Northrop Grumman set a record backlog and still reported lower quarterly earnings

Northrop Grumman's backlog reached $105bn, a company record, on $20bn of net awards in the quarter. Earnings went the other way.

Sales for the second quarter were $10.9bn, up 5 percent from $10.4bn a year earlier, with all four sectors growing and Aeronautics Systems up 13 percent, according to the Form 8-K exhibit the company released on July 21. Net earnings came in at $1.1bn, down 7 percent, and diluted EPS fell to $7.68 from $8.15. The drop is mostly a comparison problem. The second quarter of 2025 included a $150m benefit, worth $1.04 a share, from the sale of the training services business, and the same sale put a $231m gain into that quarter's operating income.

Strip nothing away and the operating line still fell. Total operating income was $1,096m, down 23 percent from a year earlier, and the operating margin narrowed to 10.1 percent from 13.8 percent, both figures reflecting the absent divestiture gain and lower segment income. What held net earnings up were two items below the operating line: a non-operating pension benefit of $166m, and an effective tax rate that fell to 6.3 percent from 17.7 percent.

Kathy Warden, the chair and chief executive, said the company was raising guidance "based on our confidence in our team and the demand for our technologies." Northrop now expects full-year sales of $43.75bn to $44.25bn and MTM-adjusted EPS of $28.60 to $29.10, an increase of $1.20 on the earlier figure, and it reaffirmed its guidance for operating income and adjusted free cash flow.