What Northrop Grumman (NOC) Said on Its Q3 Earnings Call

Key Points

• Northrop Grumman delivered strong Q3 results: Sales rose 7% year over year to $11.1 billion, EPS increased 3% to $7.89, and adjusted free cash flow climbed more than 40% to $1.8 billion. Record backlog reached $110 billion, supported by a 1.5 book-to-bill ratio and more than $16 billion in bookings.
• The company raised its 2026 profit and EPS guidance while maintaining its sales and free-cash-flow outlook. For 2027, Northrop expects 5%–7% sales growth, margin expansion and free cash flow of $3.3 billion–$3.7 billion, driven by programs including the B-21, Sentinel, space systems and missiles.
• Key strategic developments included progress toward the Sentinel missile’s first flight in 2027, deployment of the first 21 Tranche 1 Transport Layer satellites, and a $1.4 billion Virginia-class submarine-related backlog addition. Northrop is also evaluating options for its microelectronics and quantum businesses and demonstrated a fully autonomous Talon Blue aircraft flight.

Northrop Grumman NYSE: NOC reported third-quarter 2026 sales growth across all four business segments, record backlog and higher earnings guidance, as the defense contractor cited demand for strategic deterrence, space systems, missile production and autonomous technologies.

Chair, CEO and President Kathy Warden said the company’s third-quarter results reflected “strong and disciplined execution” across its portfolio. Northrop reported a quarterly book-to-bill ratio of 1.5 and said backlog rose 20% from a year earlier to a record $110 billion, supported by more than $16 billion in bookings.

Chief Financial Officer John Greene said third-quarter sales increased 7% year over year to $11.1 billion. Segment operating income rose 5%, while the segment operating margin was 12.1%. Diluted earnings per share increased 3% to $7.89, helped by higher sales, stronger segment performance and tax benefits.

Adjusted free cash flow was $1.8 billion in the quarter, more than 40% above the prior-year period. Greene said the result reflected working-capital improvement and $371 million in proceeds from the sale of a B-21 test asset. Capital expenditures totaled $306 million during the quarter.

Segment performance and program milestones

Aeronautics Systems sales rose 14%, driven by higher F-35 production and sustainment volumes, the B-21 ramp and greater B-2 sustainment activity. The segment’s operating margin improved to 10.5%, which Greene attributed to product mix and program execution.

Defense Systems sales increased 12% to $2.3 billion, with growth led by the Sentinel intercontinental ballistic missile program and tactical solid rocket motor programs. Operating income reached $250 million and the segment margin was 10.8%.

Mission Systems sales increased 2%, supported by restricted airborne radar programs and marine systems. Its operating margin was 15.8%. Space Systems sales also grew 2%, driven by national security programs including restricted efforts and the Glide Phase Interceptor program. Space margins improved to 11.3%, and Greene said the company resumed deliveries of GEM 63XL rocket motors during the quarter.

The company cited several major program developments. Warden said Northrop completed the first full vertical assembly of an inert Sentinel missile at Vandenberg Space Force Base and received Air Force approval for the program’s design maturity to proceed toward a first flight in 2027. She described Sentinel as a growth driver through the 2030s as it moves from development toward production.

In space, Northrop launched and deployed its first 21 satellites for the Space Development Agency’s Tranche 1 Transport Layer. The company expects nearly 50 of its planned 150 satellites to be deployed over the next six months for transport and tracking missions.

Northrop also added $1.4 billion to backlog after definitizing the Virginia-class Block VI submarine procurement for 12 additional shipsets of main propulsion units and ship service turbine generators, supporting Navy work through 2032.

Guidance raised as 2027 outlook points to faster growth

Northrop maintained its 2026 sales outlook of $43.75 billion to $44.25 billion and expects a full-year book-to-bill ratio of at least 1.3. However, it raised the midpoint of its segment operating income forecast by $65 million. The company now expects segment operating income of $4.94 billion to $5.04 billion, implying a midpoint segment margin of about 11.3%.

The company also increased its full-year earnings-per-share guidance by $0.70, citing stronger segment performance and a lower tax rate, partly offset by higher corporate costs and interest expense. It maintained adjusted free-cash-flow guidance of $3.1 billion to $3.5 billion.

For 2027, Northrop projected sales growth of 5% to 7%, with growth anticipated in all four segments. Greene said segment operating income is expected to increase faster than sales, with margin expansion of 10 to 20 basis points from the midpoint of 2026 guidance. The company expects 2027 capital expenditures of approximately $2.1 billion, or about 4.5% of sales, primarily to support a higher B-21 production rate.

Northrop forecast 2027 adjusted free cash flow of $3.3 billion to $3.7 billion. Greene said higher capital intensity related to the B-21 acceleration would be offset by operating performance, working-capital discipline and cash-tax optimization.

Warden said growth in 2027 and beyond is expected to be supported by B-21 testing and production, Sentinel development, national security space, missile and munitions capacity, restricted space programs and international demand. The company’s goal is to double international sales by 2031.

Microelectronics and autonomy initiatives

Warden highlighted FORTITUDE, a microelectronics product Northrop said uses patented technology to provide up to three times the power and 20 times the signal quality of comparable solutions. The company said the chip could have applications in radar, GPS, electronic warfare and future 6G networks.

Northrop is evaluating strategic alternatives for its microelectronics and quantum technology capabilities, including continuing to invest internally, expanding the investment base or potentially separating the business. Warden said all options remain under consideration and the company expects to provide more detail in coming months.

The company also reported that its Talon Blue aircraft completed a fully autonomous flight, including taxi, takeoff, maneuvers and landing. Warden said Northrop’s Talon IQ system has demonstrated interoperability with other companies’ autonomy software and the ability to control other platforms. She said the company is pursuing affordable, scalable collaborative combat aircraft capabilities for U.S. and international customers.

About Northrop Grumman (NYSE:NOC)

Northrop Grumman Corporation NYSE: NOC is a global aerospace and defense company that develops and produces systems for government and commercial customers, with the U.S. government representing its primary customer base. The company operates across aerospace, defense, space, cybersecurity and advanced technology markets.

Its products and services include military aircraft and autonomous systems, space systems and satellites, missile defense technologies, command-and-control systems, cyber solutions, sensors, communications networks and other mission-critical systems.

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