filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited)
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| $ in millions, except per share amounts | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Sales | |||||||||||||||||||||||
| Product | $ | 8,369 | $ | 7,939 | $ | 24,148 | $ | 24,117 | |||||||||||||||
| Service | 2,054 | 2,057 | 6,094 | 6,230 | |||||||||||||||||||
| Total sales | 10,423 | 9,996 | 30,242 | 30,347 | |||||||||||||||||||
| Operating costs and expenses | |||||||||||||||||||||||
| Product | 6,631 | 6,280 | 19,523 | 19,079 | |||||||||||||||||||
| Service | 1,565 | 1,610 | 4,702 | 4,838 | |||||||||||||||||||
| General and administrative expenses | 985 | 986 | 3,008 | 3,149 | |||||||||||||||||||
| Total operating costs and expenses | 9,181 | 8,876 | 27,233 | 27,066 | |||||||||||||||||||
| Gain on sale of business | — | — | 231 | — | |||||||||||||||||||
| Operating income | 1,242 | 1,120 | 3,240 | 3,281 | |||||||||||||||||||
| Other (expense) income | |||||||||||||||||||||||
| Interest expense | (161) | (161) | (490) | (461) | |||||||||||||||||||
| Non-operating FAS pension benefit | 136 | 168 | 403 | 503 | |||||||||||||||||||
| Other, net | 106 | 61 | 175 | 142 | |||||||||||||||||||
| Earnings before income taxes | 1,323 | 1,188 | 3,328 | 3,465 | |||||||||||||||||||
| Federal and foreign income tax expense | 223 | 162 | 573 | 555 | |||||||||||||||||||
| Net earnings | $ | 1,100 | $ | 1,026 | $ | 2,755 | $ | 2,910 | |||||||||||||||
| Basic earnings per share | $ | 7.69 | $ | 7.02 | $ | 19.16 | $ | 19.73 | |||||||||||||||
| Weighted-average common shares outstanding, in millions | 143.1 | 146.2 | 143.8 | 147.5 | |||||||||||||||||||
| Diluted earnings per share | $ | 7.67 | $ | 7.00 | $ | 19.12 | $ | 19.69 | |||||||||||||||
| Weighted-average diluted shares outstanding, in millions | 143.5 | 146.5 | 144.1 | 147.8 | |||||||||||||||||||
| Net earnings (from above) | $ | 1,100 | $ | 1,026 | $ | 2,755 | $ | 2,910 | |||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Change in cumulative translation adjustment | 2 | 2 | 11 | 2 | |||||||||||||||||||
| Change in other, net | (1) | 8 | 18 | (10) | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | 1 | 10 | 29 | (8) | |||||||||||||||||||
| Comprehensive income | $ | 1,101 | $ | 1,036 | $ | 2,784 | $ | 2,902 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited)
| $ in millions, except par value | September 30, 2025 | December 31, 2024 | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 1,957 | $ | 4,353 | |||||||
| Accounts receivable, net | 1,983 | 1,272 | |||||||||
| Unbilled receivables, net | 7,030 | 5,908 | |||||||||
| Inventoried costs, net | 1,615 | 1,455 | |||||||||
| Prepaid expenses and other current assets | 1,520 | 1,286 | |||||||||
| Total current assets | 14,105 | 14,274 | |||||||||
| Property, plant and equipment, net of accumulated depreciation of $9,430 for 2025 and $8,733 for 2024 | 10,542 | 10,536 | |||||||||
| Operating lease right-of-use assets | 1,783 | 1,770 | |||||||||
| Goodwill | 17,436 | 17,512 | |||||||||
| Intangible assets, net | 220 | 254 | |||||||||
| Deferred tax assets | 1,255 | 1,599 | |||||||||
| Pension and other postretirement benefit plan assets | 2,501 | 2,184 | |||||||||
| Other non-current assets | 1,458 | 1,230 | |||||||||
| Total assets | $ | 49,300 | $ | 49,359 | |||||||
| Liabilities | |||||||||||
| Trade accounts payable | $ | 2,797 | $ | 2,599 | |||||||
| Accrued employee compensation | 1,946 | 2,271 | |||||||||
| Advance payments and billings in excess of costs incurred | 3,562 | 4,070 | |||||||||
| Other current liabilities | 4,413 | 5,188 | |||||||||
| Total current liabilities | 12,718 | 14,128 | |||||||||
| Long-term debt, net of current portion of $533 for 2025 and $1,582 for 2024 | 15,162 | 14,692 | |||||||||
| Pension and other postretirement benefit plan liabilities | 1,100 | 1,120 | |||||||||
| Operating lease liabilities | 1,796 | 1,798 | |||||||||
| Other non-current liabilities | 2,536 | 2,331 | |||||||||
| Total liabilities | 33,312 | 34,069 | |||||||||
| Commitments and contingencies (Note 7) | |||||||||||
| Shareholders’ equity | |||||||||||
| Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued and outstanding | — | — | |||||||||
| Common stock, $1 par value; 800,000,000 shares authorized; issued and outstanding: 2025—142,790,278 and 2024—144,952,026 | 143 | 145 | |||||||||
| Paid-in capital | — | — | |||||||||
| Retained earnings | 15,968 | 15,297 | |||||||||
| Accumulated other comprehensive loss | (123) | (152) | |||||||||
| Total shareholders’ equity | 15,988 | 15,290 | |||||||||
| Total liabilities and shareholders’ equity | $ | 49,300 | $ | 49,359 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30 | |||||||||||
| $ in millions | 2025 | 2024 | |||||||||
| Operating activities | |||||||||||
| Net earnings | $ | 2,755 | $ | 2,910 | |||||||
| Adjustments to reconcile to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 1,066 | 956 | |||||||||
| Stock-based compensation | 65 | 72 | |||||||||
| Deferred income taxes | 344 | (387) | |||||||||
| B-21 loss provision | 477 | — | |||||||||
| Gain on sale of business | (231) | — | |||||||||
| Net periodic pension and OPB income | (256) | (339) | |||||||||
| Pension and OPB contributions | (94) | (93) | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable, net | (716) | (155) | |||||||||
| Unbilled receivables, net | (1,240) | (825) | |||||||||
| Inventoried costs, net | (179) | (542) | |||||||||
| Prepaid expenses and other assets | (29) | (15) | |||||||||
| Accounts payable and other liabilities | (642) | (915) | |||||||||
| Income taxes payable, net | (421) | 1,106 | |||||||||
| Other, net | (39) | 37 | |||||||||
| Net cash provided by operating activities | 860 | 1,810 | |||||||||
| Investing activities | |||||||||||
| Capital expenditures | (788) | (951) | |||||||||
| Divestiture of training services business | 333 | — | |||||||||
| Other, net | (36) | — | |||||||||
| Net cash used in investing activities | (491) | (951) | |||||||||
| Financing activities | |||||||||||
| Net proceeds from issuance of long-term debt | 998 | 2,495 | |||||||||
| Payments of long-term debt | (1,500) | — | |||||||||
| Common stock repurchases | (1,168) | (2,073) | |||||||||
| Cash dividends paid | (964) | (887) | |||||||||
| Payments of employee taxes withheld from share-based awards | (38) | (57) | |||||||||
| Other, net | (93) | (120) | |||||||||
| Net cash used in financing activities | (2,765) | (642) | |||||||||
| (Decrease) increase in cash and cash equivalents | (2,396) | 217 | |||||||||
| Cash and cash equivalents, beginning of year | 4,353 | 3,109 | |||||||||
| Cash and cash equivalents, end of period | $ | 1,957 | $ | 3,326 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| $ in millions, except per share amounts | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Common stock | |||||||||||||||||||||||
| Beginning of period | $ | 143 | $ | 146 | $ | 145 | $ | 150 | |||||||||||||||
| Common stock repurchased | — | — | (2) | (4) | |||||||||||||||||||
| End of period | 143 | 146 | 143 | 146 | |||||||||||||||||||
| Paid-in capital | |||||||||||||||||||||||
| Beginning of period | — | — | — | — | |||||||||||||||||||
| End of period | — | — | — | — | |||||||||||||||||||
| Retained earnings | |||||||||||||||||||||||
| Beginning of period | 15,452 | 14,301 | 15,297 | 14,773 | |||||||||||||||||||
| Common stock repurchased | (278) | (313) | (1,150) | (2,076) | |||||||||||||||||||
| Net earnings | 1,100 | 1,026 | 2,755 | 2,910 | |||||||||||||||||||
| Dividends declared | (332) | (302) | (963) | (885) | |||||||||||||||||||
| Stock compensation | 26 | 26 | 29 | 16 | |||||||||||||||||||
| End of period | 15,968 | 14,738 | 15,968 | 14,738 | |||||||||||||||||||
| Accumulated other comprehensive loss | |||||||||||||||||||||||
| Beginning of period | (124) | (146) | (152) | (128) | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | 1 | 10 | 29 | (8) | |||||||||||||||||||
| End of period | (123) | (136) | (123) | (136) | |||||||||||||||||||
| Total shareholders’ equity | $ | 15,988 | $ | 14,748 | $ | 15,988 | $ | 14,748 | |||||||||||||||
| Cash dividends declared per share | $ | 2.31 | $ | 2.06 | $ | 6.68 | $ | 5.99 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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NORTHROP GRUMMAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Reporting
These unaudited condensed consolidated financial statements (the “financial statements”) include the accounts of Northrop Grumman Corporation and its subsidiaries and joint ventures or other investments for which we consolidate the financial results (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”). Intercompany accounts, transactions and profits are eliminated in consolidation. Investments in equity securities and joint ventures where the company has significant influence, but not control, are accounted for using the equity method.
Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the Ground-Based Strategic Deterrent (“Sentinel”) program, from Space Systems to Defense Systems. Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. These realignments are reflected in the financial information contained in this report.
On May 24, 2025 (the “Divestiture date”), the company completed its previously announced sale of substantially all of the Immersive Mission Solutions (IMS) operating unit of Defense Systems (the “training services” business or “divestiture”) for $333 million in cash, subject to a final working capital adjustment, and recorded a pre-tax gain on sale of $231 million. IMS is a provider of mission training and satellite ground network communications software for U.S. government customers. Operating results include sales and operating income for the training services business prior to the Divestiture date.
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”) and in accordance with the rules of the Securities and Exchange Commission (SEC) for interim reporting. The financial statements include adjustments of a normal recurring nature considered necessary by management for a fair presentation of the company’s unaudited condensed consolidated financial position, results of operations and cash flows. For classification of certain current assets and liabilities, we consider the duration of our customer contracts when defining our operating cycle, which is generally longer than one year.
Results reported in the financial statements are not necessarily indicative of results that may be expected for the entire year. The financial statements should be read in conjunction with the information contained in the company’s 2024 Annual Report on Form 10-K.
Quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30 and third quarter as ending on September 30. It is the company’s long-standing practice to establish actual interim closing dates using a “fiscal” calendar, in which we close our books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. This practice is only used at interim periods within a reporting year.
Accounting Estimates
Preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of sales and expenses during the reporting period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.
Revenue Recognition
Contract Estimates
Contract sales may include estimates of variable consideration, including cost or performance incentives (such as award and incentive fees), un-priced change orders, requests for equitable adjustment (REAs) and contract claims. Variable consideration is included in total estimated sales to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We estimate variable consideration as the most likely amount to which we expect to be entitled.
We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis. Net estimate-at-completion (EAC) adjustments represent the cumulative effect of the changes on current and prior periods; sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. If it is determined that a loss is expected to result on an individual performance
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NORTHROP GRUMMAN CORPORATION
obligation, the entire amount of the estimable future loss, including an allocation of general and administrative expense, is charged against income in the period the loss is identified.
B-21 Program
During the fourth quarter of 2023, we recognized a projected loss of $1.56 billion across the five low-rate initial production (LRIP) options on the B-21 program. During the first quarter of 2025, we recognized an additional $477 million loss across the five LRIP options. As of September 30, 2025, the remaining loss accrual on the B-21 program totaled $1.6 billion, which is included in Other current liabilities.
Net EAC Adjustments
The following table presents the effect of aggregate net EAC adjustments:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| $ in millions, except per share data | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Revenue | $ | 181 | $ | 131 | $ | 383 | $ | 242 | |||||||||||||||
| Operating income | 81 | 136 | 107 | 268 | |||||||||||||||||||
| Net earnings(1) | 64 | 107 | 85 | 212 | |||||||||||||||||||
| Diluted earnings per share(1) | 0.45 | 0.73 | 0.59 | 1.43 |
**(1)**Based on a 21 percent federal statutory tax rate.
EAC adjustments on a single performance obligation can have a significant effect on the company’s financial statements. When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments. During the third quarter of 2025, the company recorded a $122 million unfavorable EAC adjustment on the first and second LRIP lots of the B-21 program at Aeronautics Systems largely driven by higher-than-expected costs to produce the EMD flight test aircraft, which increased our estimates to manufacture the LRIP units; this EAC adjustment was largely offset by a reduction in our loss contingency accrual on the remaining LRIP lots due to a contract restructure that occurred during the third quarter of 2025. Also during the third quarter of 2025, the company recorded a $68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio at Mission Systems largely driven by program efficiencies and risk mitigations. During the second quarter of 2025, the company recorded a $76 million favorable EAC adjustment on the engineering and manufacturing development (EMD) phase of the Sentinel program at Defense Systems. During the first quarter of 2025, the company recorded a $226 million unfavorable EAC adjustment on the first and second LRIP lots of the B-21 program at Aeronautics Systems. During the third quarter of 2024, the company recorded a $39 million favorable EAC adjustment on the HALO program at Space Systems.
Backlog
Backlog represents the future sales we expect to recognize on firm orders received by the company and is equivalent to the company’s remaining performance obligations at the end of each period. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded. Backlog is converted into sales as costs are incurred or deliveries are made.
Company backlog as of September 30, 2025 was $91.4 billion and reflects a $150 million reduction to backlog in connection with the training services divestiture during the second quarter of 2025. Of our September 30, 2025 backlog, we expect to recognize approximately 40 percent as revenue over the next 12 months and 65 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.
Contract Assets and Liabilities
For each of the company’s contracts, the timing of revenue recognition, customer billings, and cash collections results in a net contract asset or liability at the end of each reporting period. Contract assets are equivalent to and reflected as Unbilled receivables in the unaudited condensed consolidated statements of financial position and are primarily related to long-term contracts where revenue recognized under the cost-to-cost method exceeds amounts billed to customers. Contract liabilities are equivalent to and reflected as Advance payments and billings in excess of costs incurred in the unaudited condensed consolidated statements of financial position. The amount of revenue recognized for the three and nine months ended September 30, 2025 that was included in the December 31, 2024 contract liability balance was $431 million and $3.1 billion, respectively. The amount of revenue recognized for the three and nine months ended September 30, 2024 that was included in the December 31, 2023 contract liability balance was $354 million and $3.4 billion, respectively.
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NORTHROP GRUMMAN CORPORATION
Disaggregation of Revenue
See Note 10 for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
Property, Plant, and Equipment
Non-cash investing activities for the nine months ended September 30, 2025 and 2024 include capital expenditures incurred but not yet paid of $140 million and $251 million, respectively.
Leases
As of September 30, 2025, we have approximately $1.3 billion in rental commitments for real estate leases that have not yet commenced. These leases are expected to commence between 2025 and 2027 with lease terms of 5 to 26 years.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, are as follows:
| $ in millions | September 30, 2025 | December 31, 2024 | |||||||||
| Cumulative translation adjustment | $ | (129) | $ | (140) | |||||||
| Other, net | 6 | (12) | |||||||||
| Total accumulated other comprehensive loss | $ | (123) | $ | (152) |
Related Party Transactions
For all periods presented, the company had no material related party transactions.
Accounting Standards Updates
On December 14, 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2023-09; however, the standard will not have an impact on the company’s consolidated financial position, results of operations and/or cash flows.
On November 4, 2024, the FASB issued ASU No. 2024-03 Disaggregation of Income Statement Expenses (Subtopic 220-40). ASU 2024-03 requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 will be effective for annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028 and will be applied on a prospective basis with the option to apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2024-03; however, the standard will not have an impact on the company’s consolidated financial position, results of operations and/or cash flows.
On September 18, 2025, the FASB issued ASU No. 2025-06 Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40). ASU 2025-06 removes references to prescriptive and sequential development stages, requiring companies to capitalize internal-use software costs when management commits to funding the software project and it is probable the project will be completed. ASU 2025-06 will be effective for annual and interim periods beginning January 1, 2028, and can be applied on a prospective, modified prospective, or retrospective basis. We are currently evaluating the potential impact of ASU 2025-06 on the company’s consolidated financial position, results of operations and cash flows.
Other accounting standards updates adopted and/or issued, but not effective until after September 30, 2025, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.
2. EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK
Basic Earnings Per Share
We calculate basic earnings per share by dividing net earnings by the weighted-average number of shares of common stock outstanding during each period.
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NORTHROP GRUMMAN CORPORATION
Diluted Earnings Per Share
Diluted earnings per share include the dilutive effect of awards granted to employees under stock-based compensation plans. The dilutive effect of these securities totaled 0.4 million shares and 0.3 million shares for the three and nine months ended September 30, 2025, respectively. The dilutive effect of these securities totaled 0.3 million shares for each of the three and nine months ended September 30, 2024.
Share Repurchases
Share Repurchase Programs
On January 24, 2022, the company’s board of directors authorized a share repurchase program of up to $2.0 billion in share repurchases of the company’s common stock (the “2022 Repurchase Program”). Repurchases under the 2022 Repurchase Program commenced in April 2023 and were completed in February 2024.
On December 6, 2023, the company’s board of directors authorized a new share repurchase program of up to an additional $2.5 billion in share repurchases of the company’s common stock (the “2023 Repurchase Program”). Repurchases under the 2023 Repurchase Program commenced in February 2024 and were completed in September 2025.
On December 11, 2024, the company’s board of directors authorized a new share repurchase program of up to an additional $3.0 billion in share repurchases of the company’s common stock (the “2024 Repurchase Program”). Repurchases under the 2024 Repurchase Program commenced in September 2025 upon completion of the 2023 Repurchase Program. As of September 30, 2025, repurchases under the 2024 Repurchase Program totaled $8 million; $2.99 billion remained under this share repurchase authorization. By its terms, the 2024 Repurchase Program will expire when we have used all authorized funds for repurchases.
Accelerated Share Repurchase Agreements
During the first quarter of 2024, the company entered into an accelerated share repurchase (ASR) agreement with Morgan Stanley & Co. LLC (Morgan Stanley) to repurchase $1.0 billion of the company’s common stock as part of the 2022 Repurchase Program. Under the agreement, we made a payment of $1.0 billion to Morgan Stanley and received an initial delivery of 1.8 million shares valued at $800 million that were immediately canceled by the company. The remaining balance of $200 million was settled on May 1, 2024 with a final delivery of 0.4 million shares from Morgan Stanley. The final average purchase price was $455.73 per share.
Share repurchases take place from time to time, subject to market and regulatory conditions and management’s discretion, in the open market or in privately negotiated transactions. The company retires its common stock upon repurchase and, in the periods presented, has not made any purchases of common stock other than in connection with these publicly announced repurchase programs.
The table below summarizes the company’s share repurchases to date under the authorizations described above:
| Shares Repurchased (in millions) | ||||||||||||||||||||||||||||||||||||||
| Repurchase Program Authorization Date | Amount Authorized (in millions) | Total Shares Retired (in millions) | Average Price Per Share(1) | Date Completed | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||||||||
| January 24, 2022 | $ | 2,000 | 4.4 | $ | 455.01 | February 2024 | — | 2.5 | ||||||||||||||||||||||||||||||
| December 6, 2023 | $ | 2,500 | 5.2 | $ | 482.41 | September 2025 | 2.3 | 2.0 | ||||||||||||||||||||||||||||||
| December 11, 2024 | $ | 3,000 | — | $ | 589.50 | — | — |
(1)Excludes brokerage commissions and other costs of execution, including taxes.
Dividends on Common Stock
In May 2025, the company increased the quarterly common stock dividend 12 percent to $2.31 per share from the previous amount of $2.06 per share.
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NORTHROP GRUMMAN CORPORATION
3. INVENTORIED COSTS, NET
Inventoried costs, net consist of the following:
| $ in millions | September 30, 2025 | December 31, 2024 | ||||||||||||
| Raw materials | $ | 340 | $ | 293 | ||||||||||
| Work in process | 1,203 | 1,118 | ||||||||||||
| Finished goods | 72 | 44 | ||||||||||||
| Inventoried costs, net | $ | 1,615 | $ | 1,455 |
4. INCOME TAXES
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures under Internal Revenue Code (IRC) Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes. The company recognized the income tax effects of the OBBBA in its third quarter 2025 financial statements.
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| $ in millions | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Federal and foreign income tax expense | $ | 223 | $ | 162 | $ | 573 | $ | 555 | |||||||||||||||
| Effective income tax rate | 16.9 | % | 13.6 | % | 17.2 | % | 16.0 | % |
Current Quarter
Third quarter 2025 income tax expense increased $61 million, or 38 percent, due to a higher effective tax rate (ETR) and higher earnings before income taxes. The third quarter 2025 ETR increased to 16.9 percent from 13.6 percent primarily due to the prior year ETR reflecting a net reduction in tax reserves largely due to a federal court decision in 2024 as well as a reduction in research credits in the current year due to enactment of the OBBBA, partially offset by lower interest expense on unrecognized tax benefits. The third quarter 2025 ETR includes benefits of $66 million for research credits and $16 million for foreign derived intangible income (FDII), partially offset by $19 million of interest expense on unrecognized tax benefits. The third quarter 2024 ETR included benefits of $191 million for research credits, partially offset by $64 million of interest expense on unrecognized tax benefits and $41 million in tax expense related to FDII.
Year to Date
Year to date 2025 income tax expense increased $18 million, or 3 percent, due to a higher ETR, which more than offset lower earnings before income taxes. The year to date 2025 ETR increased to 17.2 percent from 16.0 percent primarily due to the prior year ETR reflecting a net reduction in tax reserves largely due to a federal court decision in 2024 as well as additional income tax expense in the current year related to nondeductible goodwill in the divested training services business, partially offset by lower interest expense on unrecognized tax benefits. The year to date 2025 ETR includes benefits of $169 million for research credits and $34 million for FDII, partially offset by $53 million of interest expense on unrecognized tax benefits and $17 million of tax expense related to nondeductible goodwill in the divested business. The year to date 2024 ETR included benefits of $280 million for research credits, partially offset by $110 million of interest expense on unrecognized tax benefits and $11 million in tax expense related to FDII.
Taxes receivable, which are included in Prepaid expenses and other current assets in the unaudited condensed consolidated statements of financial position, were $786 million as of September 30, 2025 and $517 million as of December 31, 2024. Enactment of the OBBBA resulted in an increase of $346 million to taxes receivable and a decrease of $383 million to deferred tax assets as of September 30, 2025.
During 2025, we increased our unrecognized tax benefits by approximately $180 million principally in connection with state apportionment matters and research credits. It is reasonably possible that within the next 12 months the company’s unrecognized tax benefits may increase by approximately $90 million.
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We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. During the fourth quarter of 2024, the company entered into an agreed Revenue Agent’s Report (“RAR”) for certain matters related to the company’s 2018-2020 federal income tax returns, resulting in a $766 million reduction to our unrecognized tax benefits and an immaterial impact to income tax expense. The matters not addressed by the agreed RAR related to the company’s 2018-2020 federal income tax returns are currently under Internal Revenue Service (IRS) examination. Certain matters related to the 2014-2017 federal income tax returns and refund claims related to its 2007-2016 federal tax returns are currently under review by the IRS Appeals Office.
The Organization for Economic Co-operation and Development issued Pillar Two model rules for a global minimum tax of 15% effective January 1, 2024. Pillar Two had no impact on our third quarter or year to date 2025 or 2024 ETR, and we do not currently expect Pillar Two to significantly impact our ETR going forward.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The company holds a portfolio of marketable securities including investments to partially fund non-qualified employee benefit plans as well as investments in companies that are advancing or developing technologies applicable to our business. A portion of these securities are held in common/collective trust funds and are measured at fair value using net asset value (NAV) per share as a practical expedient; therefore, they are not categorized in the fair value hierarchy table below. Marketable securities are included in Other non-current assets in the unaudited condensed consolidated statements of financial position.
The company’s derivative portfolio consists primarily of foreign currency forward contracts. Where model-derived valuations are appropriate, the company utilizes the income approach to determine the fair value using internal models based on observable market inputs.
The following table presents the financial assets and liabilities the company records at fair value on a recurring basis identified by the level of inputs used to determine fair value:
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| $ in millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||||
| Financial Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketable securities | $ | 496 | $ | — | $ | 14 | $ | 510 | $ | 325 | $ | — | $ | 14 | $ | 339 | ||||||||||||||||||||||||||||||||||
| Marketable securities valued using NAV | 6 | 8 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total marketable securities | 496 | — | 14 | 516 | 325 | — | 14 | 347 | ||||||||||||||||||||||||||||||||||||||||||
| Derivatives | — | 7 | — | 7 | — | (11) | — | (11) |
During the third quarter of 2025, the company transferred $50 million of securities from Level 3 to Level 1 in connection with the initial public offering (“IPO”) of a company in which we hold an investment. As of September 30, 2025, the company’s investment was valued at $115 million. The company is prohibited from selling this investment until the first quarter of 2026. There were no other transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the nine months ended September 30, 2025.
Unrealized gains and losses from marketable securities, which are reflected in Other, net on the unaudited condensed consolidated statement of earnings and comprehensive income, were $82 million and $92 million for the three and nine months ended September 30, 2025, respectively. Unrealized gains and losses from marketable securities were not material for the three and nine months ended September 30, 2024.
The notional value of the company’s foreign currency forward contracts at September 30, 2025 and December 31, 2024 was $334 million and $399 million, respectively. The portion of notional value designated as a cash flow hedge at September 30, 2025 and December 31, 2024 was $241 million and $273 million, respectively.
The derivative fair values and related unrealized gains/losses at September 30, 2025 and December 31, 2024 were not material.
The carrying value of cash and cash equivalents approximates fair value.
Long-term Debt
The estimated fair value of the company’s long-term debt was $15.1 billion and $15.3 billion as of September 30, 2025 and December 31, 2024, respectively. We calculated the fair value of long-term debt using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the company’s existing debt
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arrangements. The current portion of long-term debt is recorded in Other current liabilities in the unaudited condensed consolidated statements of financial position.
Issuance of Senior Notes
In May 2025, the company issued $1.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:
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$500 million of 4.65% senior notes due 2030 (the “2030 Notes”) and
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$500 million of 5.25% senior notes due 2035 (the “2035 Notes”).
In January 2024, the company issued $2.5 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:
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$500 million of 4.60% senior notes due 2029 (the “2029 Notes”),
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$850 million of 4.90% senior notes due 2034 (the “2034 Notes”), and
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$1.15 billion of 5.20% senior notes due 2054 (the “2054 Notes”).
We refer to the 2029 Notes, 2030 Notes, 2034 Notes, 2035 Notes, and 2054 Notes together, as the “notes.” Interest on the notes is payable semi-annually in arrears. The notes are generally subject to redemption, in whole or in part, at the company’s discretion at any time, or from time to time, prior to maturity at a redemption price equal to the greater of 100% of the principal amount of the notes to be redeemed or an applicable “make-whole” amount, plus accrued and unpaid interest.
Repayment of Senior Notes
In January 2025, the company repaid $1.5 billion of 2.93% unsecured senior notes upon maturity.
6. INVESTIGATIONS, CLAIMS AND LITIGATION
For over 25 years, the company has worked closely with the United States Navy, the United States Environmental Protection Agency, the New York State Department of Environmental Conservation, the New York State Department of Health and other federal, state and local governmental authorities, to address environmental conditions allegedly resulting from historic operations at the former United States Navy and Grumman facilities in Bethpage, New York. We have incurred, and expect to continue to incur, as included in Note 7, substantial remediation costs related to these Bethpage environmental conditions, including potential costs relating to unanticipated developments such as new discoveries of potential contaminants. It is also possible that applicable remediation standards and other requirements to which we are subject may continue to change, and that our costs may increase materially. In 2022, we resolved several disputes and regulatory proceedings concerning the scope and allocation of remediation responsibilities and costs related to this site and we continue remediation consistent with agreements through which those disputes were resolved. The company continues to be involved in other remediation-related disputes, none of which are material individually or in the aggregate. We are also a party to various individual lawsuits and a putative class action in the Eastern District of New York alleging personal injury and property damage related to the legacy Bethpage environmental conditions (the “Bethpage EDNY cases”). The court has stayed the filed individual lawsuits, pending its decision on class certification. Although the court has ordered supplemental briefing on pending class certification and expert motions in the putative class action, the parties remain engaged in a mediation. We are also a party, and may become a party, to other lawsuits brought by or against insurance carriers, and by other individual plaintiffs and/or putative classes, as well as other parties. We cannot at this time predict or reasonably estimate the potential outcomes or ranges of possible liability of the Bethpage EDNY cases.
The company received from the U.S. Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost accounting and controls focused on the interest rate assumptions the company used to determine our U.S. Government Cost Accounting Standards (CAS) pension expense, which we discuss in Note 7 below. The company is engaging with the government and responding to the requests. We cannot at this point predict the outcome of these matters.
The company is a party to various other investigations, lawsuits, arbitration, claims, enforcement actions and other legal proceedings, including government investigations and claims, that arise in the ordinary course of our business. The nature of legal proceedings is such that we cannot assure the outcome of any particular matter. However, based on information available to the company to date, the company does not believe that the outcome of any of these other matters pending against the company is likely to have a material adverse effect on the company’s unaudited
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condensed consolidated financial position as of September 30, 2025, or its annual results of operations and/or cash flows.
7. COMMITMENTS AND CONTINGENCIES
U.S. Government Cost Claims and Contingencies
From time to time, the company is advised of claims by the U.S. government concerning certain potential disallowed costs, plus, at times, penalties and interest. When such findings are presented, the company and U.S. government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed. Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs. Such provisions are reviewed periodically using the most recent information available. The company believes it has adequately reserved for disputed amounts that are probable and reasonably estimable, and that the outcome of any such matters would not have a material adverse effect on its unaudited condensed consolidated financial position as of September 30, 2025, or its annual results of operations and/or cash flows.
In 2019, the Defense Contract Management Agency (DCMA) raised questions about an interest rate assumption used by the company to determine our CAS pension expense. On June 1, 2020, DCMA provided written notice that the assumptions the company used during the period 2013-2019 were potentially noncompliant with CAS. We submitted a formal response on July 31, 2020, which we believed demonstrates the appropriateness of the assumptions used. On November 24, 2020, DCMA replied to the company’s response, disagreeing with our position and requesting additional input, which we provided on February 22, 2021. We subsequently continued to exchange correspondence and engage with DCMA on this matter, including responding to requests for and providing additional information. On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of noncompliance with CAS, which is an interim, non-final determination, and the parties engaged in discussions. In addition, as noted in Note 6 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information related to the interest rate assumptions at issue in our discussions with DCMA. The company has responded to requests and expects to continue discussions with the DOJ and DCMA as these matters progress. We cannot at this point predict the outcome of these matters. The sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of these matters could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.
Environmental Matters
The table below summarizes the amount accrued for environmental remediation costs, management’s estimate of the amount of reasonably possible future costs in excess of accrued costs and the deferred costs expected to be recoverable through overhead charges on U.S. government contracts as of September 30, 2025 and December 31, 2024:
| $ in millions | Accrued Costs(1)(2) | Reasonably Possible Future Costs in Excess of Accrued Costs(2) | Deferred Costs(3) | |||||||||||||||||
| September 30, 2025 | $ | 567 | $ | 387 | $ | 522 | ||||||||||||||
| December 31, 2024 | 546 | 377 | 507 |
(1) As of September 30, 2025, $198 million is recorded in Other current liabilities and $369 million is recorded in Other non-current liabilities.
(2) Estimated remediation costs are not discounted to present value. The reasonably possible future costs in excess of accrued costs do not take into consideration amounts expected to be recoverable through overhead charges on U.S. government contracts.
(3) As of September 30, 2025, $184 million is deferred in Prepaid expenses and other current assets and $338 million is deferred in Other non-current assets. These amounts are evaluated for recoverability on a routine basis.
Although management cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s unaudited condensed consolidated financial position as of September 30, 2025, or its annual results of operations and/or cash flows.
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NORTHROP GRUMMAN CORPORATION
Financial Arrangements
In the ordinary course of business, the company uses standby letters of credit and guarantees issued by commercial banks and surety bonds issued principally by insurance companies to guarantee the performance on certain obligations. At September 30, 2025, there were $598 million of stand-by letters of credit and guarantees and $269 million of surety bonds outstanding.
Commercial Paper
The company maintains a commercial paper program that serves as a source of short-term financing. In September 2025, the company amended its commercial paper program to increase its capacity to issue unsecured commercial paper notes from $2.5 billion to $3.0 billion. At September 30, 2025, there were no commercial paper borrowings outstanding.
Credit Facilities
In September 2025, the company entered into a new five-year senior unsecured revolving credit facility in an aggregate principal amount of $3.0 billion (the “2025 Credit Agreement”). The 2025 Credit Agreement replaced the company’s prior five-year, $2.5 billion revolving credit facility entered into in August 2022. The revolving credit facility established under the 2025 Credit Agreement is intended to support the company's commercial paper program and other general corporate purposes. Commercial paper borrowings reduce the amount available for borrowing under the 2025 Credit Agreement. At September 30, 2025, there were no borrowings outstanding under this facility.
The 2025 Credit Agreement contains generally customary terms and conditions, including covenants restricting the company’s ability to sell all or substantially all of its assets, merge or consolidate with another entity or undertake other fundamental changes and incur liens. The company also cannot permit the ratio of its debt to capitalization (as set forth in the credit agreement) to exceed 65 percent.
At September 30, 2025, the company was in compliance with all covenants under its credit agreements.
8. RETIREMENT BENEFITS
The cost to the company of its pension and other postretirement benefit (OPB) plans is shown in the following table:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||||
| Pension Benefits | OPB | Pension Benefits | OPB | ||||||||||||||||||||||||||||||||||||||||||||
| $ in millions | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||||||||
| Components of net periodic benefit cost (benefit) | |||||||||||||||||||||||||||||||||||||||||||||||
| Service cost | $ | 55 | $ | 60 | $ | 1 | $ | 1 | $ | 163 | $ | 179 | $ | 3 | $ | 3 | |||||||||||||||||||||||||||||||
| Interest cost | 404 | 381 | 16 | 15 | 1,209 | 1,144 | 47 | 46 | |||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | (540) | (549) | (22) | (21) | (1,619) | (1,647) | (64) | (64) | |||||||||||||||||||||||||||||||||||||||
| Amortization of prior service credit | — | — | (1) | — | — | — | (2) | — | |||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | 7 | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Net periodic benefit cost (benefit) | $ | (81) | $ | (108) | $ | (6) | $ | (5) | $ | (240) | $ | (324) | $ | (16) | $ | (15) |
Employer Contributions
The company sponsors defined benefit pension and OPB plans, as well as defined contribution plans. We fund our defined benefit pension plans annually in a manner consistent with the Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006.
Contributions made by the company to its retirement plans are as follows:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| $ in millions | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Defined benefit pension plans | $ | 25 | $ | 17 | $ | 67 | $ | 66 | |||||||||||||||
| OPB plans | 7 | 7 | 27 | 27 | |||||||||||||||||||
| Defined contribution plans | 133 | 136 | 517 | 517 |
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NORTHROP GRUMMAN CORPORATION
9. STOCK COMPENSATION PLANS AND OTHER COMPENSATION ARRANGEMENTS
Stock Awards
The following table presents the number of restricted stock rights (RSRs) and restricted performance stock rights (RPSRs) granted to employees under the company’s long-term incentive stock plan and the grant date aggregate fair value of those stock awards for the periods presented:
| Nine Months Ended September 30 | ||||||||||||||
| in millions | 2025 | 2024 | ||||||||||||
| RSRs granted | 0.1 | 0.1 | ||||||||||||
| RPSRs granted | 0.1 | 0.2 | ||||||||||||
| Grant date aggregate fair value | $ | 104 | $ | 109 |
RSRs typically vest on the third anniversary of the grant date, while RPSRs generally vest and pay out based on the achievement of certain performance metrics and market conditions over a three-year period.
Cash Awards
The following table presents the minimum and maximum aggregate payout amounts related to cash units (CUs) and cash performance units (CPUs) granted to employees in the periods presented:
| Nine Months Ended September 30 | ||||||||||||||
| $ in millions | 2025 | 2024 | ||||||||||||
| Minimum aggregate payout amount | $ | 35 | $ | 35 | ||||||||||
| Maximum aggregate payout amount | 199 | 200 |
CUs typically vest and settle in cash on the third anniversary of the grant date, while CPUs generally vest and pay out in cash based on the achievement of certain performance metrics over a three-year period.
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NORTHROP GRUMMAN CORPORATION
10. SEGMENT INFORMATION
The following table presents sales, operating costs and expenses, and operating income by segment:
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| $ in millions | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Aeronautics Systems | |||||||||||||||||||||||
| Sales | $ | 3,142 | $ | 2,961 | $ | 9,070 | $ | 9,065 | |||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Product | 2,108 | 1,956 | 6,575 | 6,043 | |||||||||||||||||||
| Service | 690 | 666 | 1,940 | 2,007 | |||||||||||||||||||
| Intersegment | 39 | 30 | 112 | 88 | |||||||||||||||||||
| Aeronautics Systems operating income | 305 | 309 | 443 | 927 | |||||||||||||||||||
| Defense Systems | |||||||||||||||||||||||
| Sales | 2,059 | 1,800 | 5,855 | 5,396 | |||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Product | 1,483 | 1,269 | 4,117 | 3,764 | |||||||||||||||||||
| Service | 297 | 333 | 940 | 1,011 | |||||||||||||||||||
| Intersegment | 45 | 38 | 132 | 114 | |||||||||||||||||||
| Defense Systems operating income | 234 | 160 | 666 | 507 | |||||||||||||||||||
| Mission Systems | |||||||||||||||||||||||
| Sales | 3,093 | 2,823 | 9,057 | 8,255 | |||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Product | 1,825 | 1,747 | 5,500 | 5,037 | |||||||||||||||||||
| Service | 466 | 451 | 1,383 | 1,372 | |||||||||||||||||||
| Intersegment | 287 | 235 | 857 | 717 | |||||||||||||||||||
| Mission Systems operating income | 515 | 390 | 1,317 | 1,129 | |||||||||||||||||||
| Space Systems | |||||||||||||||||||||||
| Sales | 2,698 | 2,870 | 7,912 | 9,021 | |||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||
| Product | 1,980 | 2,077 | 5,702 | 6,706 | |||||||||||||||||||
| Service | 297 | 351 | 1,021 | 1,056 | |||||||||||||||||||
| Intersegment | 123 | 97 | 328 | 280 | |||||||||||||||||||
| Space Systems operating income | 298 | 345 | 861 | 979 | |||||||||||||||||||
| Intersegment profit eliminations | (75) | (58) | (223) | (191) | |||||||||||||||||||
| Total segment operating income | 1,277 | 1,146 | 3,064 | 3,351 | |||||||||||||||||||
| FAS/CAS operating adjustment | 67 | 20 | 193 | 32 | |||||||||||||||||||
| Unallocated corporate expense | (102) | (46) | (17) | (102) | |||||||||||||||||||
| Total operating income | 1,242 | 1,120 | 3,240 | 3,281 | |||||||||||||||||||
| Other (expense) income | |||||||||||||||||||||||
| Interest expense | (161) | (161) | (490) | (461) | |||||||||||||||||||
| Non-operating FAS pension benefit | 136 | 168 | 403 | 503 | |||||||||||||||||||
| Other, net | 106 | 61 | 175 | 142 | |||||||||||||||||||
| Earnings before income taxes | $ | 1,323 | $ | 1,188 | $ | 3,328 | $ | 3,465 |
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NORTHROP GRUMMAN CORPORATION
FAS/CAS Operating Adjustment
For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with applicable Federal Acquisition Regulation (FAR) and CAS requirements. The FAS/CAS operating adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income.
Unallocated Corporate Expense
Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs. Unallocated corporate expense also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of property, plant and equipment acquired through business combinations, as well as certain compensation and other costs.
During the second quarter of 2025, the $231 million pre-tax gain on the sale of our training services business and $19 million of unallowable state taxes and transaction costs associated with the divestiture were recorded in Unallocated corporate income (expense).
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NORTHROP GRUMMAN CORPORATION
Disaggregation of Revenue
| Sales by Customer Type | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| $ in millions | $ | %****(3) | $ | %(3) | $ | %****(3) | $ | %(3) | |||||||||||||||||||||||||||
| Aeronautics Systems | |||||||||||||||||||||||||||||||||||
| U.S. government(1) | $ | 2,530 | 82 | % | $ | 2,451 | 84 | % | $ | 7,346 | 82 | % | $ | 7,641 | 85 | % | |||||||||||||||||||
| International(2) | 564 | 18 | % | 470 | 16 | % | 1,586 | 18 | % | 1,309 | 15 | % | |||||||||||||||||||||||
| Other customers | 6 | — | % | 7 | — | % | 17 | — | % | 16 | — | % | |||||||||||||||||||||||
| Intersegment sales | 42 | 33 | 121 | 99 | |||||||||||||||||||||||||||||||
| Aeronautics Systems sales | 3,142 | 2,961 | 9,070 | 9,065 | |||||||||||||||||||||||||||||||
| Defense Systems | |||||||||||||||||||||||||||||||||||
| U.S. government(1) | 1,570 | 78 | % | 1,472 | 84 | % | 4,632 | 81 | % | 4,435 | 84 | % | |||||||||||||||||||||||
| International(2) | 419 | 21 | % | 271 | 15 | % | 1,013 | 18 | % | 777 | 15 | % | |||||||||||||||||||||||
| Other customers | 19 | 1 | % | 14 | 1 | % | 61 | 1 | % | 54 | 1 | % | |||||||||||||||||||||||
| Intersegment sales | 51 | 43 | 149 | 130 | |||||||||||||||||||||||||||||||
| Defense Systems sales | 2,059 | 1,800 | 5,855 | 5,396 | |||||||||||||||||||||||||||||||
| Mission Systems | |||||||||||||||||||||||||||||||||||
| U.S. government(1) | 2,166 | 79 | % | 2,093 | 82 | % | 6,421 | 80 | % | 6,033 | 81 | % | |||||||||||||||||||||||
| International(2) | 557 | 20 | % | 427 | 17 | % | 1,537 | 19 | % | 1,308 | 18 | % | |||||||||||||||||||||||
| Other customers | 31 | 1 | % | 28 | 1 | % | 84 | 1 | % | 65 | 1 | % | |||||||||||||||||||||||
| Intersegment sales | 339 | 275 | 1,015 | 849 | |||||||||||||||||||||||||||||||
| Mission Systems sales | 3,093 | 2,823 | 9,057 | 8,255 | |||||||||||||||||||||||||||||||
| Space Systems | |||||||||||||||||||||||||||||||||||
| U.S. government(1) | 2,366 | 93 | % | 2,606 | 94 | % | 7,024 | 93 | % | 8,245 | 95 | % | |||||||||||||||||||||||
| International(2) | 63 | 2 | % | 50 | 2 | % | 154 | 2 | % | 171 | 2 | % | |||||||||||||||||||||||
| Other customers | 132 | 5 | % | 107 | 4 | % | 367 | 5 | % | 293 | 3 | % | |||||||||||||||||||||||
| Intersegment sales | 137 | 107 | 367 | 312 | |||||||||||||||||||||||||||||||
| Space Systems sales | 2,698 | 2,870 | 7,912 | 9,021 | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| U.S. government(1) | 8,632 | 83 | % | 8,622 | 86 | % | 25,423 | 84 | % | 26,354 | 87 | % | |||||||||||||||||||||||
| International(2) | 1,603 | 15 | % | 1,218 | 12 | % | 4,290 | 14 | % | 3,565 | 12 | % | |||||||||||||||||||||||
| Other customers | 188 | 2 | % | 156 | 2 | % | 529 | 2 | % | 428 | 1 | % | |||||||||||||||||||||||
| Total Sales | $ | 10,423 | $ | 9,996 | $ | 30,242 | $ | 30,347 |
(1) Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. government. Each of the company’s segments derives a substantial percentage of its revenue from the U.S. government.
(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted through the U.S. government.
(3) Percentages calculated based on external customer sales.
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NORTHROP GRUMMAN CORPORATION
| Sales by Contract Type | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| $ in millions | $ | %****(1) | $ | %(1) | $ | %****(1) | $ | %(1) | |||||||||||||||||||||||||||
| Aeronautics Systems | |||||||||||||||||||||||||||||||||||
| Cost-type | $ | 1,454 | 47 | % | $ | 1,321 | 45 | % | $ | 4,254 | 48 | % | $ | 4,080 | 46 | % | |||||||||||||||||||
| Fixed-price | 1,646 | 53 | % | 1,607 | 55 | % | 4,695 | 52 | % | 4,886 | 54 | % | |||||||||||||||||||||||
| Intersegment sales | 42 | 33 | 121 | 99 | |||||||||||||||||||||||||||||||
| Aeronautics Systems sales | 3,142 | 2,961 | 9,070 | 9,065 | |||||||||||||||||||||||||||||||
| Defense Systems | |||||||||||||||||||||||||||||||||||
| Cost-type | 1,028 | 51 | % | 965 | 55 | % | 3,077 | 54 | % | 2,843 | 54 | % | |||||||||||||||||||||||
| Fixed-price | 980 | 49 | % | 792 | 45 | % | 2,629 | 46 | % | 2,423 | 46 | % | |||||||||||||||||||||||
| Intersegment sales | 51 | 43 | 149 | 130 | |||||||||||||||||||||||||||||||
| Defense Systems sales | 2,059 | 1,800 | 5,855 | 5,396 | |||||||||||||||||||||||||||||||
| Mission Systems | |||||||||||||||||||||||||||||||||||
| Cost-type | 1,219 | 44 | % | 1,216 | 48 | % | 3,788 | 47 | % | 3,390 | 46 | % | |||||||||||||||||||||||
| Fixed-price | 1,535 | 56 | % | 1,332 | 52 | % | 4,254 | 53 | % | 4,016 | 54 | % | |||||||||||||||||||||||
| Intersegment sales | 339 | 275 | 1,015 | 849 | |||||||||||||||||||||||||||||||
| Mission Systems sales | 3,093 | 2,823 | 9,057 | 8,255 | |||||||||||||||||||||||||||||||
| Space Systems | |||||||||||||||||||||||||||||||||||
| Cost-type | 1,351 | 53 | % | 1,750 | 63 | % | 4,453 | 59 | % | 5,429 | 62 | % | |||||||||||||||||||||||
| Fixed-price | 1,210 | 47 | % | 1,013 | 37 | % | 3,092 | 41 | % | 3,280 | 38 | % | |||||||||||||||||||||||
| Intersegment sales | 137 | 107 | 367 | 312 | |||||||||||||||||||||||||||||||
| Space Systems sales | 2,698 | 2,870 | 7,912 | 9,021 | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| Cost-type | 5,052 | 48 | % | 5,252 | 53 | % | 15,572 | 51 | % | 15,742 | 52 | % | |||||||||||||||||||||||
| Fixed-price | 5,371 | 52 | % | 4,744 | 47 | % | 14,670 | 49 | % | 14,605 | 48 | % | |||||||||||||||||||||||
| Total Sales | $ | 10,423 | $ | 9,996 | $ | 30,242 | $ | 30,347 |
(1)Percentages calculated based on external customer sales.
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NORTHROP GRUMMAN CORPORATION
| Sales by Geographic Region | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||||
| $ in millions | $ | %****(3) | $ | %(3) | $ | %****(3) | $ | %(3) | |||||||||||||||||||||||||||
| Aeronautics Systems | |||||||||||||||||||||||||||||||||||
| United States(1) | $ | 2,536 | 82 | % | $ | 2,458 | 84 | % | $ | 7,363 | 82 | % | $ | 7,657 | 85 | % | |||||||||||||||||||
| Asia/Pacific | 221 | 7 | % | 200 | 7 | % | 647 | 7 | % | 534 | 6 | % | |||||||||||||||||||||||
| Europe | 321 | 10 | % | 259 | 9 | % | 891 | 10 | % | 749 | 9 | % | |||||||||||||||||||||||
| Other geographic regions(2) | 22 | 1 | % | 11 | — | % | 48 | 1 | % | 26 | — | % | |||||||||||||||||||||||
| Intersegment sales | 42 | 33 | 121 | 99 | |||||||||||||||||||||||||||||||
| Aeronautics Systems sales | 3,142 | 2,961 | 9,070 | 9,065 | |||||||||||||||||||||||||||||||
| Defense Systems | |||||||||||||||||||||||||||||||||||
| United States(1) | 1,589 | 79 | % | 1,486 | 85 | % | 4,693 | 82 | % | 4,489 | 85 | % | |||||||||||||||||||||||
| Asia/Pacific | 111 | 6 | % | 74 | 4 | % | 271 | 5 | % | 204 | 4 | % | |||||||||||||||||||||||
| Europe | 251 | 12 | % | 144 | 8 | % | 589 | 10 | % | 440 | 8 | % | |||||||||||||||||||||||
| Other geographic regions(2) | 57 | 3 | % | 53 | 3 | % | 153 | 3 | % | 133 | 3 | % | |||||||||||||||||||||||
| Intersegment sales | 51 | 43 | 149 | 130 | |||||||||||||||||||||||||||||||
| Defense Systems sales | 2,059 | 1,800 | 5,855 | 5,396 | |||||||||||||||||||||||||||||||
| Mission Systems | |||||||||||||||||||||||||||||||||||
| United States(1) | 2,197 | 80 | % | 2,121 | 83 | % | 6,505 | 81 | % | 6,098 | 82 | % | |||||||||||||||||||||||
| Asia/Pacific | 147 | 5 | % | 98 | 4 | % | 407 | 5 | % | 346 | 5 | % | |||||||||||||||||||||||
| Europe | 318 | 12 | % | 246 | 10 | % | 820 | 10 | % | 727 | 10 | % | |||||||||||||||||||||||
| Other geographic regions(2) | 92 | 3 | % | 83 | 3 | % | 310 | 4 | % | 235 | 3 | % | |||||||||||||||||||||||
| Intersegment sales | 339 | 275 | 1,015 | 849 | |||||||||||||||||||||||||||||||
| Mission Systems sales | 3,093 | 2,823 | 9,057 | 8,255 | |||||||||||||||||||||||||||||||
| Space Systems | |||||||||||||||||||||||||||||||||||
| United States(1) | 2,498 | 98 | % | 2,713 | 98 | % | 7,391 | 98 | % | 8,538 | 98 | % | |||||||||||||||||||||||
| Asia/Pacific | 25 | 1 | % | 6 | — | % | 48 | 1 | % | 30 | 1 | % | |||||||||||||||||||||||
| Europe | 28 | 1 | % | 36 | 1 | % | 74 | 1 | % | 112 | 1 | % | |||||||||||||||||||||||
| Other geographic regions(2) | 10 | — | % | 8 | 1 | % | 32 | — | % | 29 | — | % | |||||||||||||||||||||||
| Intersegment sales | 137 | 107 | 367 | 312 | |||||||||||||||||||||||||||||||
| Space Systems sales | 2,698 | 2,870 | 7,912 | 9,021 | |||||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||||||||
| United States(1) | 8,820 | 85 | % | 8,778 | 88 | % | 25,952 | 86 | % | 26,782 | 88 | % | |||||||||||||||||||||||
| Asia/Pacific | 504 | 5 | % | 378 | 4 | % | 1,373 | 4 | % | 1,114 | 4 | % | |||||||||||||||||||||||
| Europe | 918 | 8 | % | 685 | 7 | % | 2,374 | 8 | % | 2,028 | 7 | % | |||||||||||||||||||||||
| Other geographic regions(2) | 181 | 2 | % | 155 | 1 | % | 543 | 2 | % | 423 | 1 | % | |||||||||||||||||||||||
| Total Sales | $ | 10,423 | $ | 9,996 | $ | 30,242 | $ | 30,347 |
(1)No country other than the United States represents greater than 10% of total company sales.
(2)Other geographic regions are principally comprised of the Middle East.
(3)Percentages calculated based on external customer sales.
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NORTHROP GRUMMAN CORPORATION
Capital Expenditures and Depreciation and Amortization
The following table presents capital expenditures and depreciation and amortization for each of our reportable segments and for Corporate:
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||
| $ in millions | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Capital Expenditures | ||||||||||||||||||||||||||
| Aeronautics Systems | $ | 102 | $ | 139 | $ | 250 | $ | 339 | ||||||||||||||||||
| Defense Systems | 21 | 24 | 44 | 46 | ||||||||||||||||||||||
| Mission Systems | 66 | 62 | 152 | 143 | ||||||||||||||||||||||
| Space Systems | 70 | 128 | 251 | 401 | ||||||||||||||||||||||
| Corporate (1) | 42 | 8 | 91 | 22 | ||||||||||||||||||||||
| Total capital expenditures | $ | 301 | $ | 361 | $ | 788 | $ | 951 | ||||||||||||||||||
| Depreciation and Amortization | ||||||||||||||||||||||||||
| Aeronautics Systems | $ | 92 | $ | 92 | $ | 273 | $ | 266 | ||||||||||||||||||
| Defense Systems | 47 | 44 | 132 | 129 | ||||||||||||||||||||||
| Mission Systems | 71 | 64 | 206 | 188 | ||||||||||||||||||||||
| Space Systems | 98 | 86 | 261 | 246 | ||||||||||||||||||||||
| Corporate (1) | 71 | 45 | 194 | 127 | ||||||||||||||||||||||
| Total depreciation and amortization | $ | 379 | $ | 331 | $ | 1,066 | $ | 956 |
(1)Corporate amounts include the amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations as they are not considered part of management’s evaluation of segment operating performance.
AssetsOur chief operating decision maker (“CODM”) does not use assets by segment to evaluate segment performance or allocate resources. Therefore, we do not disclose assets by segment.
-20-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Northrop Grumman Corporation
Falls Church, Virginia
Results of Review of Interim Financial Information
We have reviewed the accompanying condensed consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries (the “Company”) as of September 30, 2025, and the related condensed consolidated statements of earnings and comprehensive income and changes in shareholders’ equity for the three-month and nine-month periods ended September 30, 2025 and 2024, and of cash flows for the nine-month periods ended September 30, 2025 and 2024 and the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries as of December 31, 2024, and the related consolidated statements of earnings and comprehensive income, changes in shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated January 29, 2025, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2024, is fairly stated, in all material respects, in relation to the audited consolidated statement of financial position from which it has been derived.
Basis for Review Results
This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
| /s/ | Deloitte & Touche LLP | ||||
| McLean, Virginia | |||||
| October 20, 2025 |
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NORTHROP GRUMMAN CORPORATION
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