Northrop Grumman lifts 2026 profit outlook as backlog climbs to a record $110 billion

Northrop Grumman raised its 2026 earnings forecast on Tuesday after a quarter of heavy contract wins pushed its backlog to a record $109.6 billion.

The defense contractor booked $16.4 billion of net awards in the third quarter, a book-to-bill ratio of 1.5 times. Sales rose 7% to $11.1 billion from $10.4 billion, with all four sectors growing, the company said in its earnings release filed with an 8-K.

Net earnings rose 2% to $1.12 billion, or $7.89 a diluted share, from $1.10 billion, or $7.67, a year earlier. A lower tax rate helped: the effective rate fell to 13.4% from 16.9%, principally on higher research credits.

Guidance moves higher

Northrop now expects 2026 MTM-adjusted EPS of $29.35 to $29.75, up from $28.60 to $29.10, a 70-cent increase at the midpoint. It raised segment operating income guidance to $4.94 billion to $5.04 billion from $4.85 billion to $5.00 billion.

The company's 2026 guidance also lists sales of $43.75 billion to $44.25 billion and adjusted free cash flow of $3.1 billion to $3.5 billion.

"Our customers continue to turn to Northrop Grumman, and we are delivering with urgency and innovation," Chair, CEO and President Kathy Warden said.

Where the orders came from

The largest new awards included $4.6 billion for restricted programs, $2.0 billion for the Sentinel program, $1.4 billion for Virginia Class submarines, $1.3 billion for F-35 and $1.0 billion for E-2.

Aeronautics Systems led growth. Its sales rose 14% to $3.58 billion, including a $195 million increase on F-35, higher B-21 sales and more B-2 sustainment work. Operating income climbed 24% to $377 million, and the sector's margin widened to 10.5% from 9.7%.

Defense Systems sales rose 12% to $2.31 billion, helped by a $180 million increase on Sentinel "as the program continues to ramp." Mission Systems and Space Systems each grew 2%; Space was held back by $136 million of lower Commercial Resupply Service sales due to launch timing.

Margins and cash

Total operating margin slipped to 11.4% from 11.9%, mainly because of a smaller FAS/CAS operating adjustment. Segment operating margin was 12.1%, down from 12.3%, which the company attributed principally to a $68 million favorable adjustment in the prior-year quarter at Mission Systems.

Operating cash flow rose 12% to $1.75 billion. Adjusted free cash flow jumped 44% to $1.81 billion, aided by $371 million of proceeds from the sale of equipment to a customer.

Through nine months, Northrop paid $1.04 billion in dividends and repurchased $68 million of stock, down from $1.17 billion of buybacks in the same period last year.

By the numbers

• Diluted EPS: $7.89, vs. $7.67
• Sales: $11.1 billion, up 7%
• Net awards: $16.4 billion
• Backlog: $109.6 billion
• 2026 MTM-adjusted EPS guidance: $29.35 to $29.75
• Q3 adjusted free cash flow: $1.81 billion

Sources

1. Northrop Grumman Corporation, Form 8-K (Item 2.02) with Exhibit 99 earnings release for the third quarter of 2026, filed Oct. 20, 2026, accession 0001133421-26-000037

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