01—Abstract
Summary
Summary of the 10-Q filed July 21, 2026. Cited figures are marked; the original filing is the authoritative source.
Northrop Grumman Corporation reported solid top-line growth in its second-quarter 2026 results, with total sales increasing by 5% year-over-year to $10.9 billiona for the quarter and $20.8 billion for the first six months.
This growth was primarily driven by strong performance across all four operating segments, particularly Aeronautics Systems, which saw a 13%b increase in quarterly sales. While overall sales grew, operating income experienced a year-over-year decline of 23% for the quarter, largely due to the absence of a significant gain on the sale of a business in the prior year and lower segment operating income. However, for the year-to-date period, operating income saw a modest increase of 4%.
The company's profitability was impacted by several factors, including unfavorable estimate-at-completion (EAC) adjustments on programs like GEM 63XL and SiAW, and the prior year's B-21 loss provision, which had a positive impact on the current year's results. The effective tax rate saw a significant reduction due to the remeasurement of uncertain tax positions, contributing to a substantial increase in net earnings for the year-to-date period.
02—Key points
Key Highlights
- Total sales increased by 5% to $10.9 billion for the quarter ended June 30, 2026, and by 5% to $20.8 billion for the six months ended June 30, 2026.
- Operating income decreased by 23% to $1.1 billion for the quarter, primarily due to the prior year's gain on sale of business. However, year-to-date operating income increased by 4% to $2.1 billion.
- Aeronautics Systems segment showed robust sales growth of 13% for the quarter, driven by B-21 and TACAMO programs.
- Net earnings for the six months ended June 30, 2026, increased by 19% to $2.0 billion, benefiting from a lower effective tax rate.
- The company's backlog stood at $104.7 billion as of June 30, 2026, an increase of 9% from December 31, 2025, indicating strong future revenue potential.
- Significant unfavorable estimate-at-completion (EAC) adjustments were noted on the GEM 63XL and SiAW programs, impacting operating income in the quarter.
- The company maintained strong liquidity with $2.3 billion in cash and cash equivalents at June 30, 2026, and no outstanding borrowings under its $3.0 billion revolving credit facility.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed July 21, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $10.88B$10.35B | +5.1% |
| Operating Expenses | $9.78B$9.16B | +6.8% |
| Operating Income | $1.10B$1.43B | −23.1% |
| Net Income | $1.09B$1.17B | −6.8% |
| EPS (Basic) | $7.70$8.17 | −5.8% |
| EPS (Diluted) | $7.68$8.15 | −5.8% |
| Shares Outstanding (Basic) | 142.10M143.70M | −1.1% |
| Shares Outstanding (Diluted) | 142.40M144.00M | −1.1% |
05—Questions
Frequently Asked Questions
What drove the decrease in operating income for the second quarter of 2026?
The decrease in operating income for the second quarter of 2026 was primarily driven by the absence of a $231 million gain on the sale of a business that was recognized in the prior year's quarter. Additionally, lower segment operating income and a decrease in the FAS/CAS operating adjustment also contributed to the decline.
How has the company's backlog evolved, and what does this imply for future performance?
Northrop Grumman's total backlog increased by 9% to $104.7 billion as of June 30, 2026, compared to December 31, 2025. This growth, particularly strong in segments like Defense Systems and Aeronautics Systems, suggests a healthy pipeline of future work and provides a positive outlook for sustained revenue generation.
What is the impact of the B-21 program on the company's financial results?
The B-21 program is a significant driver of sales growth, particularly within the Aeronautics Systems segment. While the company has previously recognized cumulative losses on the low-rate initial production (LRIP) phase, the current reporting period benefited from the absence of a prior year loss provision. The company has also entered into an agreement to expand production capacity and increase the aircraft production rate, which is expected to improve future returns, though the program continues to be subject to estimate-at-completion adjustments.
How has the company's tax situation changed, and what is the effect on net earnings?
The effective tax rate for both the quarter and year-to-date periods has significantly decreased. This is primarily attributed to the remeasurement of uncertain tax positions (UTPs) due to developments with the IRS. This lower tax expense, coupled with increased operating income for the year-to-date period, contributed to a substantial 19% increase in net earnings for the first six months of 2026.
06—Continue