Northrop Grumman (NYSE:NOC) reported first-quarter 2026 results that executives said reflected “strong demand, solid operating performance, and progress we are making on key programs,” while maintaining full-year guidance and outlining plans to accelerate capacity on several defense priorities.
First-quarter performance and backlog
Chief Financial Officer John Greene said first-quarter sales were $9.9 billion, up 4% year-over-year, with organic sales growth of 5%. Segment operating income rose to “over $1 billion,” and segment operating margin improved to 10.8%, he said.
Diluted EPS for the quarter was $6.14, which Greene said was up substantially from the prior year, driven by higher sales and segment operating income and partially offset by lower net pension income.
Northrop also reported first-quarter cash flow as a use of approximately $1.8 billion, which Greene said was consistent with historical seasonality, with the most significant cash generation typically occurring in the fourth quarter.
Program execution: B-21 acceleration and Sentinel ramp
Chair, CEO, and President Kathy Warden said the company has been investing in capability and capacity for several years, noting that Northrop has opened “over 20 new facilities” and added “more than 2 million sq ft of manufacturing space” across the U.S. over the past two years. Warden said that since the start of 2026, Northrop has agreed with customers on plans to accelerate the Sentinel program, increase the B-21 build rate, become a second-source supplier of solid rocket motors on several programs, and ramp production on other programs.
On the B-21 program, Warden said Northrop is moving through testing “at an aggressive pace,” including aerial refueling trials that began earlier in the month, and remains “on a path through both testing and production for B-21 to arrive at Ellsworth Air Force Base in 2027.” She said the company received the Lot 4 LRIP award in the first quarter, following the Lot 3 award in the fourth quarter of 2025.
Warden said Northrop finalized an agreement with the U.S. Air Force to increase annual B-21 production by 25%, supported by customer funding included in a prior reconciliation package and “approximately $2.5 billion of company-funded investment, primarily for new facilities,” phased in over multiple years. She told analysts the company expects about $200 million of additional capital expenditures in 2026 tied to B-21 acceleration, with the majority of spending expected in 2027 through 2029 and “largely…completed this decade.”
Greene said higher B-21 sales contributed to Aeronautics Systems revenue growth in the quarter, with sales in the segment up 17% year-over-year. He said B-21 revenue in the quarter included the impact of the production capacity expansion agreement. Greene also disclosed that, to support acceleration of aircraft deliveries, the company agreed to sell an aircraft that had previously been planned as a company-owned test asset, which “accelerated revenue into the quarter” but did not change the total number of aircraft expected for delivery in the LRIP phase.
On profitability, Greene said the absence of a B-21 loss provision that was booked in the first quarter of 2025 helped Aeronautics Systems margin improve to 9.3% in Q1 2026. He said that after reviewing profitability estimates for the LRIP phase of B-21, which now includes the agreement, there were “no significant changes to the EAC,” with increased production costs on earlier lots offset by improved profitability later in the program.
For Sentinel, Warden said Northrop and the U.S. Air Force agreed to accelerate the program, with an expectation of reaching Milestone B later this year, first flight in 2027, and initial operating capability “in the early 2030s.” She said the program delivered double-digit growth in the first quarter, and that Northrop broke ground in March on a prototype of the Sentinel launch silo tube to validate the structural design and construction approach.
Warden told analysts Sentinel is about 6% to 7% of company revenue today and is expected to grow “low double digits this year,” with an expectation that it will trend toward 10% of revenue over time. She said B-21 is “nearing 10% of revenue” and, with the accelerated production rate, is expected to begin exceeding 10% over the next several years.
Segment highlights: defense growth offsets space headwinds
Greene said Defense Systems sales increased 5% year-over-year, with organic growth of 10%, driven by higher volume on Sentinel, increased volume on tactical solid rocket motors, and Integrated Battle Command programs. Defense Systems operating margin was 9.7%.
Mission Systems sales increased 2%, driven by higher volume on restricted airborne radar and marine programs, partly offset by lower volume on SABR and electronic warfare programs. Greene said Mission Systems operating income rose 20% due to a higher level of net favorable earnings adjustments, lifting the segment’s operating margin to 15.1%.
Space sales and operating income declined year-over-year, which Greene attributed to two factors:
- A $98 million sales benefit in the year-ago quarter related to NGI contract closeout that did not repeat this year.
- An unfavorable $71 million earnings adjustment on the GEM 63XL program that reduced sales and operating income.
Greene said performance elsewhere in the space portfolio was strong, citing growth on SDA programs and restricted space. When asked about broader risk of additional negative estimate adjustments in space, Greene said the portfolio was performing “pretty darn well,” and that management was comfortable there was nothing else significant in the quarter that would drive major negative or positive EAC changes.
Demand environment: budgets, munitions, missile defense, and international
Warden pointed to a “robust demand environment driven by rising global defense budgets,” saying global military spending has risen about 40% over the past decade and is expected to continue climbing. She cited heightened urgency in the Middle East for solutions including IBCS, G/ATOR, and counter-UAS capabilities.
Warden said $1 trillion had been appropriated for U.S. defense in fiscal 2026, and that budget and reconciliation funding was “starting to flow to industry.” She also referenced an administration-submitted $1.5 trillion defense budget request for fiscal 2027, including a $1.1 trillion base budget, and said the proposal emphasizes modernization and sustains support for key Northrop programs such as B-21, Sentinel, IBCS, and E-2D, as well as restricted programs.
On munitions, Warden said Northrop is a solid rocket motor supplier on more than 15 systems, including GMLRS, PrSM, Hellfire, and AIM-9X, and is working to qualify on other high-demand systems such as PAC-3. She said the company has invested more than $2 billion over the past several years in SRM and ammunition technologies and facility modernization, and that tactical SRM production capacity has already doubled, with further expansion expected to be completed by 2027.
Warden said the company’s weapons business is nearing 10% of total sales and positioned to grow faster than the company average. She added that missile defense also accounts for nearly 10% of company sales, supported by demand for air and missile defense capabilities, and that Northrop is positioned for opportunities such as “Golden Dome” and other program areas.
Shortly after the quarter ended, Warden said Northrop secured an award to accelerate development of the Glide Phase Interceptor, bringing total contract value to $1.3 billion.
On international demand, Warden said opportunities in the Middle East were “moving to the left” due to increased urgency, but she noted that international contracting cycles generally remain longer than domestic ones. She said efforts to accelerate exports include working on export approval speed and aggregating international demand signals, with much of the impact expected beyond 2026.
Guidance reaffirmed; higher 2026 CapEx with free cash flow maintained
Greene said Northrop is reaffirming its 2026 guidance for sales, earnings, and cash. The company continues to expect full-year sales of $43.5 billion to $44.0 billion, with sales accelerating through the year and high single-digit sequential sales growth expected in the second quarter.
Greene said segment operating income guidance implies a low- to mid-11% margin rate for 2026, with margins expected to improve over the course of the year due to performance, timing, and mix.
Northrop increased expected 2026 capital expenditures to $1.85 billion, reflecting an additional $200 million of investment to support increased B-21 production capacity, while maintaining free cash flow guidance of $3.1 billion to $3.5 billion. Greene said the company is working to offset the free cash flow impact of higher capital investment.
Greene also said the company repaid $527 million of fixed-rate debt in the first quarter and ended the quarter with more than $2 billion of cash on the balance sheet.
About Northrop Grumman (NYSE:NOC)
Northrop Grumman Corporation (NYSE: NOC) is a leading U.S.-based aerospace and defense company that designs, builds and sustains advanced systems, products and technologies for government and commercial customers. Formed through the combination of Northrop and Grumman businesses in the 1990s, the company’s portfolio spans manned and unmanned aircraft, space systems, missile defense, radar and sensor systems, and integrated command, control, communications, computers, intelligence, surveillance and reconnaissance (C4ISR) solutions.
The company’s work includes airframe and platform manufacturing, space hardware and satellite systems, advanced mission systems and cybersecurity services, as well as logistics, sustainment and modernization programs.
