Northrop Grumman (NOC) Q2 2026 earnings summary

Executive summary

• Achieved record backlog of $105 billion, up 17% year-over-year, driven by $20 billion in net awards and robust global demand, including ten new multi-year tactical weapons agreements.

• Q2 sales rose 5% year-over-year to $10.9 billion, up 10% sequentially, with all four segments contributing to growth.

• Diluted EPS was $7.68, down 6% year-over-year, impacted by the prior-year Training Services divestiture.

• Accelerated investments in business and capacity to support customer needs and future growth.

• Increased full-year 2026 guidance for sales, EPS, and book-to-bill, reflecting accelerating momentum and strong operational execution.

Financial highlights

• Adjusted free cash flow increased 54% year-over-year to $978 million in Q2.

• Segment operating income declined 5% to $1.16 billion, with margin rate at 10.6%, impacted by prior-year favorable EAC adjustment and divestiture gain.

• Capital expenditures totaled $302 million in Q2, up 31% year-over-year.

• Net cash provided by operating activities rose 47% to $1.28 billion.

• Effective tax rate dropped to 6.3% from 17.7% due to IRS developments.

Outlook and guidance

• 2026 sales guidance raised to $43.75–$44.25 billion, up $250 million, with over 5% organic growth at the midpoint.

• MTM-adjusted EPS guidance increased by $1.20 to $28.60–$29.10.

• Segment sales guidance: Aeronautics $14B, Mission Systems high $12B, Space ~$11B, Defense mid-to-high $8B.

• Reaffirmed segment operating income and adjusted free cash flow guidance of $3.1–$3.5 billion.

• Expect mid to high single-digit year-over-year sales growth in Q3 and a full-year book-to-bill ratio of at least 1.25.