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    NOC
    Earnings call· Mar 2026(Q1 FY26)

    NORTHROP GRUMMAN CORP /DE/ Q1 FY26 earnings call NOC

    Apr 21, 2026 Source

    Executive summary

    Northrop Grumman Q1 FY26 — Strong Sales Growth and Accelerated Production on Key Programs

    Northrop Grumman delivered a strong first quarter, marked by robust organic sales growth and solid operating performance across most segments. Strategic investments in capacity and accelerated production agreements for critical programs like B-21 and Sentinel underscore confidence in future growth. While the Space segment faced specific program headwinds, the company maintains its full-year outlook amidst a high-demand geopolitical environment.

    Highlights

    5

    • Organic sales increased 5% year-over-year, consistent with full-year expectations.

    • Segment operating income exceeded $1 billion, with segment margins improving to 10.8%.

    • Aeronautic Systems sales grew 17%, driven by B-21 and restricted programs, with operating margins improving to 9.3%.

    • Defense Systems organic sales increased 10%, fueled by Sentinel and tactical solid rocket motors, achieving 9.7% operating margins.

    • Mission Systems operating income rose 20%, leading to a 15.1% operating margin, driven by favorable earnings adjustments.

    Concerns

    4

    • Space segment sales and operating income were down year-over-year, impacted by a $98 million headwind from the NGI contract closeout in Q1 FY25.

    • The Space segment also recognized a $71 million unfavorable earnings adjustment on the GEM 63XL program.

    • Aeronautic Systems experienced lower volume on the F/A-18 program, partially offsetting overall segment growth.

    • Mission Systems saw lower volume on Sabre and electronic warfare programs.

    Guidance & targets

    10
    CategoryTargetConfidence
    Full-year sales
    $43.5 billion and $44 billion
    high materiality
    High
    Full-year segment operating income margin rate
    low to mid-11%
    high materiality
    High
    Full-year free cash flow
    $3.1 billion to $3.5 billion
    high materiality
    High
    Full-year capital expenditures
    $1.85 billion
    medium materiality
    High
    Q2 sales growth
    high single-digit sequential sales growth
    medium materiality
    High
    B-21 capital expenditures
    $200 million
    medium materiality
    High
    Sentinel Milestone B decision
    later this year
    high materiality
    High
    Sentinel first flight
    2027
    high materiality
    High
    Sentinel initial operating capability (IOC)
    early 2030s
    high materiality
    High
    B-21 arrival at Ellsworth Air Force Base
    2027
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Aeronautic Systems (AS)
    Strong growth driven by key strategic programs, with margin improvement reflecting better program performance.
    Sales driven by higher sales on B-21 and other restricted programsTACAMO sales higher as program rampsSales increases partially offset by lower volume on F/A-18Operating margins improved due to absence of B-21 loss provision booked in Q1 2025
    		—17%—9.3%
    Defense Systems (DS)
    Solid performance with strong organic growth from critical defense programs and munitions.
    Organic sales increased 10% year-over-yearDriven by higher volume on Sentinel as program rampsSales also higher due to increased volume on tactical solid rocket motors and Integrated Battle Command programs
    		—5%—9.7%
    Mission Systems (MS)
    Modest sales growth, but significant operating income and margin improvement driven by favorable adjustments.
    Driven by increased volume on restricted airborne radar and marine programsIncreases partially offset by lower volume on Sabre and electronic warfare programsOperating income increased 20% due to a higher level of net favorable earnings adjustments
    		—2%—15.1%
    Space
    Sales and operating income declined due to specific program headwinds, despite strong performance in other areas of the portfolio.
    NGI program recognized $98 million in Q1 FY25 sales as part of contract closeout, creating a year-over-year headwind in Q1 FY26Recognized an unfavorable earnings adjustment of $71 million on the GEM 63XL program, lowering sales and operating incomePerformance elsewhere in the space portfolio was strong with growth on FDA programs and restricted space
    		down——down

    Operational metrics

    13
    Global military spending growth
    40%
    past decade

    Expected to continue rising as Western nations modernize and grow forces.

    US defense appropriation
    $1 trillion
    FY26

    Funding from this budget and reconciliation are starting to flow to industry.

    US defense budget request
    $1.5 trillion44% increase over current funding levels
    FY27

    Emphasizes modernization and sustained support for key programs.

    Weapons business share of total sales
    nearing 10%
    Q1 FY26

    Positioned to grow at a pace well above the company average.

    Tactical SRM production capacity
    doubled
    current

    Further expansion will be completed by 2027.

    Missile defense business share of total sales
    nearly 10%
    Q1 FY26

    Significant increase from a few years ago, exceptionally strong demand.

    Sentinel program revenue share
    6% to 7%
    Q1 FY26

    Expected to grow low double digits this year and towards 10% of revenue over time.

    B-21 program revenue share
    nearing 10%
    Q1 FY26

    Expected to exceed 10% of company revenue over the next several years with accelerated production.

    Unmanned flight hours
    over 500,000
    cumulative

    Experience base for pursuing CCA opportunities with various services.

    Q1 diluted EPS
    $6.14up substantially compared to the prior year
    Q1 FY26

    Driven by higher sales and segment operating income, partially offset by lower net pension income.

    Q1 cash flow
    use of approximately $1.8 billionin line with the prior year
    Q1 FY26

    Expected to ramp throughout the year with most significant generation in Q4.

    Fixed rate debt repaid
    $527 million
    Q1 FY26

    Repaid in Q1.

    Cash balance
    over $2 billion
    Q1 FY26

    Ended the quarter with this balance.

    Industry KPIs

    10
    MetricValueDetails
    Launch cadence7.2 million poundsthrust
    Book to bill ratio1.3
    Free cash flow bridge$1.8 billionUSD
    Defense program awards$1.3 billionUSD
    Program segment backlog—
    Unit deliveries by program—
    Production rates by program25%%
    Program margins eac charges$71 millionUSD
    Production capacity expansion25%%
    Total company backlog total estimated contract v$96 billionUSD

    Orderbook & backlog

    2
    Q1 Awards$9.8 billionQ1 FY26
    Total Backlog$96 billionQ1 FY26

    Product announcements

    4
    ProductTypeDetails
    Glide Phase Interceptor (GPI)launch
    B-21 Production Rateupdate
    Sentinel Launch Silo Tubemilestone
    Artemis II Solid Rocket Motorsmilestone

    Deals & partnerships

    3
    Air ForceAgreement to increase B-21 production rate

    Finalized an agreement to increase the annual production rate of the B-21 by 25%. Supported by customer funding and company-funded investment.

    US Department of Defense (implied)Award for Glide Phase Interceptor (GPI) development$1.3 billion

    Secured an award to accelerate development of the Glide Phase Interceptor, designed to intercept hypersonic missiles.

    Hungarian companyRelationship for space-related work

    Announced a relationship with a Hungarian company and are pursuing work there, contributing to the growing international pipeline for Space Systems.

    Capital programs

    3
    SRM and Munition Technologies Investmentunderway$2 billion
    Start: past several years

    Benefit: modernizing facilities, establishing strong U.S. manufacturing base with capacity

    Proactive investment to position the company for the growing market for solid rocket motors and munitions.

    B-21 Production Capacity Expansionunderway$2.5 billion
    Period spend: $200 million
    Funding: company-funded investment
    Start: FY26

    Benefit: increased annual production rate of the B-21 by 25%

    Investment primarily for new facilities, phased over multiple years, with the majority in the '27, '28, '29 timeframe. Supported by customer funding.

    New Facilities and Manufacturing Space Expansioncompleted
    Start: last 2 years

    Benefit: over 20 new facilities, more than 2 million square feet of manufacturing space

    Investments made to build capability and capacity to provide solutions at scale for customers.

    Risks & headwinds

    5
    Space Segment PerformanceQ1 FY26

    $98 million headwind from NGI contract closeout in Q1 FY25; $71 million unfavorable earnings adjustment on GEM 63XL program in Q1 FY26.

    Mitigation: Strong performance elsewhere in the space portfolio with growth on FDA programs and restricted space.

    Lower Volume on F/A-18Q1 FY26

    Partially offset sales increases in Aeronautic Systems.

    Lower Volume on Sabre and Electronic Warfare ProgramsQ1 FY26

    Partially offset sales increases in Mission Systems.

    Supply Chain Bottlenecks

    Suppliers need to scale with Northrop Grumman.

    Mitigation: Company is identifying bottlenecks, helping suppliers resource their own scaling, and working to have needed capacity from them.

    F-35 Radar Concurrent Development and Production

    Known risk.

    Mitigation: Working in coordination with the JPO to complete development and quickly ramp production; opened a new facility for accelerating production.

    Q&A highlights

    10

    Can you provide details on the B-21 CapEx timeline, how production flows, and if there are protections against a B-2 curtailment scenario?

    Kathy Warden stated that approximately $200 million in CapEx is expected this year for B-21, with the majority of the $2.5 billion company-funded investment occurring in the 2027-2029 timeframe. She clarified that the revenue profile will follow facility completion and that the contract has a committed quantity, with strong support for Triad modernization, distinguishing it from the B-2 program.

    “So we expect $200 million or so of CapEx this year, and that's why we reflected that increase in our CapEx guidance for 2026. As we've said before, we do expect the majority of the capital expenditure to happen in the '27, '28, '29 timeframe and largely be completed this decade.”

    asked by Robert Stallard · answered by Kathy Warden

    3 min read8 chapters

    Detailed Narrative

    01

    Strategic Investments & Capacity Expansion

    Northrop Grumman has proactively invested in its business, opening over 20 new facilities and adding more than 2 million square feet of manufacturing space across the U.S. in the last two years. This effort aims to build capability and capacity, providing solutions at the scale customers need. The company has invested over $2 billion in solid rocket motor (SRM) and munition technologies over the past several years, establishing a strong U.S. manufacturing base.

    02

    Geopolitical Environment & Defense Spending

    The company notes a fundamental shift in the geopolitical environment, with global military spending rising approximately 40% over the past decade and expected to continue. The U.S. appropriated $1 trillion for defense in FY26, and the administration submitted a $1.5 trillion defense budget request for FY27, representing a 44% increase over current funding levels and 5% of GDP. This sustained support for key programs like B-21 and Sentinel is encouraged by strong bipartisan backing.

    03

    Solid Rocket Motors & Munitions Growth

    The Defense Systems business is fueled by growing demand for SRMs, smart munitions, and tactical missiles. The weapons business is nearing 10% of total company sales and is positioned to grow well above the company average. Tactical SRM production capacity has already doubled, with further expansion expected by 2027, providing modular and adaptable production lines to meet demand.

    04

    Triad Modernization: Sentinel Program Acceleration

    The Sentinel program is making significant progress, advancing missile development, command and control systems, and maturing design. The program delivered double-digit growth in Q1. In March, a prototype of the Sentinel launch silo tube was broken ground to validate structural design. Milestone B decision is expected later this year, with first flight in 2027 and initial operating capability in the early 2030s.

    05

    Triad Modernization: B-21 Production Ramp-Up

    The B-21 program is moving through testing aggressively, including aerial refueling trials. The company is on track for testing and production to arrive at Ellsworth Air Force Base in 2027. A Lot 4 LRIP award was received in Q1, following Lot 3 in Q4 last year. An agreement with the Air Force will increase the annual production rate by 25%, supported by customer funding and approximately $2.5 billion in company-funded investment.

    06

    Missile Defense & Hypersonic Interceptors

    Widespread adoption of ballistic missiles and drones reinforces the urgent need for air and missile defense capabilities, which now account for nearly 10% of company sales. Shortly after the quarter, Northrop Grumman secured a $1.3 billion award to accelerate development of the Glide Phase Interceptor (GPI), designed to intercept hypersonic missiles, a critical capability given their proliferation.

    07

    International Opportunities & Export Acceleration

    The company sees opportunities to accelerate international sales, particularly in the Middle East, due to heightened urgency. While international cycles are typically longer, Northrop Grumman is working with the Department of Defense to accelerate export approvals and aggregate demand. The Space Systems segment, while currently having the least international pipeline, is seeing growth and is expected to be a key contributor in the future.

    08

    F-35 Radar Production Update

    Northrop Grumman is building an advanced radar for the F-35, engaging in concurrent development and production, a known risk to expedite capability delivery. The Joint Program Office (JPO) plans to accelerate production capacity, and Northrop Grumman has opened a new facility to support this ramp-up. The company is working to complete development and quickly ramp production to deliver this game-changing radar.

    AI-generated summary of the company’s earnings call. Not investment advice.