Northrop Grumman Corp.: Q3 FY2026 earnings call

What management said about Q3 FY2026, from the documents filed with the SEC on 20 October 2026: press release. Guidance figures: 3 raised, 11 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Sales rose seven percent to $11.1 billion: Sales rose $699 million, with all four sectors higher; intersegment eliminations offset $95 million of the increase. Source
• Segment operating income rose five percent: Segment operating income rose $68 million, or 5 percent, to $1,345 million, with Aeronautics Systems adding $72 million. Source
• Operating margin fell on lower FAS/CAS adjustment: Operating income rose $27 million to $1,269 million, but operating margin fell to 11.4 percent as the FAS/CAS operating adjustment dropped $52 million. Source
• Aeronautics sales and margin rose: Aeronautics Systems sales rose to $3,575 million on F-35 material timing and sustainment; operating margin rate rose to 10.5 percent from 9.7 percent on higher net contract margin adjustments. Source
• Book to bill ratio of 1.5 times: Net awards were $16.4 billion, giving a book to bill ratio of 1.5 times; restricted program awards totaled $4.6 billion, mainly at three sectors. Source
• Backlog up 15 percent to $109.6 billion: Total backlog was $109,597 million at September 30, 2026, up 15 percent from December 31, 2025. Source
• Adjusted free cash flow rose 44 percent: Quarterly adjusted free cash flow was $1,810 million against $1,256 million; nine-month adjusted free cash flow was $965 million against $72 million. Source

“In a complex world with the growing need for solutions that scale and perform, our customers continue to turn to Northrop Grumman, and we are delivering with urgency and innovation.”

Kathy Warden, chair, chief executive officer and president

Guidance

What changed from last quarter

• Guidance raised: Segment operating income guidance raised; the midpoint increased by $65 million. Source
• Guidance raised: MTM-adjusted EPS guidance raised; the midpoint increased by $0.70. Source
• Guidance raised: Aeronautics Systems margin rate guidance changed from mid to high 9 percent to high 9 percent. Source
• Guidance kept: Full-year sales and adjusted free cash flow guidance ranges are the same as in the prior quarter's release. Source
• New: Received $371 million of proceeds from the sale of equipment to a customer in the quarter; none were received in the first half. Source

Results and growth drivers

• Sales rose seven percent to $11.1 billion: Sales rose $699 million, with all four sectors higher; intersegment eliminations offset $95 million of the increase. Source
• Segment operating income rose five percent: Segment operating income rose $68 million, or 5 percent, to $1,345 million, with Aeronautics Systems adding $72 million. Source
• Operating margin fell on lower FAS/CAS adjustment: Operating income rose $27 million to $1,269 million, but operating margin fell to 11.4 percent as the FAS/CAS operating adjustment dropped $52 million. Source
• Diluted EPS rose to $7.89: Diluted EPS was $7.89 against $7.67 a year earlier; net earnings were $1,124 million against $1,100 million. Source

Segments and programs

• Aeronautics sales and margin rose: Aeronautics Systems sales rose to $3,575 million on F-35 material timing and sustainment; operating margin rate rose to 10.5 percent from 9.7 percent on higher net contract margin adjustments. Source
• Defense sales rose on Sentinel ramp: Defense Systems sales rose to $2,307 million, with Sentinel up $180 million; GMLRS ER volume and tactical solid rocket motor volume also increased. Source
• Mission margin lower year over year: Mission Systems sales rose 2 percent on radar and marine volume; operating margin rate was 15.8 percent against 16.7 percent a year earlier. Source
• Space sales held back by launch timing: Space Systems sales rose 2 percent on restricted space ramp-up, offset by lower Commercial Resupply Service sales from launch timing; margin rate rose to 11.3 percent. Source

“I’m confident our new record backlog, well-positioned portfolio and investments, and industry-leading performance will continue to drive sales and earnings growth as reflected in our 2027 outlook.”

Kathy Warden, chair, chief executive officer and president

Awards, backlog and demand

• Book to bill ratio of 1.5 times: Net awards were $16.4 billion, giving a book to bill ratio of 1.5 times; restricted program awards totaled $4.6 billion, mainly at three sectors. Source
• Backlog up 15 percent to $109.6 billion: Total backlog was $109,597 million at September 30, 2026, up 15 percent from December 31, 2025. Source
• Defense backlog rose 31 percent: Defense Systems backlog rose 31 percent to $36.5 billion, the largest percentage increase among the four sectors. Source
• Sentinel and Virginia Class awards: Other significant awards were $2.0 billion for Sentinel, $1.4 billion for Virginia Class submarines, $1.3 billion for F-35 and $1.0 billion for E-2. Source

Costs, tax and pensions

• Segment margin fell on prior-year benefit: Segment operating margin rate was 12.1 percent against 12.3 percent, principally because of a prior-year $68 million favorable EAC adjustment at Mission Systems. Source
• Effective tax rate fell to 13.4 percent: Tax expense fell $49 million to $174 million as the effective tax rate fell from 16.9 percent, principally from higher research credits. Source
• Unallocated corporate expense declined: Unallocated corporate expense was $91 million against $102 million a year earlier; nine-month unallocated corporate expense was $250 million. Source
• Pension benefit added to net earnings: The non-operating FAS pension benefit rose $31 million, which together with lower tax expense and higher operating income lifted net earnings. Source

Cash flow and balance sheet

• Adjusted free cash flow rose 44 percent: Quarterly adjusted free cash flow was $1,810 million against $1,256 million; nine-month adjusted free cash flow was $965 million against $72 million. Source
• Operating cash flow rose on working capital: Operating cash flow rose 12 percent to $1,745 million in the quarter, mainly from improved trade working capital; nine-month operating cash flow was $1,369 million. Source
• Cash balance declined from year start: Cash and cash equivalents were $3,744 million at September 30, 2026, against $4,403 million at December 31, 2025. Source

Capital and shareholder returns

• Debt payments of $527 million: Nine-month payments of long-term debt were $527 million, against $1,500 million a year earlier, when $998 million of new debt was issued. Source
• Capital spending held near prior year: Capital expenditures were $306 million in the quarter and $775 million for nine months, against $788 million a year earlier. Source
• Dividends paid and buybacks reduced: Nine-month cash dividends were $1,035 million and common stock repurchases were $68 million, against $1,168 million of repurchases a year earlier. Source
• Diluted share count lower: Weighted-average diluted shares were 142.4 million in the quarter, against 143.5 million a year earlier. Source

Figures management reported

Risks management discussed

• Operational: Space Systems sales were reduced by $136 million of Commercial Resupply Service sales that moved with launch timing. Source
• Demand: Lower volume on restricted advanced microelectronics programs partly offset Mission Systems sales growth. Source
• Financial: Defense Systems operating margin rate declined as contract mix moved toward more cost-type content. Source

Other quarters

• Q2 FY2026 earnings call
• Q1 FY2026 earnings call
• Q4 FY2025 earnings call
• Q3 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.