Northrop Grumman Reports Third Quarter 2025 Financial Results (Form 8-K)

Northrop Grumman Reports Third Quarter 2025 Financial Results

•Net awards increase to $12.2 billion; book to bill ratio of 1.17

•Sales increase 4 percent to $10.4 billion, organic sales1 increase 5 percent

•Operating margin rate of 11.9 percent; segment operating margin rate1 of 12.3 percent

•Diluted earnings per share (EPS) increase 10 percent to $7.67

•Company raises 2025 MTM-adjusted EPS guidance range by $0.65 to $25.65 to $26.05

FALLS CHURCH, Va. - October 21, 2025 - Northrop Grumman Corporation (NYSE: NOC) reported third quarter 2025 sales increased 4 percent to $10.4 billion, as compared with $10.0 billion in the third quarter of 2024. Third quarter 2025 sales reflect continued strong demand for our global capabilities.

Third quarter 2025 net earnings totaled $1.1 billion, or $7.67 per diluted share, as compared with $1.0 billion, or $7.00 per diluted share, in the third quarter of 2024. Third quarter 2025 net earnings reflect strong segment operating performance.

"The momentum we are building in our business drove strong third quarter performance to achieve our financial objectives for mid-single-digit growth, expanding segment margins, and growing cash flows year over year. As a result of this performance and our positive outlook for the remainder of the year, we are once again increasing our 2025 EPS guidance," said Kathy Warden, chair, chief executive officer and president. "I am excited about our continued progress in responding with urgency to our customers' needs. We're demonstrating our team can rapidly innovate the way we work and the products we deliver, while also providing the quality and performance customers expect from Northrop Grumman. As we look to the future, we expect global demand to remain strong for our portfolio, with growth in each of our four business segments next year."

1 Non-GAAP measure - see definitions at the end of this earnings release.
Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

Consolidated Operating Results and Cash Flows

			Three Months Ended September 30																		Nine Months Ended September 30
$ in millions, except per share amounts			2025						2024						Change						2025						2024						Change
Sales
Aeronautics Systems			$	3,142					$	2,961					6%						$	9,070					$	9,065					-%
Defense Systems			2,059						1,800						14%						5,855						5,396						9%
Mission Systems			3,093						2,823						10%						9,057						8,255						10%
Space Systems			2,698						2,870						(6%)						7,912						9,021						(12%)
Intersegment eliminations			(569)						(458)												(1,652)						(1,390)
Total sales			10,423						9,996						4%						30,242						30,347						-%
Operating income
Aeronautics Systems			305						309						(1%)						443						927						(52%)
Defense Systems			234						160						46%						666						507						31%
Mission Systems			515						390						32%						1,317						1,129						17%
Space Systems			298						345						(14%)						861						979						(12%)
Intersegment eliminations			(75)						(58)												(223)						(191)
Segment operating income1			1,277						1,146						11%						3,064						3,351						(9%)
Segment operating margin rate1			12.3		%				11.5		%				80 bps						10.1		%				11.0		%				(90) bps
FAS/CAS operating adjustment			67						20						235%						193						32						503%
Unallocated corporate expense:
Gain on sale of business			-						-						NM						231						-						NM
Training services divestiture - unallowable state taxes and transaction costs			-						(2)						NM						(20)						(2)						NM
Intangible asset amortization and PP&E step-up depreciation			(21)						(23)						(9%)						(63)						(72)						(13%)
Other unallocated corporate expense			(81)						(21)						286%						(165)						(28)						489%
Unallocated corporate expense			(102)						(46)						122%						(17)						(102)						(83%)
Total operating income			$	1,242					$	1,120					11%						$	3,240					$	3,281					(1%)
Operating margin rate			11.9		%				11.2		%				70 bps						10.7		%				10.8		%				(10) bps
Interest expense			(161)						(161)						-%						(490)						(461)						6%
Non-operating FAS pension benefit			136						168						(19%)						403						503						(20%)
Other, net			106						61						74%						175						142						23%
Earnings before income taxes			1,323						1,188						11%						3,328						3,465						(4%)
Federal and foreign income tax expense			223						162						38%						573						555						3%
Effective income tax rate			16.9		%				13.6		%				330 bps						17.2		%				16.0		%				120 bps
Net earnings			$	1,100					$	1,026					7%						$	2,755					$	2,910					(5%)
Diluted earnings per share			7.67						7.00						10%						19.12						19.69						(3%)
Weighted-average diluted shares outstanding, in millions			143.5						146.5						(2%)						144.1						147.8						(3%)
Net cash provided by operating activities			$	1,557					$	1,091					43%						$	860					$	1,810					(52%)
Capital expenditures			(301)						(361)						(17%)						(788)						(951)						(17%)
Free cash flow1			$	1,256					$	730					72%						$	72					$	859					(92%)

1 Non-GAAP measure - see definitions at the end of this earnings release.
Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

Sales

			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2025						2024						Change						2025						2024						Change
Sales			$	10,423					$	9,996					4		%				$	30,242					$	30,347					-		%
Less: Training services sales			-						(70)												(112)						(226)
Organic sales1			$	10,423					$	9,926					5		%				$	30,130					$	30,121					-		%

Third quarter 2025 sales increased $427 million, or 4 percent, primarily driven by higher sales at Mission Systems, Defense Systems and Aeronautics Systems, partially offset by lower sales at Space Systems due, in part, to the wind-down of work on certain Space programs, as discussed in our segment operating results below.

Operating Income and Margin Rate

Third quarter 2025 operating income increased $122 million, or 11 percent, primarily due to a $131 million increase in segment operating income. Operating margin rate increased to 11.9 percent from 11.2 percent principally due to a higher segment operating margin rate.

Segment Operating Income and Margin Rate1

Third quarter 2025 segment operating income increased $131 million, or 11 percent, primarily due to higher operating income at Mission Systems and Defense Systems, partially offset by lower operating income at Space Systems. Segment operating margin rate increased to 12.3 percent from 11.5 percent due to higher operating margin rates at Mission Systems and Defense Systems, partially offset by lower operating margin rates at Space Systems and Aeronautics Systems.

Federal and Foreign Income Taxes

On July 4, 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 Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes. The company recognized the income tax effects of the OBBBA in its third quarter 2025 financial statements.

Third quarter 2025 income tax expense increased $61 million, or 38 percent, due to a higher effective tax rate (ETR) and higher earnings before income taxes. The third quarter 2025 ETR increased to 16.9 percent from 13.6 percent primarily due to the prior year ETR reflecting a net reduction in tax reserves largely due to a federal court decision in 2024 as well as a reduction in research credits in the current year due to enactment of the OBBBA, partially offset by lower interest expense on unrecognized tax benefits.

Net Earnings

Third quarter 2025 net earnings increased $74 million, or 7 percent, primarily due to the $122 million increase in operating income described above as well as a $62 million increase in returns on marketable securities, partially offset by a $61 million increase in income tax expense and a $32 million reduction in the non-operating FAS pension benefit.

1 Non-GAAP measure - see definitions at the end of this earnings release.
Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

Cash Flows

Third quarter 2025 net cash provided by operating activities increased $466 million as compared with the same period in 2024 primarily due to higher earnings and improved trade working capital due principally to the timing of billings and collections. Third quarter 2025 free cash flow1 increased $526 million, or 72 percent, due to an increase in net cash provided by operating activities and lower capital expenditures.

Awards and Backlog

Third quarter 2025 net awards totaled $12.2 billion and backlog totaled $91.4 billion. Significant third quarter new awards include $4.5 billion for restricted programs (primarily at Space Systems, Mission Systems and Aeronautics Systems), $1.8 billion for Ground-Based Midcourse Defense Weapon System (GWS), $0.5 billion for F-35 (primarily at Aeronautics Systems and Mission Systems), and $0.4 billion for Virginia Class submarines.

Segment Operating Results

Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the Sentinel program, from Space Systems to Defense Systems. Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. These realignments are reflected in the financial information contained in this report.

AERONAUTICS SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2025						2024						Change						2025						2024						Change
Sales			$	3,142					$	2,961					6		%				$	9,070					$	9,065					-		%
Operating income			305						309						(1)		%				443						927						(52)		%
Operating margin rate			9.7		%				10.4		%										4.9		%				10.2		%

Sales

Third quarter 2025 sales increased $181 million, or 6 percent, primarily due to a $110 million increase on the E-130J TACAMO ("TACAMO") program as it ramps up and a $105 million increase on the F-35 program largely driven by materials volume, partially offset by a decrease on F/A-18 as production nears completion.

Operating Income

Third quarter 2025 operating income decreased $4 million, or 1 percent, due to a lower operating margin rate, partially offset by higher sales. Operating margin rate decreased to 9.7 percent from 10.4 percent, primarily due to lower net contract margin adjustments.

1 Non-GAAP measure - see definitions at the end of this earnings release.
Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

DEFENSE SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2025						2024						Change						2025						2024						Change
Sales			$	2,059					$	1,800					14		%				$	5,855					$	5,396					9		%
Less: Training services sales			-						(70)												(112)						(226)
Organic sales1			$	2,059					$	1,730					19		%				$	5,743					$	5,170					11		%
Operating income			$	234					$	160					46		%				$	666					$	507					31		%
Operating margin rate			11.4		%				8.9		%										11.4		%				9.4		%

Sales

Third quarter 2025 sales increased $259 million, or 14 percent, primarily due to higher volume on armament programs, including military ammunition programs, increased volume from new awards across the Integrated Battle Command System (IBCS) program portfolio and higher sales on Sentinel. These increases were partially offset by a $70 million reduction in sales related to the training services divestiture.

Operating Income

Third quarter 2025 operating income increased $74 million, or 46 percent, primarily due to a higher operating margin rate and higher sales. Operating margin rate increased to 11.4 percent from 8.9 percent principally due to higher net EAC adjustments and changes in mix toward more fixed-price contracts.

MISSION SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2025						2024						Change						2025						2024						Change
Sales			$	3,093					$	2,823					10		%				$	9,057					$	8,255					10		%
Operating income			515						390						32		%				1,317						1,129						17		%
Operating margin rate			16.7		%				13.8		%										14.5		%				13.7		%

Sales

Third quarter 2025 sales increased $270 million, or 10 percent, primarily due to higher sales on restricted advanced microelectronics programs, higher volume on marine systems programs and ramp-up on international ground-based radar programs.

Operating Income

Third quarter 2025 operating income increased $125 million, or 32 percent, due to a higher operating margin rate and higher sales. Operating margin rate increased to 16.7 percent from 13.8 percent, principally due to higher net EAC adjustments, including a $68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio largely driven by program efficiencies and risk mitigations.

1 Non-GAAP measure - see definitions at the end of this earnings release.
Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

SPACE SYSTEMS			Three Months Ended September 30												%						Nine Months Ended September 30												%
$ in millions			2025						2024						Change						2025						2024						Change
Sales			$	2,698					$	2,870					(6)		%				$	7,912					$	9,021					(12)		%
Operating income			298						345						(14)		%				861						979						(12)		%
Operating margin rate			11.0		%				12.0		%										10.9		%				10.9		%

Sales

Third quarter 2025 sales decreased $172 million, or 6 percent, primarily due to wind-down of work on the restricted space and Next Generation Interceptor (NGI) programs, which reduced sales by $124 million, as well as lower volume on Space Development Agency (SDA) satellite programs. These decreases were partially offset by a $100 million increase for Commercial Resupply Services (CRS) missions.

Operating Income

Third quarter 2025 operating income decreased $47 million, or 14 percent, primarily due to a lower operating margin rate and lower sales. Operating margin rate decreased to 11.0 percent from 12.0 percent principally due to lower net EAC adjustments, including a prior year $39 million favorable EAC adjustment on the Habitation and Logistics Outpost program, partially offset by sales growth on programs with accretive margin rates.

1 Non-GAAP measure - see definitions at the end of this earnings release.
Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

Guidance

Financial guidance, as well as outlook, trends, expectations and other forward-looking statements provided by the company for 2025 and beyond, reflect the company's judgment based on the information available to the company at the time of this release. The company's financial guidance and outlook for 2025 and beyond reflect what the company currently anticipates will be the impacts on the company from, among other factors, the global macroeconomic, security, and political/budget environments, including the impacts from inflationary pressures and labor and supply chain challenges; changes in the threat environment; changes in government budget, appropriations and procurement priorities and processes; changes in the regulatory environment, including trade policy and tax policy; and changes in support for our programs. We are not assuming, and the company's financial guidance and outlook for 2025 and beyond do not reflect impacts on the company from, a prolonged government shutdown, or application of spending limits or other spending cuts. However, the company cannot predict how these factors will evolve or what impacts they will have, and there can be no assurance that the company's current expectations or underlying assumptions are correct. These factors can affect the company's ability to achieve guidance or meet expectations.

For additional factors that may impact the company's ability to achieve guidance or meet expectations, please see the "Forward-Looking Statements" section in this release and our Form 10-Q.

2025 Guidance
($ in millions, except per share amounts)			As of 10/21/2025
Sales			$41,700 - $41,900
			Prior: $42,050 - $42,250
Segment operating income1			$4,275 - $4,375
MTM-adjusted EPS1			$25.65 - $26.05
			Prior: $25.00 - $25.40
Free cash flow1			$3,050 - $3,350

2025 Segment Guidance
			As of 10/21/2025
			Sales ($B)			OM Rate %
Aeronautics Systems			High $12			Low to Mid 6%
			Prior: Low $13
Defense Systems			Low $8			High 10%
						Prior: Mid 10%
Mission Systems			Mid $12			Mid 14%
			Prior: Low to Mid $12
Space Systems			Mid to High $10			High 10%
Intersegment Eliminations			~($2.25)			High 13%
			Prior: ~($2.1)

1			Non-GAAP measure - see definitions at the end of this earnings release.

Northrop Grumman Corporation 2980 Fairview Park Drive • Falls Church, VA 22042-4511 news.northropgrumman.com

About Northrop Grumman

Northrop Grumman will webcast its earnings conference call at 9:30 a.m. Eastern Time on October 21, 2025. A live audio broadcast of the conference call will be available on the investor relations page of the company's website at www.northropgrumman.com.

Northrop Grumman is a leading global aerospace and defense technology company. Our pioneering solutions equip our customers with the capabilities they need to connect and protect the world, and push the boundaries of human exploration across the universe. Driven by a shared purpose to solve our customers' toughest problems, our employees define possible every day.

###

Forward-Looking Statements and Projections

This earnings release and the information we are incorporating by reference, and statements to be made on the earnings conference call, contain or may 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," "strategy," "project," "forecast," "achieve," "believe," "estimate," "guidance," "outlook," "trends," "goals," "confident," "on track" and similar expressions generally identify these forward-looking statements.