394 million, or 82 percent, primarily due to the $416 million increase in operating income described above and a $36 million increase in the non-operating FAS pension benefit, partially offset by a $58 million increase in income tax expense.

Diluted Earnings Per Share

First quarter 2026 diluted earnings per share increased $2.82, or 85 percent, reflecting an 82 percent increase in net earnings and a 2 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.

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 March 31				%
$ in millions		2026			2025			Change
Operating income		$	989		$	573		73	%
Operating margin rate		10.0		%	6.1		%
Reconciliation to segment operating income:
CAS pension expense		(60)			(117)			(49)	%
FAS pension service expense		53			54			(2)	%
FAS/CAS operating adjustment		(7)			(63)			(89)	%


Intangible asset amortization and PP&E step-up depreciation		21			21			—	%
Other unallocated corporate expense		69			37			86	%
Unallocated corporate expense		90			58			55	%
Segment operating income		$	1,072		$	568		89	%
Segment operating margin rate		10.8		%	6.0		%

First quarter 2026 segment operating income increased $504 million, or 89 percent, primarily due to $488 million of higher operating income at Aeronautics Systems and $72 million of higher operating income at Mission Systems, partially offset by $48 million of lower operating income at Space Systems. Segment operating margin rate increased to 10.8 percent from 6.0 percent primarily due to a higher operating margin rate at Aeronautics Systems and Mission Systems, partially offset by a lower operating margin rate at Space Systems.

FAS/CAS Operating Adjustment

The first quarter 2026 FAS/CAS operating adjustment reflects lower CAS pension expense largely driven by favorable plan asset returns in prior years.

Unallocated Corporate Expense

The increase in first quarter 2026 unallocated corporate expense is primarily due to the resolution of a litigation matter as well as higher deferred state tax expense largely related to the repeal of mandatory capitalization of research and development expenditures under IRC Section 174.

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.

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


	Three Months Ended March 31
$ in millions		2026		2025
Favorable EAC adjustments		$	660	$	324
Unfavorable EAC adjustments		(740)		(424)
Net EAC adjustments		$	(80)	$	(100)

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


	Three Months Ended March 31
$ in millions		2026		2025
Aeronautics Systems		$	(107)	$	(189)
Defense Systems		15		23
Mission Systems		51		37
Space Systems		(38)		29
Eliminations		(1)		—
Net EAC adjustments		$	(80)	$	(100)


AERONAUTICS SYSTEMS	Three Months Ended March 31				%
$ in millions		2026			2025			Change
Sales		$	3,283		$	2,814		17	%
Operating income (loss)		305			(183)			NM
Operating margin rate		9.3		%	(6.5)		%

Sales

First quarter 2026 sales increased $469 million, or 17 percent, primarily due to higher sales on B-21 and other restricted programs as well as increased volume on the E-130J TACAMO program as it ramps up. 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

First quarter 2026 operating income increased $488 million and operating margin rate increased to 9.3 percent primarily due to the absence of the prior year B-21 loss provision.


DEFENSE SYSTEMS	Three Months Ended March 31				%
$ in millions		2026			2025			Change
Sales		$	1,899		$	1,805		5	%
Less: Training services sales		—			(72)
Organic sales		$	1,899		$	1,733		10	%

Operating income		$	184		$	179		3	%
Operating margin rate		9.7		%	9.9		%

Sales

First quarter 2026 sales increased $94 million, or 5 percent, primarily due to higher volume on Sentinel as that program continues to ramp, as well as higher volume on tactical solid rocket motor programs and across the Integrated Battle Command System (IBCS) portfolio. These increases were partially offset by a $72 million reduction in sales related to the divested training services business.

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Operating Income

First quarter 2026 operating income increased $5 million, or 3 percent, primarily due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 9.7 percent from 9.9 percent principally due to lower net EAC adjustments.


MISSION SYSTEMS	Three Months Ended March 31				%
$ in millions		2026			2025			Change
Sales		$	2,861		$	2,807		2	%
Operating income		433			361			20	%
Operating margin rate		15.1		%	12.9		%

Sales

First quarter 2026 sales increased $54 million, or 2 percent, primarily due to ramp-up on restricted airborne radar programs and higher volume on marine systems programs, partially offset by lower volume on the Scalable Agile Beam Radar program and airborne electronic warfare programs.

Operating Income

First quarter 2026 operating income increased $72 million, or 20 percent, primarily due to a higher operating margin rate and higher sales. Operating margin rate increased to 15.1 percent from 12.9 percent, primarily due to prior year investments made by the sector in connection with restricted business opportunities, as well as higher net EAC adjustments in the current year.


SPACE SYSTEMS	Three Months Ended March 31				%
$ in millions		2026			2025			Change
Sales		$	2,480		$	2,568		(3)	%
Operating income		235			283			(17)	%
Operating margin rate		9.5		%	11.0		%

Sales

First quarter 2026 sales decreased $88 million, or 3 percent, primarily due to wind-down of work on the NGI program, which reduced sales by $98 million, as well as lower sales on the GEM 63XL program related to the unfavorable EAC adjustment described below. These decreases were partially offset by higher volume on Space Development Agency satellite programs driven by ramp-up on the Tranche 3 tracking layer award.

Operating Income

First quarter 2026 operating income decreased $48 million, or 17 percent, due to a lower operating margin rate and lower sales. Operating margin rate decreased to 9.5 percent from 11.0 percent, largely due to lower net EAC adjustments, including a $71 million unfavorable adjustment on GEM 63XL associated with a launch anomaly that occurred during the first quarter.

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PRODUCT AND SERVICE ANALYSIS

The following table presents product and service sales and operating costs and expenses by segment:


	Three Months Ended March 31
$ in millions		2026	2025
Segment Information:			Sales		Operating Costs and Expenses		Sales		Operating Costs and Expenses
Aeronautics Systems
Product			$	2,494	$	2,294	$	2,091	$	2,358
Service			755		653		682		601
Intersegment eliminations			34		31		41		38
Total Aeronautics Systems			3,283		2,978		2,814		2,997
Defense Systems
Product			1,517		1,375		1,405		1,262
Service			330		294		355		324
Intersegment eliminations			52		46		45		40
Total Defense Systems			1,899		1,715		1,805		1,626
Mission Systems
Product			1,966		1,682		1,961		1,730
Service			510		419		511		434
Intersegment eliminations			385		327		335		282
Total Mission Systems			2,861		2,428		2,807		2,446
Space Systems
Product			1,981		1,811		2,064		1,829
Service			328		281		399		362
Intersegment eliminations			171		153		105		94
Total Space Systems			2,480		2,245		2,568		2,285
Segment Totals
Total Product			$	7,958	$	7,162	$	7,521	$	7,179
Total Service			1,923		1,647		1,947		1,721
Total Segment(1)			$	9,881	$	8,809	$	9,468	$	8,900

(1) A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.”

Product Sales and Costs

First quarter 2026 product sales increased $437 million, or 6 percent, primarily due to higher sales on B-21 at Aeronautics Systems, as well as higher volume on Sentinel, tactical solid rocket motor programs and across the IBCS portfolio at Defense Systems. These increases were partially offset by the wind-down of work on the NGI program and lower sales on GEM 63XL at Space Systems.

First quarter 2026 product costs were comparable to the prior year, reflecting a higher operating margin rate principally due to the absence of the prior year B-21 loss provision at Aeronautics Systems and investments made in connection with restricted business opportunities at Mission Systems.

Service Sales and Costs

First quarter 2026 service sales decreased $24 million, or 1 percent, primarily due to lower restricted sales at Space Systems and lower service volume at Defense Systems due to the training services divestiture, partially offset by higher restricted sales at Aeronautics Systems.

First quarter 2026 service costs decreased $74 million, or 4 percent, reflecting a higher operating margin rate principally driven by higher net EAC adjustments on service programs across each of the sectors.

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BACKLOG

Backlog consisted of the following as of March 31, 2026 and December 31, 2025:


	March 31, 2026						December 31, 2025
$ in millions	Funded		Unfunded		Total Backlog		Total Backlog		% Change in 2026
Aeronautics Systems	$	12,996	$	11,275	$	24,271	$	23,052	5	%
Defense Systems	7,759		19,970		27,729		27,796		—	%
Mission Systems	12,887		4,916		17,803		18,632		(4)	%
Space Systems	10,426		15,379		25,805		26,201		(2)	%
Total backlog	$	44,068	$	51,540	$	95,608	$	95,681	—	%

First quarter 2026 net awards totaled $9.8 billion and backlog totaled $95.6 billion. Significant first quarter new awards include $4.9 billion for restricted programs (primarily at Aeronautics Systems, Space Systems, and Mission Systems), $0.5 billion for F-35 (primarily at Aeronautics Systems), $0.5 billion for infrared countermeasures programs, and $0.4 billion for Triton.

LIQUIDITY AND CAPITAL RESOURCES

We are focused on the efficient conversion of operating income into cash to provide for the company’s material cash requirements, including working capital needs, satisfaction of contractual commitments, funding of our pension and OPB plans, investment in our business through capital expenditures, and shareholder returns.

At March 31, 2026, we had $2.1 billion in cash and cash equivalents. We expect cash and cash equivalents and cash generated from operating activities, supplemented by borrowings under credit facilities, commercial paper and/or in the capital markets, if needed, to be sufficient to provide liquidity to the company in the short-term and long-term. The company has a five-year senior unsecured revolving credit facility in an aggregate principal amount of $3.0 billion, and in April 2026, we renewed our one-year $500 million uncommitted credit facility. At March 31, 2026, there were no borrowings outstanding under these credit facilities; however, as of March 31, 2026, we had $500 million in commercial paper outstanding, which reduced the amount available for borrowing under our unsecured revolving credit facility by that amount.

Cash Flow Measures

In addition to our cash position, we consider various cash flow measures in capital deployment decision-making, including cash provided by operating activities and free cash flow, a non-GAAP measure described in more detail below.

Operating Cash Flow

The table below summarizes key components of cash used in operating activities:


	Three Months Ended March 31			%
$ in millions		2026		2025		Change
Net earnings		$	875	$	481	82	%
Changes in trade working capital(1)		(2,074)		(2,187)		(5)	%
Other, net		(457)		141		NM
Net cash used in operating activities		$	(1,656)	$	(1,565)	(6)	%

(1)Beginning in the fourth quarter of 2025, the company redefined trade working capital presented in this table to include accounts receivable, unbilled receivables, inventoried costs, trade accounts payable and advance payments and billings in excess of costs incurred. Prior period amounts and disclosures have been recast to conform to the current period presentation.

First quarter 2026 net cash used in operating activities was comparable with the same period in 2025. Net cash used in operating activities reflects increases in trade working capital, consistent with the company’s historical timing of operating cash flows, which are generally more heavily weighted towards the second half of the year.

Free Cash Flow

Free cash flow, as reconciled in the table below, is a non-GAAP measure defined as net cash provided by or used in operating activities less capital expenditures, and may not be defined and calculated by other companies in the same

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manner. We use free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and stock repurchases. This non-GAAP measure may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating cash flows presented in accordance with GAAP.

The table below reconciles net cash used in operating activities to free cash flow:


	Three Months Ended March 31			%
$ in millions		2026		2025		Change
Net cash used in operating activities		$	(1,656)	$	(1,565)	(6)	%
Capital expenditures		(167)		(256)		(35)	%
Free cash flow		$	(1,823)	$	(1,821)	—	%

First quarter 2026 free cash flow was comparable with the prior year period and reflects a $91 million increase in net cash used in operating activities and an $89 million reduction in capital expenditures.

Investing Cash Flow

First quarter 2026 net cash used in investing activities decreased $84 million, or 33 percent, as compared with the same period in 2025 principally due to lower capital expenditures.

Financing Cash Flow

First quarter 2026 net cash used in financing activities decreased $362 million, or 43 percent, as compared with the same period in 2025, primarily due to a $412 million decrease in share repurchases.

Credit Facilities, Commercial Paper and Financial Arrangements - See Note 7 to the financial statements for further information on our credit facilities, commercial paper and our use of standby letters of credit and guarantees.

Share Repurchases - See Note 2 to the financial statements for further information on our share repurchase programs.

Long-term Debt - See Note 5 to the financial statements for further information.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates from those discussed in our 2025 Annual Report on Form 10-K.

ACCOUNTING STANDARDS UPDATES

See Note 1 to our financial statements for further information on accounting standards updates.

FORWARD-LOOKING STATEMENTS AND PROJECTIONS

This Form 10-Q and the information we are incorporating by reference contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,” “believe,” “estimate,” “guidance,” “outlook,” “trends,” “goals” and similar expressions generally identify these forward-looking statements. Forward-looking statements include, among other things, statements relating to our future financial condition, results of operations and/or cash flows. Forward-looking statements are based upon assumptions, expectations, plans and projections that we believe to be reasonable when made, but which may change over time. These statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict. Specific risks that could cause actual results to differ materially from those expressed or implied in these forward-looking statements include, but are not limited to, those identified and discussed more fully in the section entitled “Risk Factors” in our 2025 Annual Report on Form 10-K and from time to time in our other filings with the SEC. They include:

Industry and Economic Risks

•our dependence on the U.S. government for a substantial portion of our business

•significant delays or reductions in appropriations and/or for our programs, and U.S. government funding and program support more broadly, including as a result of a prolonged continuing resolution and/or government shutdown, and/or related to the global security environment or other global events

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•significant delays or reductions in payments as a result of or related to a breach of the debt ceiling or a prolonged government shutdown

•the use of estimates when accounting for our contracts and the effect of contract cost growth and our efforts to recover or offset such costs and/or changes in estimated contract costs and revenues, including as a result of inflationary pressures, labor shortages, supply chain challenges, changes in trade policies and/or other macroeconomic factors, and risks related to management’s judgments and assumptions in estimating and/or projecting contract revenue and performance which may be inaccurate

•increased competition within our markets and bid protests

•continued pressures from macroeconomic trends, including on costs, schedules, performance and ability to meet expectations

Legal and Regulatory Risks

•investigations, claims, disputes, enforcement actions, litigation (including criminal, civil and administrative) and/or other legal proceedings

•changes in procurement and other laws, SEC, DoW and other rules and regulations, including changes through executive orders, contract terms and practices applicable to our industry, findings by the U.S. government as to our compliance with such requirements, more aggressive enforcement of such requirements and changes in our customers’ business practices and preferences globally

•the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate, including the impact on our reputation and our ability to do business

•environmental matters, unforeseen environmental costs and government and third-party claims

•unanticipated changes in our tax provisions or exposure to additional tax liabilities

Business and Operational Risks

•cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners, and changes in related regulations

•the performance and viability of our subcontractors and suppliers and the availability and pricing of raw materials, critical minerals and metals, chemicals, parts and components, particularly with inflationary pressures, increased costs, pricing changes, shortages in labor and financial resources, supply chain disruptions, and extended material lead times

•our ability to attract and retain a qualified and talented workforce with the necessary security clearances to meet our performance obligations

•our exposure to additional risks as a result of our international business, including risks related to global security and strategic alliances, geopolitical and economic factors, misconduct, suppliers, laws and regulations

•our ability to innovate, develop new products and technologies, progress and benefit from digital transformation and maintain technologies to meet the needs of our customers

•natural disasters, epidemics, pandemics and similar outbreaks and other significant disruptions

•products and services we provide related to hazardous and high risk operations, including the production and use of such products, which subject us to various environmental, regulatory, financial, reputational and other risks

•our ability appropriately to protect and exploit intellectual property rights

General and Other Risk Factors

•the adequacy and availability of, and ability to obtain, insurance coverage, customer indemnifications or other liability protections

•the future investment performance of plan assets, gains or losses associated with changes in valuation of marketable securities related to our non-qualified benefit plans, changes in actuarial assumptions associated with our pension and other postretirement benefit plans and legislative or other regulatory actions impacting our pension and postretirement benefit obligations

•changes in business conditions that could impact business investments and/or recorded goodwill or the value of other long-lived assets, and other potential future liabilities

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You are urged to consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of forward-looking statements. These forward-looking statements speak only as of the date this report is first filed or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risks from those discussed in our 2025 Annual Report on Form 10-K.

Item 4. Controls and Procedures

DISCLOSURE CONTROLS AND PROCEDURES

Our principal executive officer (Chair, Chief Executive Officer and President) and principal financial officer (Corporate Vice President and Chief Financial Officer) have evaluated the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)) as of March 31, 2026, and have concluded that these controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit is accumulated and communicated to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the three months ended March 31, 2026, no changes occurred in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We have provided information about certain legal proceedings in which we are involved in Notes 6 and 7 to the financial statements.

We are a party to various investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, that arise in the ordinary course of our business. These types of matters could result in administrative, civil or criminal fines, penalties or other sanctions (which terms include judgments or convictions and consent or other voluntary decrees or agreements); compensatory, treble or other damages; non-monetary relief; or other liabilities. Government regulations provide that certain allegations against a contractor may lead to suspension or debarment from future government contracts or suspension of export privileges for the company or one or more of its components. The nature of legal proceedings is such that we cannot assure the outcome of any particular matter. For additional information on pending matters, please see Notes 6 and 7 to the financial statements, and for further information on the risks we face from existing and future investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, please see “Risk Factors” in our 2025 Annual Report on Form 10-K.

Consistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental proceedings with a governmental entity as a party where the company reasonably believes such proceeding would result in monetary sanctions, exclusive of interest and costs, of $1.0 million or more.

Item 1A. Risk Factors

For a discussion of our risk factors please see the section entitled “Risk Factors” in our 2025 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below summarizes our repurchases of common stock during the three months ended March 31, 2026.


Period	Total Number of Shares Purchased	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(2)	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs ($ in millions)(2)
January 1, 2026 - January 23, 2026	80,801	$	626.37	80,801	$	2,484
January 24, 2026 - February 20, 2026	17,981	677.44		17,981		2,472
February 21, 2026 - March 27, 2026	—	—		—		2,472
Total	98,782	$	635.67	98,782	$	2,472

(1)Excludes commissions paid and other costs of execution, including taxes.

(2)On December 11, 2024, the company’s board of directors authorized a new share repurchase program of up to an additional $3.0 billion in share repurchases of the company’s common stock. Repurchases under the program commenced in September 2025. All repurchases of common stock during the three months ended March 31, 2026 were made pursuant to this program. By its terms, the program will expire when the company has used all authorized funds for repurchases.

See Note 2 to the financial statements for further information on our share repurchase programs.

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Item 5. Other Information

Consistent with Item 408 of Regulation S-K, the following table reflects Rule 10b5-1 trading arrangements and non-Rule 10b5-1 trading arrangements (as defined in Item 408) entered into by any director or officer (as defined in Rule 16a-1(f) of the Exchange Act) during the quarter ended March 31, 2026.

Name
(Title)

Type of Trading Arrangement

Date of Adoption

Expiration Date of Trading Arrangement

Aggregate Number of Securities to Be Purchased or Sold

Kathy J. Warden

Rule 10b5-1 Trading Arrangement

February 13, 2026

January 29, 2027 or such earlier date upon the completion of all trades under the plan or the occurrence of such other termination events as specified in the plan.

Sale of 25,000 shares of common stock

(Chair, Chief Executive Officer and President)

Michael A. Hardesty

Rule 10b5-1 Trading Arrangement

February 20, 2026

March 12, 2027 or such earlier date upon the completion of all trades under the plan or the occurrence of such other termination events as specified in the plan.

Sale of 1,036 shares of common stock

Sale of shares to be received upon payout of 2024 RSRs and RPSRs(1)

(Corporate Vice President, Controller, and Chief Accounting Officer)

Thomas H. Jones

Rule 10b5-1 Trading Arrangement

February 25, 2026

February 5, 2027 or such earlier date upon the completion of all trades under the plan or the occurrence of such other termination events as specified in the plan.

Gift of 526 shares

Sale of shares received upon payout of 2023 RSRs and RPSRs

(Corporate Vice President and President, Aeronautics Systems Sector)

(1) The aggregate number of shares to be sold will depend, in part, on future company performance.

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Table of Contents

NORTHROP GRUMMAN CORPORATION

Item 6. Exhibits



*+10.1			2026 Restricted Stock Rights Grant Agreement Specifying Terms and Conditions Applicable to 2026 Restricted Stock Rights Granted under the 2024 Long-Term Incentive Stock Plan

*+10.2			2026 Restricted Performance Stock Rights Grant Agreement Specifying Terms and Conditions Applicable to 2026 Restricted Performance Stock Rights Granted Under the 2024 Long-Term Incentive Stock Plan

*+10.3			2026 Restricted Stock Rights Grant Agreement Specifying Terms and Conditions Applicable to 2026 Restricted Stock Rights Granted to Kathy J. Warden under the 2024 Long-Term Incentive Stock Plan

*+10.4			2026 Restricted Performance Stock Rights Grant Agreement Specifying Terms and Conditions Applicable to 2026 Restricted Performance Stock Rights Granted to Kathy J. Warden under the 2024 Long-Term Incentive Stock Plan

*+10.5			Special 2026 Restricted Stock Rights Grant Agreement Specifying Terms and Conditions Applicable to 2026 Restricted Stock Rights Granted to John T. Greene Under the 2024 Long-Term Incentive Stock Plan

*+10.6			Group Personal Excess Liability Policy, effective as of January 1, 202 6

*+10.7			Form of Indemnification Agreement between Northrop Grumman Corporation and its directors and executive officers

*15			Letter from Independent Registered Public Accounting Firm

*31.1			Certification of Kathy J. Warden pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31.2			Certification of John T. Greene pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

**32.1			Certification of Kathy J. Warden pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

**32.2			Certification of John T. Greene pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*101			Northrop Grumman Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted as inline XBRL (Extensible Business Reporting Language): (i) the Cover Page, (ii) Condensed Consolidated Statements of Earnings and Comprehensive Income, (iii) Condensed Consolidated Statements of Financial Position, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Shareholders’ Equity, (vi) Notes to Condensed Consolidated Financial Statements, and (vii) Other Information. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


+			Management contract or compensatory plan or arrangement

*			Filed with this report

**			Furnished with this report

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Table of Contents

NORTHROP GRUMMAN CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


NORTHROP GRUMMAN CORPORATION (Registrant)

By:						/s/ Michael A. Hardesty
						Michael A. Hardesty Corporate Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)

Date: April 20, 2026

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Northrop Grumman - 10-Q quarterly report FY

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