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What changed in Northrop Grumman's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Northrop Grumman's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+400 added−402 removedSource: 10-K (2026-01-27) vs 10-K (2025-01-30)

Top changes in Northrop Grumman's 2025 10-K

400 paragraphs added · 402 removed · 308 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

44 edited+10 added−20 removed24 unchanged
Biggest changeKey unrestricted programs include: • Evolved Strategic SATCOM (ESS) satellites and payloads providing assured, no-fail, and survivable Nuclear Command and Control (NC3) communications capabilities; • Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) program satellites and payloads providing resilient and enhanced missile warning over the critical northern polar region; • Space Development Agency Tracking and Transport layers providing missile warning/tracking and resilient, low-latency, high-volume data transport communication systems; • Missile defense systems, interceptors, targets, mission processing and boosters for the Missile Defense Agency's (MDA) Ground-based Midcourse Defense Weapon Systems (GWS); • Cygnus spacecraft, used in the execution of our Commercial Resupply Services (CRS) contracts with NASA to resupply and re-boost the International Space Station; • Development and production of solid rocket motors for NASA’s Space Launch System (SLS) heavy lift vehicle; • Habitation and Logistics Outpost (HALO) module in support of NASA’s Lunar Gateway; • 63-inch diameter Graphite Epoxy Motor (GEM 63) and the extended length variation (GEM 63XL) solid rocket boosters used to provide lift capability for the ATLAS V and Vulcan launch vehicles; • Medium-class solid rocket motors for the U.S.
Biggest changeKey programs include: • 63-inch diameter Graphite Epoxy Motor (GEM 63) and the extended length variation (GEM 63XL) solid rocket boosters used to provide lift capability for the ATLAS V and Vulcan launch vehicles; • Space Development Agency (SDA) Tracking and Transport layers providing missile warning/tracking and resilient, low-latency, high-volume data transport communication systems; -3- Table of Contents NORTHROP GRUMMAN CORPORATION • Glide Phase Interceptor (GPI) Cooperative Development producing interceptor capability to defeat hypersonic threats; • Cygnus spacecraft, used in the execution of our Commercial Resupply Services (CRS) contracts with NASA to resupply and re-boost the International Space Station; • Missile defense systems, interceptors, targets, mission processing and boosters for the Missile Defense Agency's (MDA) Ground-based Midcourse Defense Weapon Systems (GWS); • Habitation and Logistics Outpost (HALO) module in support of NASA’s Lunar Gateway; • Next-Generation Overhead Persistent Infrared (Next-Gen OPIR) program satellites and payloads providing resilient and enhanced missile warning over the critical northern polar region; • Development and production of solid rocket motors for NASA’s Space Launch System (SLS) heavy lift vehicle; and • Medium-class solid rocket motors for the U.S.
Major products and services include command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR) systems; radar, electro-optical/infrared (EO/IR) and acoustic sensors; electronic warfare systems; advanced communications and network systems; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload launch systems; full spectrum cyber solutions; and intelligence processing systems.
Major products and services include radar, electro-optical/infrared (EO/IR) and acoustic sensors; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR) systems; electronic warfare systems; advanced communications and network systems; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload launch systems; full spectrum cyber solutions; and intelligence processing systems.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statement for the annual shareholders’ meeting, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with the U.S. Securities and Exchange Commission (SEC).
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statement for the annual meeting of shareholders, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with the U.S. Securities and Exchange Commission (SEC).
(OATK), developer and producer of satellites and other space systems, launch vehicles and missile products; and • 2021 - Completed the sale of our IT and mission support services business (the “IT services divestiture”) to Veritas Capital. Organization From time to time, we acquire or dispose of businesses and realign contracts, programs or businesses among and within our operating segments.
(OATK), developer and producer of satellites and other space systems, launch vehicles and missile products; and • 2021 - Completed the sale of our IT and mission support services business to Veritas Capital. Organization From time to time, we acquire or dispose of businesses and realign contracts, programs or businesses among and within our operating segments.
Internal realignments are typically designed to leverage existing capabilities more fully and to enhance efficient development and delivery of products and services. At December 31, 2024, the company was aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.
Internal realignments are typically designed to leverage existing capabilities more fully and to enhance efficient development and delivery of products and services. At December 31, 2025, the company was aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems.
Item 1. Business HISTORY AND ORGANIZATION History Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”) is a leading global aerospace and defense technology company. We deliver a broad range of products, services and solutions to U.S. and international customers, and principally to the U.S. Department of Defense (DoD) and intelligence community.
Item 1. Business HISTORY AND ORGANIZATION History Northrop Grumman Corporation (herein referred to as “Northrop Grumman,” the “company,” “we,” “us,” or “our”) is a leading global aerospace and defense technology company. We deliver a broad range of products, services and solutions to U.S. and international customers, and principally to the U.S. Department of War (“DoW”) and intelligence community.
Major products include satellites and spacecraft systems, subsystems, sensors and payloads; ground systems; missile defense systems and interceptors; and launch vehicles and related propulsion systems. Approximately 40 percent of this business is performed through restricted programs.
Major products include satellites and spacecraft systems, subsystems, sensors and payloads; ground systems; missile defense systems and interceptors; and launch vehicles and related propulsion systems. Approximately 45 percent of this business is performed through restricted programs.
Our Values and Culture Our values reflect our priorities and form the bedrock of our culture: • We do the right thing – we earn trust, act with ethics, integrity and transparency, treat everyone with respect, value diverse perspectives and foster safe and inclusive environments. • We do what we promise – we own the delivery of results, focused on quality. • We commit to shared success – we work together to focus on the mission and take accountability for the sustainable success of our people, customers, shareholders, suppliers and communities. • We pioneer – with fierce curiosity, dedication and innovation, we seek to solve the world’s most challenging problems.
Our Values and Culture Our values reflect our priorities and form the bedrock of our culture: • We do the right thing – we earn trust, act with ethics, integrity and transparency, treat everyone with respect and value diverse perspectives. • We do what we promise – we own the delivery of results, focused on quality outcomes. • We commit to shared success – we work together to focus on the mission and take accountability for the sustainable success of our people, customers, shareholders, suppliers and communities. • We pioneer – with fierce curiosity, dedication and innovation, we seek to solve the world’s most challenging problems.
We developed into one of the largest defense technology companies in the world through a series of acquisitions, as well as organic growth, including the following: • 1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator.
We developed into one of the largest defense technology companies in the world through organic growth and a series of acquisitions and divestitures, including the following: • 1994 - Acquired Grumman Corporation, a premier military aircraft systems integrator.
Collective Agreements Approximately 4,100 employees are covered by 15 collective agreements in the U.S., of which we negotiated five renewals in 2024 and expect to negotiate seven renewals in 2025. See “Risk Factors” for further discussion regarding risks related to our workforce and employee relations.
Collective Agreements Approximately 4,300 employees are covered by 15 collective agreements in the U.S., of which we negotiated seven renewals in 2025 and expect to negotiate two renewals in 2026. See “Risk Factors” for further discussion regarding risks related to our workforce and employee relations.
References to our website and the SEC’s website in this report are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference of the information contained on, or available through, such websites. Such information should not be considered a part of this report, unless otherwise expressly incorporated by reference in this report.
References to our website and the SEC’s website in this report are provided as a convenience and do not constitute, and should not be viewed as, incorporation by reference of the information contained on, or available through, such websites.
See Note 1 to the consolidated financial statements and “Risk Factors” for further information regarding our contracts and Note 15 to the consolidated financial statements for sales by contract type. The following table summarizes sales for the year ended December 31, 2024, recognized by contract type and customer category: $ in millions U.S.
See Note 1 to the consolidated financial statements and “Risk Factors” for further information regarding our contracts and Note 15 to the consolidated financial statements for sales by contract type. -6- Table of Contents NORTHROP GRUMMAN CORPORATION The following table summarizes sales for the year ended December 31, 2025, recognized by contract type and customer category: $ in millions U.S.
It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts, or vice versa.
It is not unusual to compete for a contract award with a peer company and, simultaneously, perform as a supplier to or a customer of that same competitor on other contracts, or vice versa. SEASONALITY No material portion of our business is seasonal.
Our differentiated culture and workforce was a factor in our ability to hire approximately 7,400 new employees in 2024, and as of December 31, 2024, we have approximately 97,000 employees.
Our differentiated culture and workforce was a factor in our ability to hire approximately 7,500 new employees in 2025, and as of December 31, 2025, we have approximately 95,000 employees.
Less than 5 percent of this business is performed through restricted programs. Key programs include: • Sentinel Engineering & Manufacturing Development (EMD) program, initial phase of the modernization of the intercontinental ballistic missile (ICBM) system that will serve as the ground-based strategic deterrent for the U.S. nuclear triad; • Integrated Battle Command System (IBCS) for the U.S.
Key programs include: • Sentinel Engineering & Manufacturing Development (EMD) program, initial phase of the modernization of the intercontinental ballistic missile (ICBM) system that will serve as the ground-based strategic deterrent for the U.S. nuclear triad; • Integrated Battle Command System (IBCS) for the U.S.
DEFENSE SYSTEMS Defense Systems is a leader in the design, engineering, development, integration and production of strategic deterrent systems, advanced tactical weapons, and missile defense solutions, and a provider of sustainment, modernization and training services for manned and unmanned aircraft and electronics systems for the U.S. military and a broad range of international customers.
DEFENSE SYSTEMS Defense Systems is a leader in the design, engineering, development, integration and production of strategic deterrent systems, advanced tactical weapons, and missile defense solutions for the U.S. military and a broad range of international customers.
Key unrestricted programs include: • Scalable Agile Beam Radar (SABR), an active electronically scanned array fire control radar system for F-16 aircraft; • F-35 fire control radar and Distributed Aperture System (DAS), which provides 360 degree field of view tracking, identifying, missile warning and night vision capabilities; • F-35 Communications, Navigation and Identification (CNI) integrated avionics system, which provides secure communications and interoperability capabilities; • Ground/Air Task Oriented Radar (G/ATOR), a mobile multi-mode active electronically scanned array; • Surface Electronic Warfare Improvement Program (SEWIP) Block III, which protects surface ships from anti-ship missiles, provides early detection, signal analysis and threat warning; • Airborne Early Warning & Control (AEW&C).
Key programs include: • Large Aircraft and Common Infrared Countermeasures (LAIRCM, DoN LAIRCM, CIRCM) systems, which protect large aircraft as well as rotary wing and medium fixed wing aircraft from infrared missiles using advanced laser technology; • F-35 fire control radar and Distributed Aperture System (DAS), which provides 360 degree field of view tracking, identifying, missile warning and night vision capabilities; • F-35 Communications, Navigation and Identification (CNI) integrated avionics system, which provides secure communications and interoperability capabilities; • Scalable Agile Beam Radar (SABR), an active electronically scanned array fire control radar system for F-16 aircraft; • Ground/Air Task Oriented Radar (G/ATOR), a mobile multi-mode active electronically scanned array; • Surface Electronic Warfare Improvement Program (SEWIP) Block III, which protects surface ships from anti-ship missiles, provides early detection, signal analysis and threat warning; • Power generation and propulsion systems for Virginia and Columbia class submarines; • Airborne Early Warning & Control (AEW&C).
We routinely apply for patents related to the technologies we develop in the U.S. and in certain foreign jurisdictions. We license some intellectual property rights to third parties and we also license or otherwise obtain access to intellectual property from third parties.
INTELLECTUAL PROPERTY We protect our technological innovations using a combination of trade secrets, patents, trademarks, and copyrights. We routinely apply for patents related to the technologies we develop in the U.S. and in certain foreign jurisdictions. We license some intellectual property rights to third parties and we also license or otherwise obtain access to intellectual property from third parties.
The centerpiece of the E-7 AEW&C aircraft is the Multi-role Electronically Scanned Array (MESA) radar which enables 360 degree long range advanced air moving target indicator (AMTI) capabilities for Battle Management, Command and Control, and Maritime Surveillance; • Large Aircraft and Common Infrared Countermeasures (LAIRCM, DoN LAIRCM, CIRCM) systems, which protect large aircraft as well as rotary wing and medium fixed wing aircraft from infrared missiles using advanced laser technology; • Battlefield Airborne Communications Node (BACN), one of the first airborne gateway systems that allows platforms to communicate and securely share data; • DDG Modernization, which is comprised of several subsystems to support modernization of Arleigh Burke-class guided missile destroyers including Integrated Bridge and Navigation Systems (IBNS) and ship control systems; • LITENING Advanced Targeting Pod, an electro-optical infrared sensor system for targeting and surveillance that enables aircrews to detect, acquire, identify and track targets at long ranges; • APR-39 DV(2) and EV(2) Radar Warning Receiver programs, which provide a digital radar warning receiver for the U.S.
The centerpiece of the E-7 AEW&C aircraft is the Multi-role Electronically Scanned Array (MESA) radar which enables 360 degree long range advanced air moving target indicator (AMTI) capabilities for Battle Management, Command and Control, and Maritime Surveillance; • Battlefield Airborne Communications Node (BACN), one of the first airborne gateway systems that allows platforms to communicate and securely share data; • LITENING Advanced Targeting Pod, an electro-optical infrared sensor system for targeting and surveillance that enables aircrews to detect, acquire, identify and track targets at long ranges; • APR-39 DV(2) and EV(2) Radar Warning Receiver programs, which provide a digital radar warning receiver for the U.S.
REGULATORY MATTERS Government Contract Security Restrictions We are prohibited by the U.S. government from publicly discussing the details of classified programs. These programs are generally referred to as “restricted” in this Annual Report. The consolidated financial statements and financial information in this Annual Report reflect the operating results of our entire company, including restricted programs.
REGULATORY MATTERS Government Contract Security Restrictions We are prohibited by the U.S. government from publicly discussing the details of classified programs. These programs are generally referred to as “restricted” in this Annual Report.
In addition to offering our employees flexible work arrangements, caregiver support and mental health services that help our employees make their careers work within their lives, we also help our employees build the careers that will serve them into the future.
As part of our employee experience focus, we offer flexible work arrangements, caregiver support and mental health services that help our employees make their careers work within their lives and help them build the careers that will serve them in the future.
Major products and services include strategic missiles; integrated, all-domain command and control (C2) systems; precision strike weapons; advanced propulsion, including tactical solid rocket motors and high speed air-breathing and hypersonic systems; high-performance gun systems, ammunition, precision munitions and advanced fuzes; and aircraft and mission systems logistics support, sustainment, operations and modernization.
Major products and services include strategic missiles; integrated, all-domain command and control (C2) systems; precision strike weapons; advanced propulsion, including tactical solid rocket motors and high speed air-breathing and hypersonic systems; high-performance gun systems, ammunition, precision munitions and advanced fuzes; and weapons integration, modernization, and sustainment. Less than 5 percent of this business is performed through restricted programs.
Nonetheless, these challenges have not, to date, materially impacted our ability to perform on our contracts. See “Risk Factors” for further discussion regarding risks related to raw materials. HUMAN CAPITAL Underpinned by our values and culture, we hire, promote, and pay based on merit and performance to ensure we have the best team to deliver for our customers.
See “Risk Factors” for further discussion regarding risks related to raw materials. -4- Table of Contents NORTHROP GRUMMAN CORPORATION HUMAN CAPITAL Underpinned by our values and culture, we hire, promote, and pay based on merit and performance to help ensure we have the best team to deliver for our customers.
Army, Navy and Marines; • Exploitation and cyber programs, which provide cyber and intelligence domain support through unique intelligence and cyber capabilities; • AC/MC 130J Radio Frequency Countermeasures system, which provides superior situational awareness and better enables aircraft survivability in operationally relevant environments; and • Embedded Global Positioning System (GPS) / Inertial Navigation Systems-Modernization (EGI-M) program, which provides state-of-the-art airborne navigation capabilities with an open architecture that enables rapid responses to future threats. -3- NORTHROP GRUMMAN CORPORATION SPACE SYSTEMS Space Systems is a leader in delivering end-to-end mission solutions through the design, development, integration, production and operation of space, missile defense, and launch systems for national security, civil government, commercial and international customers.
Army, Navy and Marines; • Exploitation and cyber programs, which provide cyber and intelligence domain support through unique intelligence and cyber capabilities; • Embedded GPS / Inertial Navigation Systems-Modernization (EGI-M) program, which provides state-of-the-art airborne navigation capabilities with an open architecture that enables rapid responses to future threats; and • AC/MC 130J Radio Frequency Countermeasures system, which provides superior situational awareness and better enables aircraft survivability in operationally relevant environments.
Navy, other U.S. government agencies, and international customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft; airborne battle management and command and control systems; and unmanned autonomous aircraft systems, including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR) systems. Approximately 45 percent of this business is performed through restricted programs.
Air Force, the U.S. Navy, other U.S. government agencies, and international customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft; -1- Table of Contents NORTHROP GRUMMAN CORPORATION airborne battle management and command and control systems; and uncrewed autonomous aircraft systems, including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR) systems.
We evaluate the effectiveness of our health and safety programs by conducting trend analyses of our past performance and externally through benchmarking with industry peers and the U.S. Bureau of Labor Statistics.
Everyone has a responsibility to identify workplace hazards, and employees may raise concerns without fear of reprisal. We evaluate the effectiveness of our health and safety programs by conducting trend analyses of our past performance and externally through benchmarking with industry peers and the U.S. Bureau of Labor Statistics.
This realignment is reflected in the financial information contained in this report. -1- NORTHROP GRUMMAN CORPORATION Subsequent Realignment - Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems.
Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems. This realignment is reflected in the financial information contained in this report. AERONAUTICS SYSTEMS Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization of military aircraft systems for the U.S.
Our leaders review the survey responses and work collaboratively with their teams to take meaningful actions based on survey results. Our culture and values serve as an enabling force that helps us pioneer, perform and deliver on quality, which results in value for our shareholders, customers, and employees.
Our culture and values serve as an enabling force that helps us pioneer, perform and deliver on quality, which results in value for our shareholders, customers, and employees.
Government (1) International (2) Other Customers Total Percentage of Total Sales Cost-type contracts $ 20,256 $ 684 $ 24 $ 20,964 51 % Fixed-price contracts 15,180 4,316 573 20,069 49 % Total sales $ 35,436 $ 5,000 $ 597 $ 41,033 100 % (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.
Government (1) International (2) Other Customers Total Percentage of Total Sales Cost-type contracts $ 20,104 $ 794 $ 46 $ 20,944 50 % Fixed-price contracts 15,079 5,196 735 21,010 50 % Total sales $ 35,183 $ 5,990 $ 781 $ 41,954 100 % (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.
Cost-type contracts typically require that the contractor use its best efforts to accomplish the scope of work within some specified time and stated dollar limitation.
As a result, cost-type contracts have less financial risk associated with unanticipated cost growth but generally provide lower profit margins than fixed-price contracts. Cost-type contracts typically require that the contractor use its best efforts to accomplish the scope of work within some specified time and stated dollar limitation.
Navy’s Advanced Anti-Radiation Guided Missile (AARGM), a medium-range, air-to-surface missile, and its extended range variant, AARGM-ER; • U.S.
Navy’s Advanced Anti-Radiation Guided Missile (AARGM), a medium-range, air-to-surface missile, and its extended range variant, AARGM-ER; • Medium caliber cannons for air, land, sea and counter unmanned aircraft systems (C-UAS) applications, ranging from 20mm to 50mm configurations; • U.S.
Air Force B-21 Raider long-range strike aircraft that defines sixth-generation technologies; • Modernization and sustainment services for the B-2 Spirit stealth aircraft; • Fuselage production for the F-35 Lighting II Joint Strike Fighter and F/A-18 Super Hornet for use by U.S. and international forces; • E-2D Advanced Hawkeye battle management aircraft production for the U.S.
Navy’s Take Charge And Move Out (TACAMO) mission; • Fuselage production for the F-35 Lighting II Joint Strike Fighter and F/A-18 Super Hornet for use by U.S. and international forces; • E-2D Advanced Hawkeye battle management aircraft production for the U.S.
We actively seek candidates for employment from a wide range of backgrounds and experiences to tap into the full spectrum of talent available now and in the future to create a culture of belonging for everyone. -5- NORTHROP GRUMMAN CORPORATION Talent Management Northrop Grumman’s talent strategy is focused on four key pillars: broadening talent pools; enhancing the employee experience; building leaders of the future; and fostering employee growth.
We actively seek candidates for employment from a wide range of backgrounds and experiences to tap into the full spectrum of talent available now and in the future to create a culture of belonging for everyone. Talent Management Our talent strategy is designed to secure the people, skills, and leadership required to support the company’s long term growth.
Key programs include: • Development and production of the U.S.
Approximately 40 percent of this business is performed through restricted programs. Key programs include: • Development and production of the U.S.
CUSTOMER CONCENTRATION Our largest customer is the U.S. government. Sales to the U.S. government accounted for 87 percent, 86 percent and 86 percent of sales during the years ended December 31, 2024, 2023 and 2022, respectively. For further information on sales by customer type, contract type and geographic region, see Note 15 to the consolidated financial statements.
Navy's Trident II Fleet Ballistic Missile program. CUSTOMER CONCENTRATION Our largest customer is the U.S. government. Sales to the U.S. government accounted for 84 percent, 87 percent and 86 percent of sales during the years ended December 31, 2025, 2024 and 2023, respectively.
Additional information regarding our environmental sustainability goals is available in our Sustainability Report, which can be found on our company website. EXECUTIVE OFFICERS See “Directors, Executive Officers and Corporate Governance” for information about our executive officers. AVAILABLE INFORMATION Our principal executive offices are located at 2980 Fairview Park Drive, Falls Church, Virginia 22042.
EXECUTIVE OFFICERS See “Directors, Executive Officers and Corporate Governance” for information about our executive officers. AVAILABLE INFORMATION Our principal executive offices are located at 2980 Fairview Park Drive, Falls Church, Virginia 22042. Our telephone number is (703) 280-2900 and our home page is www.northropgrumman.com.
Air Force, Japan, and the Republic of Korea; and • North Atlantic Treaty Organization (NATO) Alliance Ground Surveillance (AGS), a Global Hawk variant, for strategic ISR missions conducted in multinational theater operations.
Air Force, Japan, and the Republic of Korea; and • Global system sustainment and operations support for the F-35, B-2, F/A-18, E-2, E-3, A-10, North Atlantic Treaty Organization (NATO) Alliance Ground Surveillance (AGS), Triton, Global Hawk, and restricted programs.
We monitor our contracts on a regular basis for compliance with our policies and procedures and applicable government laws and regulations.
We monitor our contracts on a regular basis for compliance with our policies and procedures and applicable government laws and regulations. In addition, costs incurred and allocated to contracts with the U.S. government are routinely audited by the Defense Contract Audit Agency (DCAA).
Contracts We generate the majority of our business from long-term contracts with the U.S. government for development, production and support activities.
The consolidated financial statements and -5- Table of Contents NORTHROP GRUMMAN CORPORATION financial information in this Annual Report reflect the operating results of our entire company, including restricted programs. Contracts We generate the majority of our business from long-term contracts with the U.S. government for development, production and support activities.
Air Force’s Stand-In Attack Weapon (SiAW), an advanced capability air-to-surface tactical missile for the F-35; • Hypersonic Attack Cruise Missile (HACM) air-breathing, scramjet propulsion subsystem for the hypersonic air-launched cruise missile to travel at speeds of Mach 5 or greater; -2- NORTHROP GRUMMAN CORPORATION • Global system sustainment and operations support for the F-35, B-2, P-3 Orion, E-6B Mercury, KC-30A multi-role tanker, C-27J transport, NATO AGS, Triton and restricted programs; • Precision Guidance Kit (PGK), replaces conventional fuzes for artillery and mortar munitions and transforms them into Global Positioning System enabled precision guided weapons; • Forward Area Air Defense Command and Control (FAAD C2), the Army’s long-standing program of record for short range air defense and Counter Rocket, Artillery and Mortar (C-RAM), as well as the interim C2 for Counter Unmanned Aircraft Systems (C-UAS); • AAQ-24 sensor sustainment and repair for U.S. military customers; and • Special Electronics Mission Aircraft (SEMA) ISR support.
Air Force’s Stand-In Attack Weapon (SiAW), an advanced capability air-to-surface tactical missile for the F-35; • Hypersonic Attack Cruise Missile (HACM) air-breathing, scramjet propulsion subsystem for the hypersonic air-launched cruise missile to travel at speeds of Mach 5 or greater; • Precision Guidance Kit (PGK), replaces conventional fuzes for artillery and mortar munitions and transforms them into Global Positioning System (GPS) enabled precision guided weapons; and • Production of solid rocket motors for the Precision Strike Missile (PrSM) program and Third Stage Rocket Motor (TSRM) for the Standard Missile (SM-3) program. -2- Table of Contents NORTHROP GRUMMAN CORPORATION MISSION SYSTEMS Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense and intelligence community, and international customers.
See “Risk Factors” for further discussion regarding risks related to customer concentration. COMPETITIVE CONDITIONS We compete with many companies in the defense, intelligence and federal civil markets. The Boeing Company, General Dynamics, L3Harris Technologies, Lockheed Martin, and RTX are some of our primary competitors.
COMPETITIVE CONDITIONS We compete with many companies in the defense, intelligence and federal civil markets, including The Boeing Company, General Dynamics Corporation, L3Harris Technologies, Inc., Lockheed Martin Corporation, and RTX Corporation, as well as, increasingly, new entrants and startups.
In addition, costs incurred and allocated to contracts with the U.S. government are routinely audited by the Defense Contract Audit Agency (DCAA). -6- NORTHROP GRUMMAN CORPORATION Our long-term contracts typically fall into one of two contract types: Cost-type contracts – Cost-type contracts include cost plus fixed fee, cost plus award fee and cost plus incentive fee contracts.
Our long-term contracts typically fall into one of two contract types: Cost-type contracts – Cost-type contracts include cost plus fixed fee, cost plus award fee and cost plus incentive fee contracts. Cost-type contracts generally provide for reimbursement of a contractor’s allowable costs incurred plus fee.
See “Risk Factors” and Notes 1 and 11 to the consolidated financial statements for further information regarding environmental matters. Our environmental sustainability goals focus on Northrop Grumman’s facilities in addition to supply chain partners and customers: -7- NORTHROP GRUMMAN CORPORATION • Net zero greenhouse gas emissions (GHG) in operations (Scopes 1 and 2) by 2035.
See “Risk Factors” and Notes 1 and 11 to the consolidated financial statements for further information regarding environmental matters. Our environmental sustainability goals help manage the environmental impact of our operations.
SEASONALITY No material portion of our business is seasonal. -4- NORTHROP GRUMMAN CORPORATION BACKLOG At December 31, 2024, total backlog, which is equivalent to the company’s remaining performance obligations, was $91.5 billion as compared with $84.2 billion at December 31, 2023.
BACKLOG At December 31, 2025, total backlog, which is equivalent to the company’s remaining performance obligations, was $95.7 billion as compared with $91.5 billion at December 31, 2024. For further information, see “Backlog” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) and Note 1 to the consolidated financial statements.
Removed
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.
Added
Air Force B-21 Raider long-range strike aircraft that define sixth-generation technologies; • Modernization and sustainment services for the B-2 Spirit stealth aircraft; • Development and production of the E-130J Phoenix II nuclear command, control and communications (NC3) aircraft for the U.S.
Removed
This realignment is not reflected in the financial information contained in this report; it will be reflected in the company’s operating results beginning in the first quarter of 2025. AERONAUTICS SYSTEMS Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization of military aircraft systems for the U.S. Air Force, the U.S.
Added
SPACE SYSTEMS Space Systems is a leader in delivering end-to-end mission solutions through the design, development, integration, production and operation of space, missile defense, and launch systems for national security, civil government, commercial and international customers.
Removed
MISSION SYSTEMS Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense and intelligence community, and international customers.
Added
For further information on sales by customer type, contract type and geographic region, see Note 15 to the consolidated financial statements. See “Risk Factors” for further discussion regarding risks related to customer concentration.
Removed
Navy's Trident II Fleet Ballistic Missile program; • Glide Phase Interceptor (GPI) Cooperative Development producing interceptor capability to defeat hypersonic threats; • Protected Tactical SATCOM (PTS) satellites and payloads providing resilient, protected tactical communications to U.S. forces; and • Arctic Satellite Broadband Mission (ASBM) satellites and payloads expanding both commercial as well as military broadband communications for an international partner.
Added
Nonetheless, these challenges have not, to date, materially impacted our ability to perform on our contracts.
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For further information, see “Backlog” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) and Note 1 to the consolidated financial statements. INTELLECTUAL PROPERTY We protect our technological innovations using a combination of trade secrets, patents, trademarks, and copyrights.
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It is anchored in recruiting and deploying talent, building a future-ready workforce and engaging our employees. We attract, develop, and retain top critical talent while preparing our workforce for the future by increasing expertise in critical technology areas.
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Among other programs through which the company lives its values, the company maintains a Standards of Business Conduct program through which our employees are empowered to raise concerns through multiple channels without fear of reprisal. In addition to full-time ethics professionals, we also have over 150 business conduct advisors who promote values and an ethical culture within the company.
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We focus on talent readiness to ensure a robust pipeline of employees with the skills and expertise necessary to support our business and provide business continuity. We employ a mix of on-the-job training and development, in-person training and virtual curated career-specific resources that allow employees to personalize their development.
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Additionally, our annual Employee Experience Survey gives employees a voice and a mechanism to provide feedback on our culture and empower our leaders to enhance the employee experience. This anonymous survey encourages employee candor on key engagement and inclusion drivers, including belonging, respect, a sense of personal work accomplishment and recommending the company to others.
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We encourage all employees, regardless of level, to cultivate leadership skills, enabled by our leadership development platform. Talent review discussions are built into our operational cadence with an emphasis on providing the experience needed to accelerate development.
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In 2024, 80 percent of employees responded to the survey, an indication that our employees believe their feedback matters. Our performance on the annual survey is compared to the Qualtrics Global Benchmark and our survey results exceeded many of their global norms for both engagement and inclusion.
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To help ensure our employees have the tools and resources necessary to align with industry transformation and workforce expectations, we continue to adapt our ways of working and implement technology that enhances the employee experience. Employee Health and Safety Training and risk/hazard identification, mitigation and prevention are key components of Northrop Grumman’s safety program.
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Our strategy addresses the external and internal landscape and ensures that we can attract, retain and develop the workforce necessary to support the continued success of the business. We hold regular talent review discussions to ensure line of sight to talent at various levels of the organization.
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We are focused on achieving Net Zero greenhouse gas emissions (GHG) in our operations (Scopes 1 and 2) by 2035, while also sourcing electricity from renewable sources and reducing our water withdrawals and solid waste footprint. Additional information regarding our environmental sustainability goals is available in our Sustainability Report, which can be found on our company website.
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We refresh and review succession plans to ensure a robust pipeline of talent and business continuity with a tight linkage to development. We focus on accelerating learning and development of our leaders by providing a combination of experiences, exposure and education.
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Such information should not be considered a part of this report, unless otherwise expressly incorporated by reference in this report. -7- Table of Contents NORTHROP GRUMMAN CORPORATION
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Our employee development programs strengthen employee skills aligned to our current and future business needs through on-the-job development, knowledge sharing and tools to support career growth. Employees utilize curated, career-specific resources such as My Learning Experience, a machine learning enabled content aggregator that creates a personalized learning experience for each employee.
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Our Education Assistance Program subsidizes tuition and other educational institution fees to support development through job-related degrees and certificates. Our early-in-career rotation program, Pathways, develops talent pipelines with both depth of critical skills and breadth of experiences. Our technical cohort programs cultivate technical, domain expertise and collaborative thought leadership for early through advanced career levels.
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In a rapidly changing world, we maintain focus on keeping our team and our company prepared for the evolving future of work.
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We ensure that our employees have the tools and resources to develop their knowledge base and skill sets, so they can continue to thrive at Northrop Grumman even in the midst of change. When our employees succeed and grow at work, our business succeeds and grows.
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Through a focus on our employees, we remain agile and innovative, adapting to the future as it unfolds before us. Employee Health and Safety Health and safety are foundational to our success. People are our most valuable resource and we prioritize occupational health and safety to position the company for long-term success.
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Training and risk and hazard identification, mitigation and prevention are key components of Northrop Grumman’s safety program. Everyone has a responsibility to identify workplace hazards, and employees may raise concerns without fear of reprisal.
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Cost-type contracts generally provide for reimbursement of a contractor’s allowable costs incurred plus fee. As a result, cost-type contracts have less financial risk associated with unanticipated cost growth but generally provide lower profit margins than fixed-price contracts.
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Award and incentive fees are 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.
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Interim target of 50% GHG emissions reduction by 2030; • Source 50 percent of total electricity from renewable sources by 2030; • Reduce 10% of absolute water withdrawals, reuse 10% of water withdrawals and replenish 10% of water withdrawals, focusing in water-stressed regions — all by 2030; • Reduce solid waste sent to landfill and incineration by 10% by 2030; • In collaboration with key customers, work to develop a pioneering product stewardship program focused on material efficiency, product design and life cycle assessment; • Expand Technology for Conservation initiatives in proximity to Northrop Grumman's U.S. locations by 2030, in collaboration with external partners.
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Our telephone number is (703) 280-2900 and our home page is www.northropgrumman.com.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThis may increase the risk to our employees, suppliers or other third parties, including for their safety, and increase our risk to a wide range of financial consequences and other liabilities, as well as loss of property or damage to our products. • Our business is subject to significant disruptions caused by natural disasters or other events outside of our control, which could have a material adverse effect on our financial position, results of operations and/or cash flows. -17- NORTHROP GRUMMAN CORPORATION We have significant operations, including centers of excellence, located in regions that have been, and may in the future be, exposed to hurricanes, earthquakes, water levels, wildfires, windstorms, heat waves, other extreme weather conditions, acts of terrorism, power shortages and blackouts, telecommunications failures and other significant disruptions, and epidemics, pandemics, and similar outbreaks, especially of infectious diseases.
Biggest changeWe have significant operations, including centers of excellence, located in regions that have been, and may in the future be, exposed to hurricanes, earthquakes, water levels, fires, windstorms, heat waves, other extreme weather conditions, acts of terrorism, power shortages and blackouts, telecommunications failures, epidemics, pandemics, and similar outbreaks, and other significant disruptions.
In addition, our customers may use, handle or test our products and services in ways that can be unusually hazardous or risky, or in ways that are not intended, not authorized or inconsistent with guidance and warnings, which may create potential liabilities for our company, as well as reputational harm. • We may not be able to adequately protect and fully exploit our intellectual property rights or obtain necessary rights to intellectual property of others, which could materially and adversely affect our ability to compete and perform on contracts, and have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows.
In addition, our customers, or others, may use, handle or test our products and services in ways that can be unusually hazardous or risky, or in ways that are not intended, not authorized or inconsistent with guidance and warnings, which may create potential liabilities for our company, as well as reputational harm. • We may not be able to adequately protect and fully exploit our intellectual property rights or obtain necessary rights to intellectual property of others, which could materially and adversely affect our ability to compete and perform on contracts, and have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows.
Failure by us, our employees, partners or others with whom we work to comply with applicable laws and regulations could result in administrative, civil, commercial or criminal liabilities, including suspension or debarment from government contracts or suspension of export/import privileges. Failure to comply with local practices can adversely impact our ability to win and perform business.
Failure by us, our employees, partners or others with whom we work to comply with applicable laws and regulations could result in administrative, civil, commercial or criminal liabilities, including suspension or debarment from government contracts or suspension of export/import privileges. Additionally, failure to comply with local practices can adversely impact our ability to win business and/or perform work.
We have more often entered into fixed-price contracts where costs can be more reasonably estimated based on actual experience, such as for mature production programs. However, our customers have sought, and may in the future seek, fixed-price contracts for development programs, combined development and production programs, or low-rate initial production programs, where the risks are greater.
We have entered into fixed-price contracts more often when costs can be more reasonably estimated based on actual experience, such as for mature production programs. However, our customers have sought, and may in the future seek, fixed-price contracts for development programs, combined development and production programs, or low-rate initial production programs, where the risks are greater.
Changes in assumptions associated with our pension and OPB plans, investment performance of plan assets, and gains or losses associated with changes in valuation of marketable securities related to our non-qualified plans and other non-operating assets could have a material adverse effect on our financial position, results of operations and/or cash flows.
Changes in assumptions associated with our pension and OPB plans, the investment performance of plan assets, and gains or losses associated with changes in valuation of marketable securities related to our non-qualified plans and other non-operating assets could have a material adverse effect on our financial position, results of operations and/or cash flows.
The U.S. and its allies and security partners continue to face a global security environment of heightened tensions and instability, threats from state and non-state actors, including major global powers, as well as terrorist organizations, emerging nuclear tensions, and diverse regional security concerns.
Additionally, the U.S. and its allies and security partners continue to face a global security environment of heightened tensions and instability, threats from state and non-state actors, including major global powers, as well as terrorist organizations, emerging nuclear tensions, and diverse regional security concerns.
However, to the extent insufficient funds have been appropriated by the U.S. government to cover such costs, the U.S. government may assert that it is not required to provide additional funding for such costs.
However, to the extent insufficient funds have been appropriated by the U.S. government, the U.S. government may assert that it is not required to provide additional funding for such costs.
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. government and its agencies, such as the DCAA, Defense Contract Management Agency (DCMA) and the DoD Inspector General. These agencies review performance under our contracts, our cost structure and accounting, our compliance, and the adequacy of our systems in meeting government requirements.
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. government and its agencies, such as the DCAA, Defense Contract Management Agency (DCMA) and the DoW Inspector General. These agencies review performance under our contracts, our cost structure and accounting, our compliance, and the adequacy of our systems in meeting government requirements.
Terms include requirements to hire, invest, manufacture or purchase locally, or specific financial obligations, including offset obligations, and provisions that impose significant penalties if we fail to meet such requirements. We have also been required to enter into letters of credit, performance bonds, bank guarantees or other financial arrangements in certain cases.
Such terms include, in some cases, requirements to hire, invest, manufacture or purchase locally, or specific financial obligations, including offset obligations, and provisions that impose significant penalties if we fail to meet our requirements. We have also been required to enter into letters of credit, performance bonds, bank guarantees or other financial arrangements in certain cases.
Such natural disasters and other significant disruptions can interrupt our operations, impact our employees, and result in significant costs and adversely affect our performance. Our subcontractors and other suppliers have also been, and may in the future be, subject to natural disasters or other significant disruptions that could affect their ability to deliver or perform.
Such natural disasters and other significant disruptions can interrupt our operations, impact our employees, and result in significant costs and adversely affect our performance. Our subcontractors and other suppliers have also been, and may in the future be, subject to natural disasters or other significant disruptions that could delay or otherwise affect their ability to deliver or perform.
At the same time, law enforcement agencies are continuing to focus collaboratively on combating global corruption and other misconduct. In the ordinary course we form and are members of joint ventures or other business arrangements and/or invest in third parties with whom we do business.
At the same time, law enforcement agencies are continuing to focus collaboratively on combating global corruption and other misconduct. We form and are members of joint ventures or other business arrangements and/or invest in third parties with whom we do business.
Cyber threats, both on premises and in the cloud, are complex, continuous and evolving and include, but are not limited to: malicious software, destructive malware, ransomware, targeting by more advanced and persistent -14- NORTHROP GRUMMAN CORPORATION adversaries, including nation states and other actors, zero-day attacks, attempts to gain unauthorized access to systems or data, disruption to operations, critical systems or denial of service attacks; unauthorized release of confidential, personal or other protected information (ours or that of our employees, customers or partners); corruption of data, networks or systems; harm to individuals; and loss of assets.
Cyber threats, both on premises and in the cloud, are complex, continuous and evolving and include, but are not limited to: malicious software, destructive malware, ransomware, targeting by more advanced and persistent adversaries, including nation states and other actors, zero-day attacks, attempts to gain unauthorized access to systems or data, disruption to operations, critical systems or denial of service attacks, unauthorized release of confidential, personal or other protected information (ours or that of our employees, customers or partners), corruption of data, networks or systems, harm to individuals, and loss of assets.
We endeavor to obtain insurance from financially stable, responsible, highly rated counterparties in established markets to cover significant risks and liabilities (including, for example, natural disasters, space launches and on-orbit operations, cyber security, hazardous operations, energetics and products liability). Not every risk or liability can be insured, and insurance coverage is not always reasonably available.
We endeavor to obtain insurance from financially stable, responsible, highly rated counterparties in established markets to cover significant risks and liabilities (including, for example, natural disasters, space launches and on-orbit operations, cybersecurity, hazardous operations, energetics and products liability). Not every risk or liability can be insured, and insurance coverage is not always reasonably available.
The U.S. continues to face a changing geopolitical environment, along with substantial fiscal, economic and security challenges, which affect funding and budgetary priorities. The budget and macroeconomic environment, global security environment, political instability, and uncertainty surrounding the appropriations processes and the debt ceiling, remain significant short and long-term risks. See “Overview” in MD&A.
The U.S. continues to face a changing geopolitical environment, along with substantial fiscal, economic, political and security challenges, which affect funding and budgetary priorities. The budget and macroeconomic environment, global security environment, political instability, and uncertainty surrounding the appropriations processes and the debt ceiling, remain significant short and long-term risks for our business. See “Overview” in MD&A.
U.S. government programs are subject to annual congressional budget authorization and appropriation processes. For many programs, Congress appropriates funds annually even though the program performance period may extend over several years. Programs are often partially funded initially, with additional funds committed only as Congress makes further appropriations.
U.S. government programs are subject to annual congressional budget authorization and appropriation processes. For many programs, Congress appropriates funds annually even though the program performance period may extend over several years. Programs are often partially funded initially, with additional funds committed incrementally over time as Congress makes further appropriations.
We have safety and loss prevention programs, which provide for pre-construction reviews, along with safety audits of operations involving explosive materials, to attempt to avoid or mitigate some such incidents, as well as potentially insurance coverage and indemnification to address resulting liabilities, but they may not be successful.
We have safety and loss prevention programs, which provide for pre-construction reviews, along with safety audits of operations involving explosive materials, to attempt to avoid or mitigate such incidents, as well as potential insurance coverage and indemnification to address resulting liabilities, but they may not be successful.
Changes in political or economic conditions, including changes in demand, changes in the macroeconomic environment (including inflation and labor and supply chain challenges), changes in defense budgets and/or priorities, changes in the global security environment, changes in export/import restrictions, sanctions and other trade restrictive activities, evolving requirements, or changes in access to critical technology and materials (including metals and components), among others, have adversely affected and could in the future adversely affect the financial stability of our suppliers and/or their ability to perform effectively.
Changes in political or economic conditions, including changes in demand, the macroeconomic environment (including inflation and labor and supply chain challenges), defense budgets and/or priorities, the global security environment, export/import restrictions, tariffs, sanctions and other trade-related activities, access to critical technology and materials (including metals and components), and/or evolving requirements, among others, have adversely affected and could adversely affect the financial stability of our suppliers and/or their ability to perform effectively.
We also face -10- NORTHROP GRUMMAN CORPORATION additional financial risk when solicitations require us to bid on cost-type development work and fixed-price production lots and/or options in one submission, where we must estimate the cost of production before a product has been developed and tested, or cost-type development work requiring us to provide certain items at our expense or with little or no fee.
We also face additional financial risk when solicitations require us to bid on cost-type development work and fixed-price production lots and/or options in one submission, where we must estimate the cost of production before a product has been developed and tested, or cost-type development work requiring us to provide certain items at our expense or with little or no fee.
Fixed-price contracts inherently tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, labor rates and shortages, challenges in estimating contract revenues and costs and supplier challenges. In 2024, approximately half of our sales were derived from fixed-price contracts.
Fixed-price contracts tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, labor rates and shortages, challenges in estimating contract revenues and costs, and supplier challenges. In 2025, approximately half of our sales were derived from fixed-price contracts.
To perform on our contracts and to win new business, we also depend increasingly on our ability to progress successfully on our digital transformation strategy. To meet evolving customer requirements, it is increasingly necessary to differentiate our offerings and to achieve efficiencies in our operations through digital based solutions.
To perform on our contracts and to win new business, we also depend increasingly on our ability to progress successfully on our digital transformation strategy. To meet evolving customer requirements, it is increasingly necessary to differentiate our offerings and to achieve efficiencies in our operations through digital based solutions, including artificial intelligence.
Costs ultimately found to be unallowable or improperly allocated are generally not reimbursed or require us to refund the customer. When an audit uncovers improper or illegal activities, we are subject to possible civil and criminal penalties, sanctions, or suspension or debarment.
Costs ultimately found to be unallowable or improperly allocated are generally not reimbursed or require us to refund the customer. If an audit uncovers improper or illegal activities, we could be subject to possible civil and criminal penalties, sanctions, or suspension or debarment.
There are many reasons estimated contract costs can increase, including inflation, labor challenges, supply chain challenges, and market and exchange rate volatility; delays or limitations in customer funding; design or other development challenges; production challenges (including from technical or quality issues and other performance concerns); inability to realize learning curves or other cost savings; changes in laws or regulations; actions necessary for long-term customer satisfaction; and natural disasters or environmental matters.
There are many reasons estimated contract costs can increase, including inflation, labor challenges, supply chain challenges, shortages of raw materials, market and exchange rate volatility, delays or limitations in customer funding, design or other development challenges, production challenges (including from technical or quality issues and other performance concerns), inability to realize learning curves or expected cost savings, changes in laws or regulations, actions necessary for long-term customer satisfaction, and natural disasters or other environmental matters.
Our operating results and growth opportunities are heavily dependent upon our ability to attract and retain sufficient qualified personnel who are or can reasonably be cleared (and obtain program access), who have the requisite skills in multiple areas, including science, technology, engineering and math, and who share our values and are able to operate effectively consistent with our culture.
Our operating results and growth opportunities are heavily dependent upon our ability to attract and retain sufficient qualified personnel who are or can reasonably obtain requisite security clearances and program access, who have the requisite skills in multiple areas, including science, technology, engineering and math, and who share our values and are able to operate effectively consistent with our culture.
These activities have resulted and may result in incidents that cause workplace injuries and fatalities, the temporary shut down or other disruption of manufacturing, production delays, environmental harm and expense, fines and liabilities to third parties.
These activities have resulted and may result in incidents that cause workplace injuries and fatalities, damage or destruction of property, the temporary shut down or other disruption of manufacturing, production delays, environmental harm and expense, fines and liabilities to third parties.
If we are unable to continue to develop new products and technologies in a timely fashion, and progress successfully to effect digital solutions and transformation, or if we fail to achieve market acceptance more rapidly than our competitors, we may be unable to maintain our competitive position and our future success could be materially adversely affected.
If we are unable to continue to develop new products and technologies in a timely fashion, and progress successfully to identify, develop and integrate new technologies and effect digital solutions and transformation, or if we fail to achieve market acceptance and scale production more rapidly than our competitors, we may be unable to maintain our competitive position and our future success could be materially adversely affected.
We may be unable to prevent misconduct or violations of applicable laws by these joint ventures or our partners, including, in each case, their respective officers, directors and employees. • Environmental matters, including climate change, unforeseen costs associated with compliance and remediation efforts, and government and third-party claims, could have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows.
We may be unable to prevent misconduct or violations of applicable laws by these joint ventures or our partners, including, in each case, their respective officers, directors and employees, and their actions may adversely impact us and our reputation. • Environmental matters, unforeseen costs associated with compliance and remediation efforts, and government and third-party claims, could have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows.
In the event of termination for convenience, contractors are generally protected by provisions covering reimbursement for costs incurred and profit on those costs up to the amount authorized under the contract, -8- NORTHROP GRUMMAN CORPORATION but not the anticipated profit that would have been earned.
In the event of termination for convenience, contractors are generally protected by provisions covering reimbursement for costs incurred and profit on those costs up to the amount authorized under the contract, but not the anticipated profit that would have been earned.
The policy limits and terms of coverage reasonably obtainable may not be sufficient to cover actual losses or liabilities. For example, the space insurance markets are experiencing increased price volatility and capacity constraint. Due to recent increases in the frequency and severity of losses, insurers are decreasing limits, increasing pricing and some have exited the market.
Further, policy limits and terms of coverage reasonably obtainable may not be sufficient to cover actual losses or liabilities. For example, the space insurance market is experiencing increased price volatility and capacity constraints. Due to recent increases in the frequency and severity of losses in the space market, insurers are decreasing limits, increasing pricing and some have exited the market.
If, for example, we also experience difficulties with renewals and renegotiations of existing collective agreements, or if our employees pursue new collective representation, we could incur additional expenses and impacts on operating efficiency and may be subject to work stoppages or other labor-related disruptions.
If, for example, we also experience difficulties with renewals and renegotiations of existing collective bargaining agreements, or if our employees pursue new collective representation, we could incur additional expenses and impacts on operating efficiency and may be subject to work stoppages, production delays, increased labor costs and/or other labor-related disruptions.
We also face increasing and evolving disclosure obligations related to cyber and other security events and the risk of failing to meet all our existing or future disclosure obligations and/or having our disclosures misinterpreted. National security or public safety considerations may also affect, or in limited instances prevent, our public disclosure of a cybersecurity incident in certain circumstances.
We also face increasing and evolving disclosure obligations related to cybersecurity events and the risk of failing to meet all our existing or future disclosure obligations and/or having our disclosures misinterpreted. National security or public safety considerations may also affect, delay or in limited instances prevent, our public disclosure of a cybersecurity incident.
In the event government funding for our significant programs is reduced, delayed or unavailable, or orders are reduced, our contracts or subcontracts, or competitions for such programs have at times been, and in the future may be, terminated or changed.
In the event government funding for our significant programs is reduced, delayed or unavailable, our contracts or subcontracts, or competitions for such programs, have at times been, and in the future may be, terminated or changed, including a reduction in orders.
We also face threats to our physical security, including to our facilities and the safety and well-being of our people, including senior executives. These threats could involve terrorism, insider threats, targeted threats against senior executives, workplace violence, civil unrest, natural disasters, damaging weather or fires, which could adversely affect our company.
We also face threats to our physical security, including to our facilities and the safety and well-being of our people, including senior executives. These threats could involve terrorism, insider threats, targeted threats against senior executives, workplace violence, or civil unrest, which could adversely affect our company.
They could also require capital investments, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame. We expect our suppliers to face similar challenges and incur additional compliance costs that may be passed on to us.
Compliance with these laws and regulations could also require capital investments, could adversely impact our ongoing operations, and could require changes on a more accelerated time frame. We expect our suppliers to face similar challenges and incur additional compliance costs that may be passed on to us.
We encourage you to consider carefully the risk factors described below in evaluating the information contained in this report as the outcome of one or more of these risks could have a material adverse effect on our financial position, results of operations and/or cash flows.
We encourage you to consider carefully the risk factors described below in evaluating the information contained in this report, as the outcome of one or more of these risks could have a material adverse effect on our financial position, results of operations and/or cash flows. Certain of the risk factors described below include references to past events as examples.
In the event of misuse, theft or misappropriation of such intellectual property rights or breach of confidentiality obligations, we may not have adequate legal remedies. In addition, our trade secrets or other proprietary information may otherwise become known or be independently developed by competitors.
In the event of misuse, theft or misappropriation of such intellectual property rights or breach of confidentiality obligations, we may not have -19- Table of Contents NORTHROP GRUMMAN CORPORATION adequate legal remedies. In addition, our trade secrets or other proprietary information may otherwise become known or be independently developed by competitors.
In the event of termination due to default, contractors may be required to pay for re-procurement costs in excess of the original contract price, net of the value of work accepted from the original contract, as well as other damages.
In the event of termination due to default, contractors may be required to pay damages, including paying for re-procurement costs in excess of the original contract price, net of the value of work accepted from the original contract.
Moreover, the legal framework concerning intellectual property rights varies among countries and the protections under foreign laws and courts may not be favorable.
Moreover, the legal framework concerning intellectual property rights varies among countries and the protections under foreign laws and courts may not be favorable and are subject to change.
We are facing increasing competition in the U.S. and outside the U.S. from U.S., foreign and multinational firms, including new entrants, and anticipate that mergers or acquisitions within our industry could further increase competition or could limit our access to certain suppliers without appropriate remedies to protect our interests.
We expect that the increasing competition in the U.S. and outside the U.S. from U.S., foreign and multinational firms, including new entrants, could further increase due to mergers or acquisitions within our industry and could limit our access to certain suppliers, absent appropriate remedies to protect our interests.
Legal proceedings, even if pending or not ultimately resulting in adverse action, or if fully indemnified or insured, can negatively impact our reputation among our customers and the public, and make it substantially more difficult for us to compete effectively for business, obtain and retain awards, ensure adequate funding for our programs or obtain adequate insurance in the future.
Legal proceedings, even if pending or not ultimately resulting in adverse action, or even if fully indemnified or insured, can negatively impact our reputation among our customers, suppliers and the public, and make it substantially more difficult for us to compete effectively for business, obtain and retain awards, ensure -11- Table of Contents NORTHROP GRUMMAN CORPORATION adequate funding for our programs or obtain adequate supplies or insurance in the future.
Goodwill is an intangible asset that we recognize in connection with acquisitions of third-party businesses. Goodwill accounts for approximately 35 percent of our total assets as of December 31, 2024. Other long-lived assets -20- NORTHROP GRUMMAN CORPORATION principally comprise property, plant and equipment (PP&E) used in operating our business.
Goodwill is an intangible asset that we recognize in connection with acquisitions of third-party businesses. Goodwill accounts for approximately 34 percent of our total assets as of December 31, 2025. Other long-lived assets principally comprise property, plant and equipment (PP&E) used in operating our business.
We have seen, and anticipate we will continue to see, increased competition in some of our core markets, especially as a result of our customers’ budget pressures, their focus on affordability and competition, and our own success in winning business.
We have seen, and anticipate we will continue to see, increased competition, including in some of our core markets, especially as a result of our customers’ budget pressures and their focus on speed, affordability and competition.
Our success in competing depends, in part, on our ability to remain cost-competitive, respond to changes in customer acquisition strategies, accurately anticipate our customers’ needs and successfully effect our digital transformation strategy and adopt and integrate new digital technologies into our manufacturing, operations, and products and services.
Our success in competing depends, in part, on our ability to remain price- and cost-competitive, respond to changes in customer acquisition strategies and preferences, accurately anticipate our customers’ needs, successfully effect our digital transformation strategy and identify, adopt and integrate new digital technologies, including artificial intelligence, into our manufacturing, operations, business processes, products and services.
Our ability to develop innovative and technologically advanced products depends on the talent of our workforce, continued funding for, and investment in, research and development projects, continued access to assured suppliers of important technologies and components, our ability to compete (including with commercial companies) and our ability to provide the people, technologies, facilities, equipment and financial capacity needed to develop and deliver those products and services with maximum efficiency.
Our ability to develop such products depends on the talent of our workforce, continued funding for, and investment in, research and development, continued access to assured suppliers of important technologies and components, our ability to effectively compete, and our ability to provide the people, technologies, facilities, equipment and financial capacity needed to develop and deliver those products and services with maximum efficiency.
However, these protections are not always available, are difficult to negotiate and obtain, are typically subject to certain terms or limitations, including the availability of funds, and may not be sufficient to cover our losses or liabilities. • Pension and other postretirement benefit (OPB) obligations and related expenses and funding requirements may fluctuate significantly depending upon investment performance of plan assets, changes in actuarial assumptions, and legislative or other regulatory actions.
However, these protections are not always available, are difficult to negotiate and obtain, are typically subject to certain terms or limitations, including the availability of funds, and may not be sufficient to cover our losses or liabilities. • Depending upon the investment performance of plan assets, changes in actuarial assumptions, and legislative or other regulatory actions, pension and other postretirement benefit (OPB) obligations and related expenses and funding requirements may fluctuate significantly and could have a material adverse effect on our financial position, results of operations and/or cash flows.
Disruptions or performance problems with our subcontractors or other suppliers (referred to inclusively as suppliers), unanticipated cost growth for the products and services they provide, failure to meet regulatory or contractual requirements, unethical or illegal behavior, or a misalignment between our contractual obligations to our customers and our agreements with our suppliers, have had and may continue to have various adverse impacts on the company, including on our ability to meet our commitments to customers and financial expectations.
Disruptions, performance problems or other issues with our suppliers, including unanticipated cost growth, failure to meet regulatory or contractual requirements, and/or unethical or illegal behavior, or a misalignment between our contractual obligations to our customers and our agreements with our suppliers, have had and may continue to have various adverse impacts on the company, including on our ability to meet our commitments to customers and financial expectations.
We expect our facilities, operations, employees and communities in the future, particularly at facilities prone to extreme weather events, such as in Florida and California, to continue to be at risk for future natural disasters or other weather events (which may be exacerbated by climate change).
We expect our facilities, operations, employees and communities to continue to be at risk for future natural disasters or other weather events, particularly at facilities prone to extreme weather events, such as in Florida and California.
Any such expenses or delays could adversely affect our performance and results. -16- NORTHROP GRUMMAN CORPORATION • Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations, which could have a material adverse impact on our financial position, results of operations and/or cash flows.
Any such expenses, stoppages or disruptions could adversely affect our performance and results. • Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations, which could have a material adverse effect on our financial position, results of operations and/or cash flows.
We rely on other companies to provide raw materials, chemicals, parts and components and subsystems for our products, produce hardware elements and sub-assemblies, provide software and intellectual property, provide information about the parts they supply to us, and perform some of the services we need for our operations or provide to our customers, and to do so in compliance with all applicable laws, regulations and contract terms, while maintaining strong values and cultures.
We rely on subcontractors and other suppliers (referred to collectively as suppliers) to provide raw materials, chemicals, parts, components and subsystems for our products, produce hardware elements and sub-assemblies, provide software and intellectual property, and perform some of the services we need for our operations or provide to our customers, and to do so efficiently and in compliance with all applicable laws, regulations and contract terms, while maintaining strong values and cultures.
If the statutory debt limit is not increased adequately, we could be obligated to work without receiving timely payments, and a prolonged breach could have far-reaching adverse consequences.
If the statutory debt limit is reached and not increased adequately, we could be obligated to work without receiving timely payments, and a prolonged breach could have far-reaching adverse consequences. • We use estimates when accounting for contracts.
Our customers and suppliers face similar risks that, if realized, could also adversely impact our operations. Such acts could cause delays, manufacturing downtime, or other impacts that could detrimentally impact our ability to perform our operations. We could also incur unanticipated costs to remediate impacts and lost business.
Our customers and suppliers face similar risks that, if realized, could also adversely impact our operations. Such acts could cause delays, manufacturing downtime, or other impacts that could detrimentally impact our ability to perform our operations.
Our business, financial position, results of operations and/or cash flows have been and may in the future be adversely impacted by the global macroeconomic environment, which impacts have included and may in the future include high rates of inflation; increased interest rates; tight credit in financial markets; widespread disruptions in supply chains; workforce challenges, including labor shortages; and market volatility, including exchange rate volatility.
Our business, financial position, results of operations and/or cash flows have been and may in the future be adversely impacted by the global macroeconomic environment, which impacts have included and may in the future include high rates of inflation, increased interest rates, tight credit conditions in financial markets, widespread disruptions in supply chains, workforce challenges, including labor shortages, changes in trade policies, such as tariffs, and market volatility, including exchange rate volatility, all of which may affect material costs and supplier pricing.
In connection with our U.S. government contracts, we are required to procure certain materials, components and parts from supply sources approved by the customer and/or are restricted from procuring products or services from certain sources. For example, we require assured access to certain microelectronics.
In connection with our U.S. government contracts, we are required to procure certain raw materials, chemicals, components and parts from supply sources approved by the customer and/or are restricted from procuring products or services from certain sources.
The cost of PP&E utilized in support of our commercial business, including approximately $575 million of PP&E in our commercial space business, is not allocable to government contracts and is therefore subject to greater recoverability risk than PP&E utilized in support of our U.S. government contracts.
The cost of PP&E -20- Table of Contents NORTHROP GRUMMAN CORPORATION utilized in support of our commercial business, including approximately $600 million of PP&E in our commercial space business, is not allocable to government contracts and is therefore subject to greater recoverability risk than PP&E utilized in support of our U.S. government contracts.
New regulations and requirements, or changes to existing ones in countries in which we operate can significantly increase our costs and risks of doing business internationally. Our customers outside of the U.S. also often have the ability to terminate contracts for convenience as well as for default based on performance.
New regulations and requirements, or changes to existing ones, in countries in which we operate can significantly -16- Table of Contents NORTHROP GRUMMAN CORPORATION increase our costs and risks of doing business internationally. Our customers outside of the U.S. also often have the ability to terminate contracts for convenience as well as for default of contract terms.
See “Critical Accounting Policies and Estimates” in MD&A and Note 11 to the consolidated financial statements. • Competition within our markets and bid protests, or other attempts to interfere with our ability to obtain and retain awards, may affect our ability to win new contracts and result in reduced revenues, which could have a material adverse effect on our financial position, results of operations and/or cash flows.
See “Critical Accounting Policies and Estimates” in MD&A and Note 11 to the consolidated financial statements. • Competitive dynamics within our markets may affect our ability to win new contracts and result in reduced revenues, which could have a material adverse effect on our financial position, results of operations and/or cash flows.
Our international business is impacted by changes in U.S. and non-U.S. national policies and priorities, and geopolitical relationships, any of which may be influenced by changes in the global threat environment, political leadership, geopolitical and economic uncertainties, world events, government budgets, inflationary pressures, sanctions imposed in countries where we do business or seek to do business, and economic and political factors more generally.
Our international business is impacted by changes in U.S. and non-U.S. national policies and priorities, and geopolitical relationships, any of which may be influenced by changes in the global threat environment, political leadership, geopolitical and economic uncertainties, trade policies, such as tariffs, world events, government budgets, inflationary pressures, trade sanctions, and economic and political factors more generally.
We design, develop and manufacture technologically advanced and innovative products and services, which are applied by our customers in a variety of environments, including highly demanding operating conditions, to accomplish challenging missions. Our success depends upon our ability to develop technologically advanced, innovative and cost-effective products and services and market these products and services to our customers globally.
We design, develop and manufacture technologically advanced and innovative products and services, which are applied by our customers in a variety of environments, including highly demanding operating conditions, to accomplish challenging missions.
The various measures and controls we have implemented to monitor and mitigate risks associated with these threats and to increase the cyber resiliency of our infrastructure and products may not always be sufficient or fully effective, particularly against previously unknown vulnerabilities, including those that could go undetected for an extended period.
The various measures and controls we have implemented to monitor and mitigate risks associated with these threats and to increase the cyber resiliency of our infrastructure and products may not always be sufficient or fully effective, particularly against previously unknown vulnerabilities, including those that could go undetected for an extended period, which may inhibit our ability to provide prompt, full, and reliable information about such incidents to our customers, regulators, and the public.
We cannot predict the impact on existing, follow-on, replacement or future programs from potential changes in the threat and global security environment, defense spending levels, government and budgetary priorities, political leadership, procurement practices and strategy, inflation and other macroeconomic trends, military strategy; or broader changes in social, economic, security or political demands and priorities.
Potential changes in the threat and global security environment; defense spending levels; government and budgetary priorities; political leadership; procurement laws, practices and strategy; inflation and other macroeconomic trends; military strategy, including changes in DoW priorities, preferences or regulations; or broader changes in social, economic, security or political demands and priorities could adversely affect existing, follow-on, replacement or future programs.
Climate related changes can impact natural disasters, including weather patterns, with the increased frequency and severity of significant weather events (e.g., flooding, hurricanes and tropical storms), natural hazards (e.g., increased wildfire risk), rising mean temperature and sea levels, and long-term changes in precipitation patterns (e.g., drought, desertification, water scarcity and/or poor water quality).
Climate related changes can impact weather patterns (e.g., increased frequency and severity of significant weather events), natural hazards (e.g., increased fire risk), mean temperature and sea levels, and long-term precipitation patterns (e.g., increased risk of drought, desertification, water scarcity and/or poor water quality).
Macroeconomic challenges increase these risks. Because of the significance of management’s judgments and the estimation processes, and the difficulties inherent in estimating future costs, particularly in a challenging macroeconomic environment, it is possible that we could see materially different results.
Changes in macroeconomic conditions increase these risks. Because of the significance of management’s judgments and estimation processes, and the difficulties inherent in estimating future costs, particularly in a challenging and dynamic macroeconomic environment, it is possible that our results could differ materially from our estimates.
We have been and could be impacted by cyber threats or other disruptions or vulnerabilities found in products or services we use or in our internal, partners’ or customers’ systems that are used in connection with our business. Further, the sophistication, availability and use of artificial intelligence by threat actors present an increased level of risk.
We have been and could be impacted by cyber threats or other disruptions or vulnerabilities found in products or services we use or in our internal, partners’ or customers’ systems that are used in connection with our business. Further, artificial intelligence techniques to automate and enhance cyber attacks pose an evolving and increased level of risk to our information systems.
These direct and indirect costs can adversely impact our results of operations and financial condition, and, if we are unable to comply with legislative and regulatory requirements or meet our sustainability objectives, our reputation and ability to do business could be negatively impacted.
These direct and indirect costs can adversely impact our results of operations and financial condition, and, if we are unable to comply with legislative and regulatory requirements, our reputation and ability to do business could be negatively impacted. Environmental impacts create short and long-term financial risks to our business globally.
We generally have been able to renegotiate renewals to expiring agreements without significant disruption of operating activities. However, other companies recently have experienced challenges in renewing labor agreements.
Certain of our employees are covered by collective bargaining agreements. We generally have been able to renegotiate renewals to expiring agreements without significant disruption of operating activities. However, other companies have experienced challenges in renewing labor agreements.
Sales to customers outside the U.S. are an important component of our strategy. Our international business (including our participation in joint ventures and other forms of collaboration, requirements for local content, and our global supply chain) is subject to numerous political and economic factors, legal requirements, cross-cultural considerations and other risks associated with doing business globally.
Sales to customers outside the U.S. are an important component of our business and strategy. Our international business is subject to numerous political and economic factors, legal requirements, cross-cultural considerations and other risks associated with doing business globally.
These risks differ in some respects from those associated with our U.S. business and our exposure to such risks is expected to increase if and as our international business continues to grow. Our international business is generally subject to both U.S. and foreign laws, regulations and practices.
These risks differ in some respects from those associated with our U.S. business and our exposure to such risks is expected to increase if and as our international business continues to grow. Our international business is generally subject to regulations and practices of the United States and other countries in which we do business.
Cyber events have caused and could cause us harm and require us to undertake remedial actions. Successful attacks can lead to losses or misuse of sensitive information or capabilities; theft or corruption of data; harm to personnel, infrastructure or products; protracted disruptions in our operations and performance; and the misuse of our products.
Successful attacks can lead to losses or misuse of sensitive information or capabilities, theft or corruption of data, harm to personnel, infrastructure or products, protracted disruptions in our operations and performance, and the misuse of our products.
Problems and delays in the successful development and delivery of our solutions, including as a result of issues with design, technology or operations, digital transformation, inability to achieve learning curve assumptions, artificial intelligence, manufacturing materials or components, or subcontractor (or other supplier) performance can prevent us from meeting requirements and create significant risk and liabilities.
Problems and delays that could limit the successful development and delivery of our solutions, prevent us from meeting requirements and/or create risk and liabilities include issues with design, technology, operations or digital transformation, inability to achieve learning curve assumptions, inability to integrate emerging and rapidly developing technologies like artificial intelligence, manufacturing materials or components, or subcontractor (or other supplier) performance.
In addition, pressures on, as well as laws and plans relating to the federal budget, potential changes in priorities and defense spending, the timing and substance of the appropriations process, use of continuing resolutions (with restrictions, e.g., on new contract and program starts) and the federal debt limit (including a breach of the federal debt ceiling), have adversely affected and could adversely affect the amount and timing of funding for individual programs and delay purchasing or payments by our customers.
In addition, certain changes in priorities and defense spending, the timing and substance of the appropriations process, use of continuing resolutions (which may carry restrictions, including on new contracts and program starts) and the federal debt limit (including a breach of the federal debt ceiling), have adversely affected and could in the future adversely affect the amount and timing of funding for individual programs and delay purchasing or payments by our customers.
We aim to mitigate this risk through contract terms, and we have submitted and may submit requests for equitable adjustment (REAs), engineering change proposals or other claims to seek recovery in whole or in part for our increased costs. We have also sought, and will seek, other avenues, as appropriate, to compensate the company for certain unexpected cost increases.
We aim to mitigate this risk through contract terms, and we have submitted and may submit requests for equitable adjustment (REAs), engineering change proposals (ECPs) or other requests or claims to seek recovery in whole or in part for our increased costs.
This risk of delays and disruptions in the supply chain, and supply chain challenges more broadly, has been and continues to be heightened globally due to the current macroeconomic environment. -15- NORTHROP GRUMMAN CORPORATION Our ability to perform our obligations on time is adversely affected if one or more of our suppliers is unable to provide the agreed-upon products, materials or information, or perform the agreed-upon services in a timely, compliant and cost-effective manner.
Supply chain challenges, including risk of delays and disruptions continue to be heightened globally. Our ability to perform our obligations on time can be adversely affected if one or more of our suppliers is unable to provide the agreed-upon products, materials or intellectual property, or perform the agreed-upon services, in a timely, compliant and cost-effective manner.
Where program cost estimates exceed certain thresholds, our customer has been, and may in the future be, required to provide congressional notification of significant or critical cost increases (or breaches) under the Nunn-McCurdy Act, which, in some circumstances, could result in program restructure or termination.
Additionally, if program costs exceed certain thresholds, or if programs are behind schedule, our U.S. government customer has been, and may in the future be, required to provide congressional notification of significant or critical cost increases or noncompliance with contractual cost or schedule provisions under the Nunn-McCurdy Act, which, in some circumstances, could result in program restructure or termination.
We also may experience challenges performing if we are unable to use certain raw materials, chemicals or other substances due to laws or other regulations that restrict or prohibit the use of such items or cause suppliers to be unwilling or unable to supply them and we cannot obtain a reasonable substitute on a cost-effective basis.
We have experienced, and may continue to experience, financial or other performance challenges if we are unable to use or obtain certain raw materials, chemicals, parts, components or other substances in a timely and/or cost-efficient manner due to laws or other regulations that restrict or prohibit the use or import of such items, or cause suppliers to be unwilling or unable to supply them, and we cannot obtain a reasonable substitute on a timely or cost-effective basis, including as a result of tariffs or other trade restrictions.
Certain of our contracts also include options exercisable at the customer’s discretion. The customer may decline to exercise an option, or the customer may exercise an option for which we may incur a loss or perform at a low margin, either of which could adversely affect our results of operations.
The customer may decline to exercise an option, or the customer may exercise an option for which we may incur a loss or perform at a low margin, either of which could adversely affect our results of operations. Our risk varies by contract type.
We are also facing increasing competition for, and more limited access to various critical products, services and other supplies. In some instances, foreign companies may receive loans, subsidies and other assistance from their governments that may not be available to U.S. companies and foreign companies may be subject to fewer restrictions on technology transfer.
We are also facing increasing competition for, and more limited access to, various critical products, services and other supplies. Additionally, in some instances, companies both inside and outside the U.S. may receive loans, investments, subsidies, preferential treatment and other assistance from their governments or customers that may not be provided or available to other companies.
Termination due to our default (or that of a teammate) could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows.
Termination due to our default (or that of a teammate) could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows. The U.S. government also has the ability to stop work under a contract for a limited period of time for its convenience.
New laws or other requirements, or changes to existing ones (including, for example, related to cybersecurity, information and data protection, cost accounting, environment, sustainability, securities, competition, compensation costs, taxes, counterfeit parts, pensions, and use of certain non-US equipment) or more expansive interpretations or other changes in how government agencies construe existing ones, can significantly increase our costs and risks and reduce our profitability.
New laws or other requirements, or changes to existing ones (including, for example, related to cybersecurity, information and data protection, cost accounting, environment, sustainability, securities, competition, compensation costs, employment, taxes, counterfeit parts, pensions, use of certain non-US equipment or acquisitions more broadly), can significantly increase our costs (including compliance costs) and risks, create operational challenges, potentially limit our ability to return cash to shareholders, reduce our profitability and/or adversely affect our competitiveness.
Stricter or different remediation standards or enforcement of existing laws and regulations; new requirements, including regulation of new substances; discovery of previously unknown or more extensive contamination or new contaminants; imposition of fines, penalties, or damages (including natural resource damages); a determination that certain remediation or other costs are unallowable; rulings on allocation or insurance coverage; and/or the insolvency, inability or unwillingness of other parties to pay their share, could require us to incur material additional costs in excess of those anticipated.
Stricter or different remediation standards or enforcement of existing laws and regulations, new requirements, including regulation of new substances, discovery of previously unknown or more extensive contamination or new contaminants, imposition of fines, penalties, or damages (including natural resource damages), a determination that certain remediation or other costs are unallowable, rulings on allocation or insurance coverage, and/or the insolvency, inability or unwillingness of other parties to pay their share, could require us to incur material additional costs in excess of those anticipated. -13- Table of Contents NORTHROP GRUMMAN CORPORATION We are and may become a party to various legal proceedings and disputes involving government and private parties (including individual and class actions) relating to alleged impacts from pollutants released into the environment, including bodily injury and property damage.
Whether or not illegal activities are alleged, the U.S. government has the ability to decrease or withhold certain payments when it deems systems to be inadequate, with significant financial impact, regardless of the ultimate outcome. In addition, we risk serious reputational harm in situations involving allegations of impropriety made against us or our business partners.
Whether or not illegal activities are alleged, the U.S. government has the ability to decrease or withhold certain payments when it deems systems to be inadequate, with significant financial impact, regardless of the ultimate outcome.
If that supplier cannot meet our needs or if we are unable to procure components from certain suppliers due to regulatory restrictions, we may be unable to find a suitable alternative and to meet our obligations. We and our suppliers are also facing increased legal requirements globally.
For example, for some components, we may have had, or have, only one supplier, or one domestic supplier, that meets our needs. If that supplier cannot timely perform, or if we are unable to procure components from certain suppliers due to regulatory restrictions, we may be unable to find a suitable alternative and to meet our obligations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe also require our suppliers, subcontractors and third-party service providers to comply with our standard cybersecurity-related terms and conditions, in addition to any requirements from our customers, as a condition of doing business with us, and require them to complete information security questionnaires to review and assess any potential cyber-related risks depending on the nature of the services or products being provided. • Third Party Cybersecurity Service Providers – We engage third party service providers to expand the capabilities and capacity of our cybersecurity program, including for design, monitoring and testing of the program’s risk prevention and protection measures and process execution, including incident detection, investigation, analysis and response, eradication and recovery.
Biggest changeWe also periodically host cybersecurity and ransomware tabletop exercises with management and other company functional stakeholders to practice rapid cyber incident response. • Supplier Engagement – We provide training and other resources to our suppliers to support cybersecurity resiliency and data security principles in our supply chain in addition to any requirements from our customers, as a condition of doing business with us, and require them to complete information security -22- Table of Contents NORTHROP GRUMMAN CORPORATION questionnaires to review and assess any potential cyber-related risks depending on the nature of the services or products being provided. • Third Party Cybersecurity Service Providers – We engage third party service providers to expand the capabilities and capacity of our cybersecurity program, including for design, monitoring and testing of the program’s risk prevention and protection measures and process execution, including incident detection, investigation, analysis and response, eradication and recovery. • Product Security – We provide cyber threat intelligence to, and collaboration with, our product security teams and share expertise in cyber vulnerability, exploit and resilience technology that can be applied to network infrastructure and company product offerings.
The current CISO is an executive with extensive technical and operational experience in building and leading cybersecurity and resiliency teams in the industry and government. Our Board of Directors is responsible for overseeing our enterprise risk management activities in general, and each of our Board committees assists the Board in the role of risk oversight.
The current CISO is an executive with extensive technical and operational experience in building and leading cybersecurity and resiliency teams in industry and the government. Our Board of Directors is responsible for overseeing enterprise risk management activities in general, and each of our Board committees assists the Board in the role of risk oversight.
To help ensure effective oversight, the CISO briefs the Audit and Risk Committee on the company’s information security and cybersecurity risk posture at least four times a year. In addition, the company’s Enterprise Risk Management Council (ERMC) considers risks relating to cybersecurity, among other significant risks, and applicable mitigation plans to address such risks.
To help ensure effective oversight, the CISO briefs the Audit and Risk Committee on the company’s information security and cybersecurity risk posture at least four times a year. The company’s Enterprise Risk Management Council (ERMC) considers risks relating to cybersecurity, among other significant risks, and applicable mitigation plans to address such risks.
The ERMC meets during the year and receives periodic updates from the CIDO and CISO on cybersecurity risks. We have an established process governing our response to a cybersecurity incident from detection to mitigation, recovery, assessment, internal and external notifications and functional stakeholder engagements with legal, privacy and risk management, among others.
The ERMC meets during the year and receives periodic updates from the CIDO and CISO on cybersecurity risks. -21- Table of Contents NORTHROP GRUMMAN CORPORATION We have an established process governing our response to a cybersecurity incident from detection to mitigation, recovery, assessment, internal and external notifications and functional stakeholder engagements with legal, privacy and risk management, among others.
The ERMC is comprised of the Executive Leadership Team, as well as the Chief Accounting Officer, Chief Ethics and Compliance Officer, Corporate Secretary, Chief Sustainability Officer, Treasurer and Vice President, Internal Audit. The CISO and the CIDO (previously the CIO) attend each ERMC meeting.
The ERMC is comprised of the Executive Leadership Team, as well as the Chief Accounting Officer, Chief Ethics and Compliance Officer, Corporate Secretary, Chief Environment, Quality and Safety Officer, Treasurer and Vice President, Internal Audit. The CIDO and CISO attend each ERMC meeting.
These relationships enable the rapid sharing of threat and vulnerability mitigation information across the defense industrial base and supply chain. • Third Party Risk Management – We conduct cybersecurity assessments before sharing or allowing the hosting or processing of sensitive data in computing environments managed by third parties, and our standard terms and conditions contain contractual provisions requiring certain cybersecurity and data protections and controls.
These relationships enable the rapid sharing of threat and vulnerability mitigation information across the defense industrial base and supply chain. • Third Party Risk Management – We conduct cybersecurity assessments before sharing or allowing the hosting or processing of our sensitive data in computing environments managed by third parties.
Item 1C. Cybersecurity We recognize the critical importance of maintaining the safety and security of our systems and data and have a holistic process for overseeing and managing cybersecurity and related risks. This process is supported by both management and our Board of Directors.
Item 1C. Cybersecurity We recognize the critical importance of maintaining the safety and security of our systems and data and have a holistic process for overseeing and managing cybersecurity and related risks. This process is supported by both management and our Board of Directors. The company’s Chief Information and Digital Officer (CIDO) reports to the CEO.
Finally, we require these third parties to notify us promptly of cyber incidents or data breaches so that we can assess potential impact on us. • Training and Awareness – We provide annual cybersecurity and information security awareness training to our employees with network access to help identify, avoid and mitigate cybersecurity threats and insider risks.
Our standard terms and conditions contain contractual provisions requiring certain cybersecurity and data protections and controls and require third parties to notify us promptly of cyber incidents or data breaches so that we can assess potential impact on us. • Training and Awareness – We provide annual cybersecurity and information security awareness training to our employees with network access to help identify, avoid and mitigate cybersecurity threats and insider risks.
The full Board receives an update on the company’s risk management process and the risk trends related to cybersecurity at least annually. The Audit and Risk Committee specifically assists the Board in its oversight of risks related to cybersecurity.
The full Board receives an update on the company’s risk management process and the risk trends related to cybersecurity at least annually. Periodic briefings are also provided when warranted by emerging risks. The Audit and Risk Committee specifically assists the Board in its oversight of risks related to cybersecurity.
The CISO is responsible for the assessment and management of cybersecurity risk and the resiliency, protection and defense of our networks and systems. The CISO leads a team of cybersecurity professionals with broad experience and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, data protection, privacy, insider threats and regulatory compliance.
The CISO leads a team of cybersecurity professionals with broad experience and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, data protection, privacy, insider threats and regulatory compliance.
Our Cybersecurity Operations Center provides comprehensive cyber threat detection and response capabilities and maintains a 24x7 monitoring system which complements the technology, processes and threat detection techniques we use to monitor, manage and mitigate cybersecurity threats or vulnerabilities. From time to time, we engage third-party consultants or other advisors to assist in assessing, identifying and/or managing cybersecurity threats.
Our Cybersecurity Operations Center provides comprehensive cyber threat detection and response capabilities and maintains a 24x7 monitoring system which complements the technology, processes and threat detection techniques we use to monitor, manage and mitigate cybersecurity threats or vulnerabilities.
This training also includes awareness about the policies and guidance associated with data privacy and protection of personal information, and protection and security of our company, customer and other third-party data. Our employees with network access also participate in annual spear phishing exercises.
This training also includes awareness about the policies and guidance associated with data privacy and protection of personal information, and protection and security of our company, customer and other third-party data. We regularly conduct targeted phishing exercises for employees on each company network.
We continue to invest in the cybersecurity and resiliency of our networks and products and to enhance our internal controls and processes, which are designed to help protect our programs, systems and infrastructure, and the information they contain.
We continue to invest in the cybersecurity and resiliency of our networks and products and to enhance our internal controls and processes, which are designed to help protect our programs, systems and infrastructure, and the information they contain. For more information regarding the risks we face from cybersecurity threats, please see “Risk Factors.”
Our -21- NORTHROP GRUMMAN CORPORATION program evaluates potential risks consistent with industry practices, customer requirements and applicable law, including privacy and other considerations. • Information Sharing and Collaboration – We work with government, customer, industry and/or supplier partners, such as the National Defense Information Sharing and Analysis Center and other government-industry partnerships, to gather and develop best practices and share information to address cyber threats.
Our insider threat program, which is supported by the cybersecurity program, evaluates potential risks consistent with applicable laws and regulations, customer requirements and industry practices. • Information Sharing and Collaboration – We work with government, customer, industry and/or supplier partners, such as the National Defense Information Sharing and Analysis Center and other government-industry partnerships, to gather and develop best practices and share information to address cyber threats.
Our approach to cybersecurity risk management includes the following key elements: • Multi-Layered Defense and Continuous Monitoring – We work to protect our computing environments and products from cybersecurity threats through multi-layered defenses and apply lessons learned from our defense and monitoring efforts to help prevent future attacks. We utilize data analytics to detect anomalies and search for cyber threats.
We protect our computing environments and products from cybersecurity threats through multi-layered defenses and apply lessons learned from our defense and monitoring efforts to help prevent future attacks. We are proactive — utilizing data analytics to detect anomalies and search for cyber threats.
We also periodically use our Internal Audit function to conduct additional reviews and assessments. • Insider Threats – We maintain an insider threat program, led by our Vice President, Corporate and Enterprise Security, designed to identify, assess, and address potential risks from within our company.
We also engage with external auditors and consultants who conduct audits and assessments of our cybersecurity controls. • Insider Threats – We maintain an insider threat program, led by our Vice President, Corporate and Enterprise Security, designed to identify, assess, and address potential risks from within our company.
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In 2024, our global cybersecurity function was maintained in our Chief Information Office, led by our Chief Information Officer (CIO), who reported to our CEO.
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Our Chief Information Security Officer (CISO) reports to the CIDO and leads our cybersecurity functions. The CISO is responsible for the assessment and management of cybersecurity risk and the resiliency, protection and defense of our networks and systems.
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In 2025, we have brought together our chief information and digital transformation offices into a newly formed Chief Information and Digital Office, led by our Chief Information and Digital Officer (CIDO), who reports to the CEO. The Chief Information Security Officer (CISO), who previously reported to the CIO, now reports to the CIDO and continues to lead our cybersecurity functions.
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Our approach to cybersecurity risk management includes the following key elements: • Multi-Layered Defense and Real Time Monitoring – We maintain a global cybersecurity program designed to identify, assess and manage material risks from cybersecurity threats. Our program is aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework.
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We also periodically host cybersecurity and ransomware tabletop exercises with management and other company functional stakeholders to practice rapid cyber incident response. • Supplier Engagement – We provide training and other resources to our suppliers to support cybersecurity resiliency and data security principles in our supply chain.
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We employ a defense-in-depth strategy that utilizes automation and intelligence-driven threat hunting methodologies, strictly enforced identity controls and real time monitoring to protect our networks and platform integrity. We continue to invest in our compliance capabilities, maintaining readiness for Cybersecurity Maturity Model Certification requirements and meeting evolving DoW standards.
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We also engage with external auditors and consultants who conduct audits and assessments of our cybersecurity controls. • Product Security – We provide cyber threat intelligence to, and collaboration with, our product security teams and share expertise in cyber vulnerability, exploit and resilience technology that can be applied to network infrastructure and company product offerings.
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From time to time, we engage third-party consultants or other advisors to assist in assessing, identifying and/or managing cybersecurity threats. • Periodic Assessment – The cybersecurity program is subject to periodic internal assessments (including Internal Audit and penetration testing), independent third-party assessments and exercises. We periodically refine our processes to incorporate lessons learned from these assessments and exercises.
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For more information regarding the risks we face from cybersecurity threats, please see “Risk Factors.” FORWARD-LOOKING STATEMENTS AND PROJECTIONS This Annual Report on Form 10-K and the information we are incorporating by reference contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
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Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,” “believe,” “estimate,” “guidance,” “outlook,” “trends,” “goals” and similar expressions generally identify these forward-looking statements. Forward-looking statements include, among other things, statements relating to our future financial condition, results of operations and/or cash flows.
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Forward-looking statements are based upon assumptions, expectations, plans and projections that we believe to be reasonable when made, but which may change over time. These statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict.
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Specific risks that could cause actual results to differ materially from those expressed or implied in these forward-looking statements include, but are not limited to, those identified -22- NORTHROP GRUMMAN CORPORATION under “Risk Factors” and other important factors disclosed in this report and from time to time in our other filings with the SEC.
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They include: Industry and Economic Risks • our dependence on the U.S. government for a substantial portion of our business • significant delays or reductions in appropriations and/or for our programs, and U.S. government funding and program support more broadly, including as a result of a prolonged continuing resolution and/or government shutdown, and/or related to the global security environment or other global events • significant delays or reductions in payments as a result of or related to a breach of the debt ceiling • the use of estimates when accounting for our contracts and the effect of contract cost growth and our efforts to recover or offset such costs and/or changes in estimated contract costs and revenues, including as a result of inflationary pressures, labor shortages, supply chain challenges and/or other macroeconomic factors, and risks related to management’s judgments and assumptions in estimating and/or projecting contract revenue and performance which may be inaccurate • increased competition within our markets and bid protests • continued pressures from macroeconomic trends, including on costs, schedules, performance and ability to meet expectations Legal and Regulatory Risks • investigations, claims, disputes, enforcement actions, litigation (including criminal, civil and administrative) and/or other legal proceedings • changes in procurement and other laws, SEC, DoD and other rules and regulations, contract terms and practices applicable to our industry, findings by the U.S. government as to our compliance with such requirements, more aggressive enforcement of such requirements and changes in our customers’ business practices globally • the improper conduct of employees, agents, subcontractors, suppliers, business partners or joint ventures in which we participate, including the impact on our reputation and our ability to do business • environmental matters, including climate change, unforeseen environmental costs and government and third-party claims • unanticipated changes in our tax provisions or exposure to additional tax liabilities Business and Operational Risks • cyber and other security threats or disruptions faced by us, our customers or our suppliers and other partners, and changes in related regulations • the performance and viability of our subcontractors and suppliers and the availability and pricing of raw materials, chemicals, parts and components, particularly with inflationary pressures, increased costs, shortages in labor and financial resources, supply chain disruptions, and extended material lead times • our ability to attract and retain a qualified and talented workforce with the necessary security clearances to meet our performance obligations • our exposure to additional risks as a result of our international business, including risks related to global security, geopolitical and economic factors, misconduct, suppliers, laws and regulations • natural disasters, epidemics, pandemics and similar outbreaks and other significant disruptions • our ability to innovate, develop new products and technologies, progress and benefit from digital transformation and maintain technologies to meet the needs of our customers • products and services we provide related to hazardous and high risk operations, including the production and use of such products, which subject us to various environmental, regulatory, financial, reputational and other risks • our ability appropriately to protect and exploit intellectual property rights -23- NORTHROP GRUMMAN CORPORATION General and Other Risk Factors • the adequacy and availability of, and ability to obtain, insurance coverage, customer indemnifications or other liability protections • the future investment performance of plan assets, gains or losses associated with changes in valuation of marketable securities related to our non-qualified benefit plans, changes in actuarial assumptions associated with our pension and other postretirement benefit plans and legislative or other regulatory actions impacting our pension and postretirement benefit obligations • changes in business conditions that could impact business investments and/or recorded goodwill or the value of other long-lived assets, and other potential future liabilities You are urged to consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of forward-looking statements.
Removed
These forward-looking statements speak only as of the date this report is first filed or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeGovernment Owned/Leased Total Aeronautics Systems 3,141 6,305 3,451 12,897 Defense Systems 921 4,857 2,285 8,063 Mission Systems 8,055 4,110 — 12,165 Space Systems 10,640 7,150 589 18,379 Corporate 372 268 — 640 Total 23,129 22,690 6,325 52,144 We maintain our properties in good operating condition and believe the productive capacity of our properties is adequate to meet current contractual requirements and those for the foreseeable future. -24- NORTHROP GRUMMAN CORPORATION
Biggest changeGovernment Owned/Leased Total Aeronautics Systems 3,050 7,020 3,414 13,484 Defense Systems 1,009 4,418 2,304 7,731 Mission Systems 8,243 4,243 — 12,486 Space Systems 10,321 7,516 559 18,396 Corporate 372 226 — 598 Total 22,995 23,423 6,277 52,695 We maintain our properties in good operating condition and believe the productive capacity of our properties is adequate to meet current contractual requirements and those for the foreseeable future. -23- Table of Contents NORTHROP GRUMMAN CORPORATION
Defense Systems Huntsville and Madison, AL; Mesa and Sierra Vista, AZ; Northridge, CA; Warner Robins, GA; Lake Charles, LA; Elkton, MD; Elk River and Plymouth, MN; Ogden and Roy, UT; Dulles, McLean and Radford, VA; and Keyser, WV. Locations outside the U.S. include Australia.
Defense Systems Huntsville and Madison, AL; Mesa, AZ; Northridge, CA; Warner Robins, GA; Lake Charles, LA; Elkton, MD; Elk River and Plymouth, MN; Ogden and Roy, UT; Dulles, McLean and Radford, VA; and Keyser, WV. Locations outside the U.S. include Australia.
Mission Systems McClellan, San Diego, Sunnyvale and Woodland Hills, CA; Apopka, FL; Rolling Meadows, IL; Annapolis, Annapolis Junction, Elkridge, Halethorpe, Linthicum and Sykesville, MD; Bethpage and Williamsville, NY; Cincinnati, OH; Salt Lake City, UT; and Chantilly, Charlottesville and Fairfax, VA. Locations outside the U.S. include France, Germany, Italy and the United Kingdom.
Mission Systems Manhattan Beach, McClellan, San Diego, Sunnyvale and Woodland Hills, CA; Apopka, FL; Rolling Meadows, IL; Annapolis, Annapolis Junction, Baltimore, Elkridge, Halethorpe, Linthicum and Sykesville, MD; Bethpage and Williamsville, NY; Cincinnati, OH; Salt Lake City, UT; and Chantilly, Charlottesville and Waynesboro, VA. Locations outside the U.S. include France, Germany, Italy and the United Kingdom.
The company’s major operations are at the following locations: Aeronautics Systems El Segundo, Mojave, Palmdale, and San Diego, CA; Melbourne and St. Augustine, FL; Iuka and Moss Point, MS; Beavercreek, OH; Oklahoma City, OK; and Clearfield, UT.
The company’s major operations are at the following locations: Aeronautics Systems Sierra Vista, AZ; El Segundo, Mojave, Palmdale and San Diego, CA; Melbourne and St. Augustine, FL; Iuka and Moss Point, MS; Beavercreek, OH; Oklahoma City, OK; and Clearfield and Layton, UT.
Space Systems Huntsville, AL; Chandler and Gilbert, AZ; Azusa, Carson, Los Angeles, Manhattan Beach, Oxnard, Redondo Beach and San Diego, CA; Aurora, Boulder, and Colorado Springs, CO; Beltsville, MD; Devens, MA; Clearfield, Corinne, Magna, Salt Lake City and Tremonton, UT; and Dulles, McLean and Sterling, VA.
Space Systems Huntsville, AL; Chandler and Gilbert, AZ; Azusa, Carson, Los Angeles, Manhattan Beach, Oxnard, Redondo Beach and San Diego, CA; Aurora, Boulder and Colorado Springs, CO; Beltsville, Elkridge and Hanover, MD; Devens, MA; Clearfield, Corinne, Magna, Salt Lake City and Tremonton, UT; and Dulles, Fairfax, McLean and Sterling, VA. Corporate Falls Church, VA.
Item 2. Properties At December 31, 2024, we had approximately 52 million square feet of floor space at 466 separate locations, primarily in the U.S., for manufacturing, warehousing, research and testing, administration and various other uses. We leased to third parties approximately 37,000 square feet of our owned and leased facilities.
Item 2. Properties At December 31, 2025, we had approximately 53 million square feet of floor space at 446 separate locations, primarily in the U.S., for manufacturing, warehousing, research and testing, administration and various other uses. We leased to third parties approximately 42,000 square feet of our owned and leased facilities.
Corporate Falls Church, VA The following is a summary of our floor space at December 31, 2024: Square feet (in thousands) Owned Leased U.S.
The following is a summary of our floor space at December 31, 2025: Square feet (in thousands) Owned Leased U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee Note 2 to the consolidated financial statements for further information on our share repurchase programs. -26- NORTHROP GRUMMAN CORPORATION STOCK PERFORMANCE GRAPH Comparison of Cumulative Five Year Total Return Among Northrop Grumman, the Standard & Poor’s (S&P) 500 Index and the S&P Aerospace & Defense (A&D) Index • Assumes $100 invested at the close of business on December 31, 2019, in Northrop Grumman Corporation common stock, the S&P 500 Index and the S&P A&D Index. • The cumulative total return assumes reinvestment of dividends. • The S&P A&D Index is comprised of Axon Enterprise, Inc., The Boeing Company, General Dynamics Corporation, General Electric Company, Howmet Aerospace Inc., Huntington Ingalls Industries Inc., L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation, Textron Inc., and TransDigm Group Incorporated. • This graph is not deemed to be “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act.
Biggest changeSee Note 2 to the consolidated financial statements for further information on our share repurchase programs. -25- Table of Contents NORTHROP GRUMMAN CORPORATION STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return, assuming reinvestment of dividends, over a five-year period of $100 invested at the close of business on December 31, 2020, in Northrop Grumman Stock, the Standard & Poor’s (S&P) 500 Index and the S&P Aerospace & Defense (A&D) Index.
PREFERRED STOCK We have 10,000,000 shares authorized at a $1 par value per share, of which no shares were issued and outstanding as of December 31, 2024 and 2023. MARKET INFORMATION Our common stock is listed on the New York Stock Exchange and trades under the symbol NOC.
PREFERRED STOCK We have 10,000,000 shares authorized at a $1 par value per share, of which no shares were issued and outstanding as of December 31, 2025 and 2024. MARKET INFORMATION Our common stock is listed on the New York Stock Exchange and trades under the symbol NOC.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities COMMON STOCK We have 800,000,000 shares authorized at a $1 par value per share, of which 144,952,026 shares and 150,109,271 shares were issued and outstanding as of December 31, 2024 and 2023, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities COMMON STOCK We have 800,000,000 shares authorized at a $1 par value per share, of which 141,997,194 shares and 144,952,026 shares were issued and outstanding as of December 31, 2025 and 2024, respectively.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS Period Number of Shares Purchased Average Price Paid per Share (1) Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs ($ in millions) (2) September 28, 2024 - October 25, 2024 150,761 $ 530.15 150,761 $ 1,483 October 26, 2024 - November 22, 2024 335,909 506.90 335,909 1,313 November 23, 2024 - December 31, 2024 376,550 478.58 376,550 4,133 Total 863,220 $ 498.61 863,220 $ 4,133 (1) Excludes commissions paid and other costs of execution, including taxes.
Period Number of Shares Purchased Average Price Paid per Share (1) Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs ($ in millions) (2) September 27, 2025 - October 24, 2025 111,974 $ 609.37 111,974 $ 2,923 October 25, 2025 - November 21, 2025 405,703 571.55 405,703 2,691 November 22, 2025 - December 31, 2025 277,220 566.31 277,220 2,534 Total 794,897 $ 575.05 794,897 $ 2,534 (1) Excludes commissions paid and other costs of execution, including taxes.
(2) The value remaining on December 31, 2024 includes an additional $3.0 billion share repurchase authorization approved by the company’s board of directors on December 11, 2024. 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.
By its terms, the program will expire when the company has used all authorized funds for repurchases. 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.
Removed
HOLDERS As of January 27, 2025, there were 17,776 common shareholders of record.
Added
HOLDERS As of January 22, 2026, there were 16,994 common shareholders of record. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The table below summarizes our repurchases of common stock during the three months ended December 31, 2025.
Added
(2) 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. Repurchases under the program commenced in September 2025. All repurchases of common stock during the three months ended December 31, 2025 were made pursuant to this program.
Added
Comparison of Cumulative Five Year Total Return The S&P A&D Index is comprised of Axon Enterprise, Inc., The Boeing Company, General Dynamics Corporation, General Electric Company, Howmet Aerospace Inc., Huntington Ingalls Industries Inc., L3Harris Technologies, Inc., Lockheed Martin Corporation, Northrop Grumman Corporation, RTX Corporation, Textron Inc., and TransDigm Group Incorporated.
Added
This graph is not deemed to be “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act), and should not be deemed to be incorporated by reference into any of our prior or subsequent filings under the Securities Act of 1933 or the Exchange Act.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThese decreases were partially offset by a $42 million benefit from insurance recoveries in our commercial space business during 2023. -36- NORTHROP GRUMMAN CORPORATION PRODUCT AND SERVICE ANALYSIS The following table presents product and service sales and operating costs and expenses by segment: Year Ended December 31 $ in millions 2024 2023 2022 Segment Information: Sales Operating Costs and Expenses Sales Operating Costs and Expenses Sales Operating Costs and Expenses Aeronautics Systems Product $ 9,064 $ 8,248 $ 8,157 $ 8,942 $ 7,981 $ 7,161 Service 2,723 2,382 2,389 2,099 2,311 2,042 Intersegment eliminations 243 218 240 218 239 212 Total Aeronautics Systems 12,030 10,848 10,786 11,259 10,531 9,415 Defense Systems Product 5,843 5,304 5,282 4,819 4,604 4,163 Service 1,862 1,641 2,231 1,959 2,231 1,985 Intersegment eliminations 855 749 776 682 794 700 Total Defense Systems 8,560 7,694 8,289 7,460 7,629 6,848 Mission Systems Product 8,076 7,000 7,749 6,669 7,376 6,291 Service 2,146 1,805 2,092 1,730 2,005 1,639 Intersegment eliminations 1,177 996 1,054 887 1,015 848 Total Mission Systems 11,399 9,801 10,895 9,286 10,396 8,778 Space Systems Product 9,743 8,711 9,709 8,844 8,561 7,664 Service 1,576 1,398 1,681 1,468 1,533 1,404 Intersegment eliminations 412 368 483 431 476 424 Total Space Systems 11,731 10,477 11,873 10,743 10,570 9,492 Total Product $ 32,726 $ 29,263 $ 30,897 $ 29,274 $ 28,522 $ 25,279 Total Service 8,307 7,226 8,393 7,256 8,080 7,070 Total Segment (1) $ 41,033 $ 36,489 $ 39,290 $ 36,530 $ 36,602 $ 32,349 (1) A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.” Product Sales and Costs 2024 product sales increased $1.8 billion, or 6 percent, due to an increase in product sales at all four sectors.
Biggest changeOperating margin rate increased to 11.0 percent from 10.7 percent principally due to more favorable contract mix. -36- Table of Contents NORTHROP GRUMMAN CORPORATION PRODUCT AND SERVICE ANALYSIS The following table presents product and service sales and operating costs and expenses by segment: Year Ended December 31 $ in millions 2025 2024 2023 Segment Information: Sales Operating Costs and Expenses Sales Operating Costs and Expenses Sales Operating Costs and Expenses Aeronautics Systems Product $ 9,723 $ 9,340 $ 9,211 $ 8,383 $ 8,280 $ 9,053 Service 3,102 2,687 3,053 2,658 2,745 2,399 Intersegment eliminations 167 152 132 119 139 128 Total Aeronautics Systems 12,992 12,179 12,396 11,160 11,164 11,580 Defense Systems Product 6,367 5,682 5,696 5,169 5,159 4,708 Service 1,425 1,263 1,532 1,365 1,875 1,659 Intersegment eliminations 210 186 171 149 151 134 Total Defense Systems 8,002 7,131 7,399 6,683 7,185 6,501 Mission Systems Product 8,854 7,608 8,076 7,000 7,749 6,669 Service 2,218 1,861 2,146 1,805 2,092 1,730 Intersegment eliminations 1,434 1,210 1,177 996 1,054 887 Total Mission Systems 12,506 10,679 11,399 9,801 10,895 9,286 Space Systems Product 8,797 7,827 9,743 8,711 9,709 8,844 Service 1,468 1,309 1,576 1,398 1,681 1,468 Intersegment eliminations 506 452 412 368 483 431 Total Space Systems 10,771 9,588 11,731 10,477 11,873 10,743 Total Product $ 33,741 $ 30,457 $ 32,726 $ 29,263 $ 30,897 $ 29,274 Total Service 8,213 7,120 8,307 7,226 8,393 7,256 Total Segment (1) $ 41,954 $ 37,577 $ 41,033 $ 36,489 $ 39,290 $ 36,530 (1) A reconciliation of segment operating income to total operating income is included in “Segment Operating Results.” Product Sales and Costs 2025 product sales increased $1.0 billion, or 3 percent, primarily due to higher sales on restricted airborne radar, marine systems and international ground-based radar programs at Mission Systems, higher volume on Sentinel, military ammunition programs and the IBCS program portfolio at Defense Systems, and higher sales on the F-35, TACAMO, E-2, and B-21 programs at Aeronautics Systems.
Major products and services include command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR) systems; radar, electro-optical/infrared (EO/IR) and acoustic sensors; electronic warfare systems; advanced communications and network systems; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload launch systems; full spectrum cyber solutions; and intelligence processing systems.
Major products and services include radar, electro-optical/infrared (EO/IR) and acoustic sensors; command, control, communications and computers, intelligence, surveillance and reconnaissance (C4ISR) systems; electronic warfare systems; advanced communications and network systems; advanced microelectronics; navigation and positioning sensors; maritime power, propulsion and payload launch systems; full spectrum cyber solutions; and intelligence processing systems.
Due to the inherent uncertainty of this assumption, we consider multiple data points at the measurement date including the plan’s target asset allocation, historical plan asset returns and third-party projection models of expected long-term returns for each of the plans’ strategic asset classes.
Due to the inherent uncertainty of this assumption, we consider multiple data points at the measurement date including the plan’s target asset allocation, third-party projection models of expected long-term returns for each of the plans’ strategic asset classes and historical plan asset returns.
Air Force awarded Northrop Grumman a $13.3 billion contract for the EMD phase of the Sentinel program. In January 2024, the U.S. Air Force provided congressional notification that the Sentinel program was under a Nunn-McCurdy breach review, which is required when total program cost estimates exceed certain defined thresholds.
Sentinel Program In 2020, the U.S. Air Force awarded Northrop Grumman a $13.3 billion contract for the EMD phase of the Sentinel program. In January 2024, the U.S. Air Force provided congressional notification that the Sentinel program was under a Nunn-McCurdy breach review, which is required when total program cost estimates exceed certain defined thresholds.
Interest is credited monthly using the current 30-Year Treasury bond rate. The interest crediting rate is part of the cash balance formula and independent of actual pension investment returns. The cash balance crediting rate tends to move in concert with the discount rate but has an offsetting effect on pension benefit obligations and the related MTM expense (benefit).
Interest is credited monthly using the current 30-Year Treasury bond rate. The interest crediting rate is part of the cash balance formula and independent of actual pension investment returns. In general, the cash balance crediting rate tends to move in concert with the discount rate but has an offsetting effect on pension benefit obligations and the related MTM (benefit) expense.
Global Economic Environment Over the past several years, the global economic environment has experienced extraordinary challenges, including inflationary pressures; widespread delays and disruptions in supply chains; business slowdowns or shutdowns; workforce challenges and labor shortfalls; and market volatility.
Global Economic Environment Over the past several years, the global economic environment has experienced challenges, including inflationary pressures; widespread delays and disruptions in supply chains; business slowdowns or shutdowns; workforce challenges and labor shortfalls; and market volatility.
We use adjusted free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and stock repurchases.
We use free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and stock repurchases.
In July 2024, the Sentinel program was certified for continuation by the DoD upon completion of the Nunn-McCurdy breach review. In connection with the certification, the DoD directed that the program be restructured, including plans for infrastructure related to the command and launch segment, which was the main driver of the increased cost estimates for the Production and Deployment phases.
In July 2024, the Sentinel program was certified for continuation by the DoW upon completion of the Nunn-McCurdy breach review. In connection with the certification, the DoW directed that the program be restructured, including plans for infrastructure related to the command and launch segment, which was the main driver of the increased cost estimates for the Production and Deployment phases.
Air Force, the U.S. Navy, other U.S. government agencies, and international customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft; airborne battle management and command and control systems; and unmanned autonomous aircraft systems, including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR) systems.
Air Force, the U.S. Navy, other U.S. government agencies, and international customers. Major products include strategic long-range strike aircraft; tactical fighter and air dominance aircraft; airborne battle management and command and control systems; and uncrewed autonomous aircraft systems, including high-altitude long-endurance (HALE) strategic intelligence, surveillance and reconnaissance (ISR) systems.
These conflicts have resulted in and may continue to result in increased demand for defense products and services from allies and partner nations, particularly in those areas. For example, we have experienced an increase in demand for certain of our products and services directly and indirectly related to the conflict in Ukraine.
These conflicts have resulted in and may continue to result in increased demand for defense products and services from allies and partner nations, particularly in those regions. For example, we experienced an increase in demand for certain of our products and services directly and indirectly related to the conflict in Ukraine.
Factors that could result in changes to the assessment of probability, range of reasonably estimated costs and environmental accruals include: modification of planned remedial actions; changes in the estimated time required to conduct remedial actions; discovery of more or less extensive (or different) contamination -43- NORTHROP GRUMMAN CORPORATION than anticipated; information regarding the potential causes and effects of contamination; results of efforts to involve other responsible parties; financial capabilities of other responsible parties; changes in laws and regulations, their interpretation or application; contractual obligations affecting remediation or responsibilities; and improvements in remediation technology.
Factors that could result in changes to the assessment of probability, range of reasonably estimated costs and environmental accruals include: modification of planned remedial actions; changes in the estimated time required to conduct remedial actions; discovery of more or less extensive (or different) contamination than anticipated; information regarding the potential causes and effects of contamination; results of efforts to involve other responsible parties; financial capabilities of other responsible parties; changes in laws and regulations, their interpretation or application; contractual obligations affecting remediation or responsibilities; and improvements in remediation technology.
Discount Rate – The discount rate represents the interest rate used to determine the present value of future cash flows currently expected to be required to settle our pension and OPB obligations. The discount rate is generally based on the yield of high-quality corporate fixed-income investments.
Discount Rate – The discount rate represents the interest rate we use to determine the present value of future cash flows currently expected to be required to settle our pension and OPB obligations. The discount rate is generally based on the yield of high-quality corporate fixed-income investments.
Determinations regarding whether to record a reserve and, if so, of what amount, reflect management’s assessment regarding what is likely to occur; they do not necessarily reflect what management believes should occur. The ultimate resolution of any such exposure to us may vary materially from earlier estimates as further facts and circumstances develop or become known to us.
Determinations regarding whether to accrue a loss and, if so, of what amount, reflect management’s assessment regarding what is likely to occur; they do not necessarily reflect what management believes should occur. The ultimate resolution of any such exposure to us may vary materially from earlier estimates as further facts and circumstances develop or become known to us.
We believe our capabilities, particularly in space, C4ISR, missile defense, battle management, advanced weapons, strategic deterrence, and survivable aircraft and mission systems should help our customers in the U.S. and globally defend against current and future threats and, as a result, continue to allow for long-term profitable business growth.
We believe our capabilities, particularly in space, C4ISR, air and missile defense, battle management, advanced weapons, strategic deterrence, survivable aircraft and mission systems should help our customers in the U.S. and globally defend against current and future threats and, as a result, continue to position us for long-term profitable business growth.
Revenue Recognition Due to the long-term nature of our contracts, we generally recognize revenue over time using the cost-to-cost method, which requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services.
Revenue Recognition Due to the long-term nature of our contracts, we generally recognize revenue over time using the cost-to-cost method, which requires us to make reasonable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services.
When it is more likely than not that a tax position will be sustained, we record the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority. As of December 31, 2024, we have approximately $1.4 billion in unrecognized tax benefits.
When it is more likely than not that a tax position will be sustained, we record the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority. As of December 31, 2025, we have approximately $1.6 billion in unrecognized tax benefits.
This income valuation method requires management to project sales, operating expenses, working capital, capital -44- NORTHROP GRUMMAN CORPORATION spending and cash flows for the reporting units over a multi-year period, as well as to determine the weighted-average cost of capital (WACC) used as a discount rate and terminal value assumptions.
This income valuation method requires management to project sales, operating expenses, working capital, capital spending and cash flows for the reporting units over a multi-year period, as well as to determine the weighted-average cost of capital (WACC) used as a discount rate and terminal value assumptions.
Estimating liabilities and costs associated with these matters requires judgment based upon the professional knowledge and experience of management. We determine whether to record a reserve and, if so, what amount based on consideration of the facts and circumstances of each matter as then known to us.
Estimating liabilities and costs associated with these matters requires judgment based upon the professional knowledge and experience of management. We determine whether to accrue a loss and, if so, what amount based on consideration of the facts and circumstances of each matter as then known to us.
As a result, sales tend to fluctuate in concert with costs incurred across our large portfolio of contracts. -29- NORTHROP GRUMMAN CORPORATION Due to the applicable FAR and CAS requirements that govern our U.S. government business, most types of costs are allocable to U.S. government contracts.
As a result, sales tend to fluctuate in concert with costs incurred across our large portfolio of contracts. Due to the applicable FAR and CAS requirements that govern our U.S. government business, most types of costs are allocable to U.S. government contracts.
For further information regarding our pension and OPB plans, see “Risk Factors” and Notes 1 and 12 to the consolidated financial statements. Litigation, Commitments and Contingencies We are subject to a range of claims, disputes, enforcement actions, investigations, lawsuits, overhead cost claims, environmental matters, income tax matters and administrative proceedings that arise in the ordinary course of business.
For further information regarding our pension and OPB plans, see “Risk Factors” and Notes 1 and 12 to the consolidated financial statements. -42- Table of Contents NORTHROP GRUMMAN CORPORATION Litigation, Commitments and Contingencies We are subject to a range of claims, disputes, enforcement actions, investigations, lawsuits, overhead cost claims, environmental matters, income tax matters and administrative proceedings that arise in the ordinary course of business.
Holding all other assumptions constant, an increase or decrease of 25 basis points in the December 31, 2024 cash balance crediting rate assumption would have the following estimated effects on the 2024 pension benefit obligation, which would be reflected in the 2024 MTM (benefit) expense, and 2025 expected pension expense: $ in millions 25 Basis Point Decrease in Rate 25 Basis Point Increase in Rate 2024 pension obligation and MTM (benefit) expense $ (101) $ 104 2025 pension (benefit) expense (9) 9 Expected Long-Term Rate of Return on Plan Assets – The expected long-term rate of return on plan assets (EROA) assumption reflects the average rate of net earnings we expect on current and future benefit plan investments.
Holding all other assumptions constant, an increase or decrease of 25 basis points in the December 31, 2025 cash balance crediting rate assumption would have the following estimated effects on the 2025 pension benefit obligation, which would be reflected in the 2025 MTM (benefit) expense, and 2026 expected pension expense: $ in millions 25 Basis Point Decrease in Rate 25 Basis Point Increase in Rate 2025 pension obligation and MTM (benefit) expense $ (106) $ 110 2026 pension (benefit) expense (9) 10 Expected Long-Term Rate of Return on Plan Assets – The expected long-term rate of return on plan assets (EROA) assumption reflects the average rate of net earnings we expect on current and future benefit plan investments.
We continue to work to address challenges caused by the macroeconomic environment on our business. We have seen positive progress in the supply chain as on-time deliveries and quality have improved. In remaining areas of pressure, we are proactively working with our suppliers to ensure we meet our contract commitments.
We continue to work to address challenges to our business caused by the macroeconomic environment. We have seen progress in the supply chain as on-time deliveries and quality continue to improve. In remaining areas of pressure, we are proactively working with our suppliers to help meet our contract commitments.
Holding all other assumptions constant, an increase or decrease of 25 basis points in our December 31, 2024 EROA assumption would have the following estimated effects on 2025 expected pension and OPB expense: $ in millions 25 Basis Point Decrease 25 Basis Point Increase 2025 pension and OPB expense (benefit) $ 75 $ (75) In addition, holding all other assumptions constant, an increase or decrease of 100 basis points in actual versus expected return on plan assets would have the following estimated effects on our 2025 MTM expense (benefit): $ in millions 100 Basis Point Decrease 100 Basis Point Increase 2025 MTM expense (benefit) $ 300 $ (300) Estimated Fair Market Value of Plan Assets – For certain plan assets where the fair market value is not readily determinable, such as real estate, private equity, hedge funds and opportunistic investments, we develop estimates of fair value using the best information available.
Holding all other assumptions constant, an increase or decrease of 25 basis points in our December 31, 2025 EROA assumption would have the following estimated effects on 2026 expected pension and OPB expense (benefit): $ in millions 25 Basis Point Decrease 25 Basis Point Increase 2026 pension and OPB expense (benefit) $ 79 $ (79) In addition, holding all other assumptions constant, an increase or decrease of 100 basis points in actual versus expected return on plan assets would have the following estimated effects on our 2026 MTM expense (benefit): $ in millions 100 Basis Point Decrease 100 Basis Point Increase 2026 MTM expense (benefit) $ 314 $ (314) Estimated Fair Market Value of Plan Assets – For certain plan assets where the fair market value is not readily determinable, such as private equity, real estate, and other alternative investments, we develop estimates of fair value using the best information available.
LIQUIDITY AND CAPITAL RESOURCES We are focused on the efficient conversion of operating income into cash to provide for the company’s material cash requirements, including working capital needs, satisfaction of contractual commitments, funding of our pension and OPB plans, investment in our business through capital expenditures, and shareholder return through dividend payments and share repurchases.
LIQUIDITY AND CAPITAL RESOURCES We are focused on the efficient conversion of operating income into cash to provide for the company’s material cash requirements, including working capital needs, satisfaction of contractual commitments, investment in our business through capital expenditures, funding of our pension and OPB plans, and shareholder returns.
For determining 2024 FAS expense, we assumed an expected long-term rate of return on pension plan assets of 7.5 percent and an expected long-term rate of return on OPB plan assets of 7.12 percent. For 2025 FAS expense, we have assumed an expected long-term rate of return on pension plan assets of 7.5 percent and 7.08 percent on OPB plans.
For determining 2025 FAS expense, we assumed an expected long-term rate of return on pension plan assets of 7.5 percent and an expected long-term rate of return on OPB plan assets of 7.08 percent. For 2026 FAS expense, we have assumed an expected long-term rate of return of 7.5 percent on pension plan assets and 7.1 percent on OPB plans.
We believe the current global security environment highlights the significant national security threats to the U.S. and its allies, and the need for strong deterrence and robust defense capabilities, and are actively evaluating both opportunities and risks associated with this environment.
We believe the current global security environment, characterized by significant national security threats to the U.S. and its allies, continues to highlight the need for strong deterrence and robust defense capabilities, and we are actively evaluating both opportunities and risks associated with this environment.
Holding all other assumptions constant, an increase or decrease of 25 basis points in the December 31, 2024 discount rate assumption would have the following estimated effects on 2024 pension and OPB obligations, which would be reflected in the 2024 MTM expense (benefit), and 2025 expected pension and OPB expense: $ in millions 25 Basis Point Decrease in Rate 25 Basis Point Increase in Rate 2024 pension and OPB obligation and MTM expense (benefit) $ 785 $ (750) 2025 pension and OPB (benefit) expense (20) 19 Cash Balance Crediting Rate – A portion of the company’s pension obligation and resulting pension expense is based on a cash balance formula, where participants’ hypothetical account balances are accumulated over time with pay-based credits and interest.
Holding all other assumptions constant, an increase or decrease of 25 basis points in the December 31, 2025 discount rate assumption would have the following estimated effects on 2025 pension and OPB obligations, which would be reflected in the 2025 MTM (benefit) expense, and 2026 expected pension and OPB expense: $ in millions 25 Basis Point Decrease in Rate 25 Basis Point Increase in Rate 2025 pension and OPB obligation and MTM expense (benefit) $ 796 $ (761) 2026 pension and OPB (benefit) expense (22) 21 Cash Balance Crediting Rate – A portion of the company’s pension obligation and resulting pension expense is based on a cash balance formula, where participants’ hypothetical account balances are accumulated over time with pay-based credits and interest.
We employ judgment in making our estimates in consideration of historical experience, currently available information and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements.
We employ judgment in making our estimates in consideration of historical experience, currently available information -39- Table of Contents NORTHROP GRUMMAN CORPORATION and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from our estimates and assumptions, and any such differences could be material to our consolidated financial statements.
Since our contracts often span a period of several years, estimation of revenue, cost, and progress toward completion requires the use of judgment.
Since our contracts often span a period of several years, estimation of revenue, cost, and progress toward completion requires significant judgment.
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.
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 -37- Table of Contents NORTHROP GRUMMAN CORPORATION (firm orders for which funding is authorized and appropriated) and unfunded backlog.
The company has a five-year senior unsecured credit facility in an aggregate principal amount of $2.5 billion, and in April 2024, we renewed our one-year $500 million uncommitted credit facility. At December 31, 2024, there were no borrowings outstanding under these credit facilities.
The company has a five-year senior unsecured credit facility in an aggregate principal amount of $3.0 billion, and in April 2025, we renewed our one-year $500 million uncommitted credit facility. At December 31, 2025, there were no borrowings outstanding under these credit facilities.
These macroeconomic factors have contributed, and in the future could contribute, to increased costs, delays, disruptions and other performance challenges, as well as increased competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.
These macroeconomic factors can and have contributed, and could continue to contribute, to increased costs, delays, disruptions and other performance challenges, as well as increased competing demands for limited resources to address such increased costs and other challenges, for our company, our suppliers and partners, and our customers.
Current and future requirements related to the conflicts in Ukraine and the Middle East, threats in the Pacific region and other security priorities, as well as the macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S. and globally, will continue to impact our customers’ budgets, spending and priorities, and our industry.
Current and future requirements related to the conflict in Ukraine and threats in the Middle East, the Western Pacific and Latin America and other security priorities, as well as the macroeconomic environment, the national debt, and other domestic priorities, among other things, in the U.S. and globally, will continue to impact our customers’ budgets, spending and priorities, and our industry.
As of December 31, 2024, we had cash and cash equivalents of $4.4 billion; $268 million was held outside of the U.S. by foreign subsidiaries.
As of December 31, 2025, we had cash and cash equivalents of $4.4 billion; $265 million was held outside of the U.S. by foreign subsidiaries.
Our average annual rate of return from 1976 to 2024 was approximately 10.5 percent and our 20-year and 30-year rolling average rates of return were approximately 7.5 percent and 8.9 percent, respectively, each determined on an arithmetic basis and net of expenses. Our 2024 return on plan assets, net of expenses, was approximately 4.7 percent.
Our average annual rate of return from 1976 to 2025 was approximately 10.6 percent and our 20-year and 30-year rolling average rates of return were approximately 7.5 percent and 8.3 percent, respectively, each determined on an arithmetic basis and net of expenses. Our 2025 return on plan assets, net of expenses, was approximately 11.3 percent.
We use judgment to evaluate the recoverability of our environmental remediation costs, assessing, among other things, U.S. government regulations, our U.S. government contract mix and past practices. Portions of the company’s environmental liabilities we do not expect to be recoverable have been expensed.
We use judgment to evaluate the recoverability of our environmental remediation costs, assessing, among other things, U.S. government regulations, our U.S. government contract mix and past practices. Portions of the company’s environmental liabilities we do not expect to be recoverable are expensed when the liability is established.
When we determine changes in the assumptions are warranted, or as a result of plan amendments, future pension and OPB expense and our projected benefit obligation could increase or decrease materially.
When we determine changes in the assumptions are warranted, or as a result of plan amendments, future pension and OPB expense and our projected -40- Table of Contents NORTHROP GRUMMAN CORPORATION benefit obligation could increase or decrease materially.
Management's Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) of our Form 10-K for the year ended December 31, 2023 (“2023 Annual Report on Form 10-K”). To the extent the July 1, 2024 SDS realignment impacted the disclosures in the 2023 Annual Report on Form 10-K, we recast those prior year MD&A disclosures herein.
Management's Discussion and Analysis of Financial Condition and Results of Operations” (MD&A) of our Form 10-K for the year ended December 31, 2024 (“2024 Annual Report on Form 10-K”). To the extent the January 1, 2025 SSAS realignment impacted the disclosures in the 2024 Annual Report on Form 10-K, we recast those prior year disclosures herein.
Taking into consideration the factors noted above, our weighted-average composite pension discount rate was 5.73 percent at December 31, 2024 and 5.15 percent at December 31, 2023. -41- NORTHROP GRUMMAN CORPORATION The effects of a hypothetical change in the discount rate may be nonlinear and asymmetrical for future years as the discount rate changes.
Taking into consideration the factors noted above, our weighted-average composite pension discount rate was 5.58 percent at December 31, 2025 and 5.73 percent at December 31, 2024. The effects of a hypothetical change in the discount rate may be nonlinear and asymmetrical for future years as the discount rate changes.
We continue to monitor developments in these regions, but have not experienced, and do not anticipate experiencing, significant adverse financial impacts directly from the conflicts in Ukraine or the Middle East.
We continue to monitor developments in these regions, but have not experienced, and do not anticipate experiencing, significant adverse financial impacts directly from these conflicts.
Diluted Earnings Per Share The table below reconciles diluted earnings per share to MTM-adjusted EPS: Year Ended December 31 % Change in 2024 2023 2022 2024 2023 Diluted earnings per share $ 28.34 $ 13.53 $ 31.47 109 % (57) % MTM (benefit) expense per share (3.02) 2.78 (7.92) NM NM MTM-related deferred state tax expense (benefit) per share (1) 0.16 (0.14) 0.42 NM NM Federal tax expense (benefit) of items above per share (2) 0.60 (0.56) 1.57 NM NM MTM adjustment per share, net of tax (2.26) 2.08 (5.93) NM NM MTM-adjusted EPS $ 26.08 $ 15.61 $ 25.54 67 % (39) % (1) The deferred state tax impact in each period was calculated using the company’s blended state tax rate of 5.25 percent and is included in Unallocated corporate expense within operating income.
Diluted Earnings Per Share The table below reconciles diluted earnings per share to MTM-adjusted EPS: Year Ended December 31 % Change in 2025 2024 2023 2025 2024 Diluted earnings per share $ 29.08 $ 28.34 $ 13.53 3 % 109 % MTM (benefit) expense per share (3.66) (3.02) 2.78 21 % NM MTM-related deferred state tax expense (benefit) per share (1) 0.19 0.16 (0.14) 19 % NM Federal tax expense (benefit) of items above per share (2) 0.73 0.60 (0.56) 22 % NM MTM adjustment per share, net of tax (2.74) (2.26) 2.08 21 % NM MTM-adjusted EPS $ 26.34 $ 26.08 $ 15.61 1 % 67 % (1) The deferred state tax impact in each period was calculated using the company’s blended state tax rate of 5.25 percent and is included in Unallocated corporate expense within operating income.
Goodwill and Long-Lived Assets Overview – We allocate the purchase price of acquired businesses to the underlying tangible and intangible assets acquired and liabilities assumed based upon their respective fair values, with the excess recorded as goodwill.
Goodwill and Long-Lived Assets Overview – We allocate the purchase price of acquired businesses to the underlying tangible and intangible assets acquired and liabilities assumed based upon their respective fair values, with the excess, as well as any adjustments during the initial measurement period, recorded as goodwill.
Net Earnings The table below reconciles net earnings to MTM-adjusted net earnings: Year Ended December 31 % Change in $ in millions 2024 2023 2022 2024 2023 Net earnings $ 4,174 $ 2,056 $ 4,896 103 % (58) % MTM (benefit) expense (443) 422 (1,232) NM NM MTM-related deferred state tax expense (benefit) (1) 23 (22) 65 NM NM Federal tax expense (benefit) of items above (2) 88 (84) 245 NM NM MTM adjustment, net of tax (332) 316 (922) NM NM MTM-adjusted net earnings $ 3,842 $ 2,372 $ 3,974 62 % (40) % (1) The deferred state tax impact in each period was calculated using the company’s blended state tax rate of 5.25 percent and is included in Unallocated corporate expense within operating income.
Net Earnings The table below reconciles net earnings to MTM-adjusted net earnings: Year Ended December 31 % Change in $ in millions 2025 2024 2023 2025 2024 Net earnings $ 4,182 $ 4,174 $ 2,056 — % 103 % MTM (benefit) expense (527) (443) 422 19 % NM MTM-related deferred state tax expense (benefit) (1) 28 23 (22) 22 % NM Federal tax expense (benefit) of items above (2) 105 88 (84) 19 % NM MTM adjustment, net of tax (394) (332) 316 19 % NM MTM-adjusted net earnings $ 3,788 $ 3,842 $ 2,372 (1) % 62 % (1) The deferred state tax impact in each period was calculated using the company’s blended state tax rate of 5.25 percent and is included in Unallocated corporate expense within operating income.
Mark-to-Market Pension and OPB Benefit/Expense The primary components of pre-tax MTM benefit (expense) are presented in the table below: Year Ended December 31 $ in millions 2024 2023 2022 Actuarial gains (losses) on projected benefit obligation $ 1,314 $ (1,489) $ 9,662 Actuarial (losses) gains on plan assets (871) 1,067 (8,430) MTM benefit (expense) $ 443 $ (422) $ 1,232 The 2024 MTM benefit of $443 million was primarily driven by a 58 basis point increase in the discount rate from year end 2023, partially offset by actual net plan asset returns of 4.7 percent compared to our 7.5 percent asset return assumption.
Mark-to-Market Pension and OPB Benefit/Expense The primary components of pre-tax MTM benefit (expense) are presented in the table below: Year Ended December 31 $ in millions 2025 2024 2023 Actuarial (losses) gains on projected benefit obligation $ (609) $ 1,314 $ (1,489) Actuarial gains (losses) on plan assets 1,136 (871) 1,067 MTM benefit (expense) $ 527 $ 443 $ (422) The 2025 MTM benefit of $527 million was primarily driven by actual net plan asset returns of 11.3 percent compared to our 7.5 percent asset return assumption, partially offset by a 15 basis point decrease in the discount rate from year end 2024.
For further information regarding product and service operating costs and expenses, see “Product and Service Analysis” below.
See “Segment Operating Results” below for further information by segment. For further information regarding product and service operating costs and expenses, see “Product and Service Analysis” below.
In January 2024, we issued $2.5 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases and working capital. The company’s principal contractual commitments include purchase obligations, repayments of long-term debt and related interest, and payments under operating leases. At December 31, 2024, we had $20.5 billion of purchase obligations, approximately half of which is short-term.
In May 2025, we issued $1.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases and working capital. The company’s principal contractual commitments include purchase obligations, repayments of long-term debt and related interest, and payments under operating leases. At December 31, 2025, we had $23.9 billion of purchase obligations, approximately half of which are short-term.
(2) The federal tax impact in each period was calculated by subtracting the deferred state tax impact from MTM benefit (expense) and applying the 21 percent federal statutory rate. 2024 diluted earnings per share increased $14.81, or 109 percent, reflecting the 103 percent increase in net earnings described above and a 3 percent reduction in weighted-average diluted shares outstanding.
(2) The federal tax impact in each period was calculated by subtracting the deferred state tax impact from MTM (benefit) expense and applying the 21 percent federal statutory rate. 2025 diluted earnings per share increased $0.74, or 3 percent, reflecting comparable net earnings and a 2 percent reduction in weighted-average diluted shares outstanding.
For a more complete description of each segment’s products and services, see “Business.” Segment Operating Income and Margin Rate Segment operating income, as reconciled in the table below, and segment operating margin rate (segment operating income divided by sales) are non-GAAP measures that reflect the combined operating income of our four segments less the operating income associated with intersegment sales.
This realignment is reflected in the financial information contained in this report. -32- Table of Contents NORTHROP GRUMMAN CORPORATION For a more complete description of each segment’s products and services, see “Business.” Segment Operating Income and Margin Rate Segment operating income, as reconciled in the table below, and segment operating margin rate (segment operating income divided by sales) are non-GAAP measures that reflect the combined operating income of our four segments less the operating income associated with intersegment sales.
DEFENSE SYSTEMS Defense Systems is a leader in the design, engineering, development, integration and production of strategic deterrent systems, advanced tactical weapons, and missile defense solutions, and a provider of sustainment, modernization and training services for manned and unmanned aircraft and electronics systems for the U.S. military and a broad range of international customers.
DEFENSE SYSTEMS Defense Systems is a leader in the design, engineering, development, integration and production of strategic deterrent systems, advanced tactical weapons, and missile defense solutions for the U.S. military and a broad range of international customers.
The minimum cash balance crediting rate allowed under the plan is 2.25 percent. The cash balance crediting rate assumption has been set to its current level of 4.78 percent as of December 31, 2024, increasing to 4.90 percent by 2030.
The minimum cash balance crediting rate allowed under the plan is 2.25 percent. The cash balance crediting rate assumption has been set to its current level of 4.84 percent as of December 31, 2025, increasing to 5.26 percent by 2031.
If our estimated cost to complete the aircraft changes or our assumptions regarding contract performance, quantities, supplier negotiations, or funding to mitigate the impact of macroeconomic disruptions are resolved more or less favorably than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected. Sentinel Program In 2020, the U.S.
If our estimated cost to complete the aircraft changes, if we reach an agreement with the customer regarding an accelerated production rate, or if our assumptions regarding contract performance, quantities, supplier negotiations, or funding to mitigate the impact of macroeconomic disruptions are resolved more or less favorably than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.
As such, after considering the information released by the RPEC in October 2021 as well as the company’s recent mortality experience, we adopted the full MP-2021 projection scale while continuing to use the Pri-2012 White Collar table, supplemented with 50% of the Gradual Wear-Off illustration as outlined in the RPEC’s 2022 Mortality Improvement Update paper to reflect the future impacts of COVID-19, to develop our mortality assumptions used in calculating our pension and OPB obligations recognized at December 31, 2024, and the amounts estimated for our 2025 pension and OPB expense.
As such, after considering the information released by the RPEC in October 2021 as well as the company’s recent mortality experience, we adopted the full MP-2021 projection scale while continuing to use the Pri-2012 White Collar table, supplemented with 50% of the Gradual Wear-Off illustration as outlined in the RPEC’s 2022 Mortality Improvement Update paper to reflect the future impacts of COVID-19.
As of December 31, 2024, we expect approximately 93 percent of the company’s environmental remediation costs to be recoverable; however, to the extent our judgments on the recoverability of our environmental remediation costs change or the unallowable portion of our environmental remediation costs otherwise increase, there could be a significant impact on our consolidated financial position, annual results of operations and/or cash flows.
To the extent our judgments on the recoverability of our environmental remediation costs change or the unallowable portion of our environmental remediation costs otherwise increase, there could be a significant impact on our consolidated financial position, annual results of operations and/or cash flows.
For example, we have included in our EACs management’s best estimate of the impact inflation and disruptions in the supply chain have had and may continue to have on our contracts.
We also consider the impact of macroeconomic factors on our estimates, in particular on contract EACs that span several years. For example, we have included in our EACs management’s best estimate of the impact inflation and disruptions in the supply chain have had and may continue to have on our contracts.
During 2024, the Investment Committee of the company’s benefit plans reviewed the plans’ major asset class allocations and approved an update to increase the target fixed-income asset allocation from 43% to 45%. The actual asset allocation as of December 31, 2024 was approximately 41% fixed-income, 29% public equities, 23% alternatives, 6% private credit and 1% cash.
During 2025, the Investment Committee of the company’s benefit plans reviewed the plans’ major asset class allocations and approved an update to increase the target fixed-income asset allocation from 45% to 48%. The actual -41- Table of Contents NORTHROP GRUMMAN CORPORATION asset allocation as of December 31, 2025 was approximately 43% fixed-income, 28% public equities, 27% alternatives, and 2% cash.
See Note 15 to the consolidated financial statements for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments.
See “Segment Operating Results” below for further information by segment and “Product and Service Analysis” for product and service detail. See Note 15 to the consolidated financial statements for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments.
CONSOLIDATED OPERATING RESULTS For purposes of the operating results discussion below, we assess our performance using certain financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”).
CONSOLIDATED OPERATING RESULTS Non-GAAP Financial Measures For purposes of the operating results discussion below, we assess our performance using certain financial measures that are not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “FAS”), as follows: • Organic sales is defined as total sales excluding sales attributable to the company's former training services business.
Purchase obligations are largely comprised of open purchase -38- NORTHROP GRUMMAN CORPORATION order commitments to suppliers and subcontractors under U.S. government contracts. In most circumstances, our risk associated with the purchase obligations on our U.S. government contracts is limited to the termination liability provisions within those contracts.
Purchase obligations are largely comprised of open purchase order commitments to suppliers and subcontractors under U.S. government contracts. In most circumstances, our risk associated with the purchase obligations on our U.S. government contracts is limited by the termination liability provisions within those contracts. As such, we do not believe they represent a material liquidity risk to the company.
Economic tensions and changes in international trade policies, including higher tariffs on imported goods and materials, the imposition of retaliatory tariffs or other trade protection measures and renegotiation of free trade agreements, could also further impact the global market for defense products, services and solutions. U.S.
Economic tensions and changes in international trade policies, including, for example, the widespread tariffs announced since last year by the U.S. on its major trading partners, higher tariffs on imported goods and materials and actions taken in response (such as retaliatory tariffs or other trade protectionist measures or the renegotiation of free trade agreements), could also further impact the global market for defense products, services and solutions.
Factors considered in these estimates include our historical performance, the availability, productivity and cost of labor, the nature and complexity of work to be performed, the effect of change orders, availability and cost of materials, components and subcontracts, the effect of any delays in performance and the level of indirect cost allocations. -40- NORTHROP GRUMMAN CORPORATION We also consider the impact of macroeconomic factors on our estimates, in particular on contract EACs that span several years.
Factors considered in these estimates include our historical performance, the availability, productivity and cost of labor, the nature and complexity of work to be performed, the effect of change orders, availability and cost of materials, components and subcontracts, the effect of any delays in performance and the level of indirect cost allocations.
Cash returned to shareholders through share repurchases and dividends totaled $3.7 billion in 2024 and $2.6 billion in 2023. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements.
In addition, an overall increase in interest rates in recent years has raised the cost of borrowing for governments, and if rates further increase, it could impact government spending priorities (in the U.S. and allied countries, in particular), including their demand for defense products.
In addition, although interest rates have declined over the past year, they remain elevated compared to recent years and have raised the cost of borrowing for governments. If rates increase or remain elevated, it could impact government spending priorities (in the U.S. and allied countries, in particular), including the demand for defense products.
The Sentinel EAC incorporates our best estimate of costs to complete the restructured EMD effort; however, if the outcome is more or less favorable than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.
If our estimated cost to complete the restructured EMD effort or our expectations for achieving contract incentives are more or less favorable than what we have estimated, our financial position, results of operations and/or cash flows could be materially affected.
Consistent with our past practice, we obtained long-term capital market forecasting models from several third parties and, using our target asset allocation, developed an expected rate of return on plan assets from each model.
Consistent with our past practice, we obtained long-term capital market forecasting models from several third parties and, using our target asset allocation, developed an expected rate of return on plan assets from each model. We considered not only the specific returns projected by those third-party models, but also changes in the models year-to-year when developing our EROA.
SEGMENT OPERATING RESULTS Basis of Presentation The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems. 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.
SEGMENT OPERATING RESULTS Basis of Presentation The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems. Effective January 1, 2025, the company realigned the Strike and Surveillance Aircraft Solutions (SSAS) business unit from Defense Systems to Aeronautics Systems.
Operating margin rate decreased to 10.0 percent from 10.2 percent, primarily due to lower net EAC adjustments. MISSION SYSTEMS Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense and intelligence community, and international customers.
Operating margin rate increased to 10.9 percent from 9.7 percent primarily due to higher net EAC adjustments, including a $76 million favorable EAC adjustment on the Sentinel program during the second quarter of 2025. MISSION SYSTEMS Mission Systems is a leader in advanced mission solutions and multifunction systems, primarily for the U.S. defense and intelligence community, and international customers.
FAS/CAS Operating Adjustment The 2024 FAS/CAS operating adjustment reflects higher CAS pension expense largely driven by plan asset returns in prior years and changes in certain CAS actuarial assumptions as of December 31, 2023.
FAS/CAS Operating Adjustment The 2025 FAS/CAS operating adjustment reflects higher CAS pension expense largely driven by plan asset returns in prior years and changes in certain CAS actuarial assumptions as of December 31, 2024. Unallocated Corporate Expense The decrease in 2025 unallocated corporate expense is primarily due to a $231 million gain on the sale of our training services business.
The table below reconciles net cash provided by operating activities to adjusted free cash flow: Year Ended December 31 % Change in $ in millions 2024 2023 2022 2024 2023 Net cash provided by operating activities $ 4,388 $ 3,875 $ 2,901 13 % 34 % Capital expenditures (1,767) (1,775) (1,435) — % 24 % Proceeds from sale of equipment to a customer — — 155 NM (100) % Adjusted free cash flow $ 2,621 $ 2,100 $ 1,621 25 % 30 % 2024 adjusted free cash flow increased $521 million, or 25 percent, principally due to higher net cash provided by operating activities.
The table below reconciles net cash provided by operating activities to free cash flow: Year Ended December 31 % Change in $ in millions 2025 2024 2023 2025 2024 Net cash provided by operating activities $ 4,757 $ 4,388 $ 3,875 8 % 13 % Capital expenditures (1,450) (1,767) (1,775) (18) % — % Free cash flow $ 3,307 $ 2,621 $ 2,100 26 % 25 % 2025 free cash flow increased $686 million, or 26 percent, due to higher net cash provided by operating activities as well as lower capital expenditures.
The same is true for our suppliers and other business partners. The conflicts in Ukraine and the Middle East and threats elsewhere, particularly in the Pacific region, have increased global tensions and instability and highlighted security requirements globally, including in Europe, the Middle East and the Pacific region, as well as the U.S.
The ongoing conflict in Ukraine, recent events in Venezuela and threats elsewhere, particularly in the Middle East and the Western Pacific region, have increased global tensions and instability and highlighted security requirements globally, including in Europe, the Middle East, the Pacific region and Latin America, as well as the U.S.
(2) The federal tax impact in each period was calculated by subtracting the deferred state tax impact from MTM benefit (expense) and applying the 21 percent federal statutory rate. 2024 net earnings increased $2.1 billion, or 103 percent, primarily due to $1.8 billion of higher operating income, an $865 million increase in our MTM benefit (expense), and a $126 million increase in the non-operating FAS pension benefit.
(2) The federal tax impact in each period was calculated by subtracting the deferred state tax impact from MTM (benefit) expense and applying the 21 percent federal statutory rate. 2025 net earnings were comparable to the prior year and reflect the $141 million increase in operating income described above and an $84 million increase in our MTM benefit, partially offset by a $115 million decrease in the non-operating FAS pension benefit, $44 million of higher interest expense and a $44 million increase in income tax expense.
Air Force have established not to exceed (NTE) pricing for additional aircraft up to unit 40. The average NTE value for these subsequent lots is above the average unit price of the five LRIP lots, and the NTE lots include an economic price adjustment clause to help protect against certain inflationary pressures.
The average NTE value for these subsequent lots is above the average unit price of the five LRIP lots, and the NTE lots include an economic price adjustment clause to help protect against certain inflationary pressures. Final terms, quantity, and pricing for these subsequent lots are not fully negotiated. We are in discussions with the U.S.
Due to the many variables inherent in developing the estimates used in our impairment analyses, differences in assumptions may have a material effect on the results of those impairment analyses. -45- NORTHROP GRUMMAN CORPORATION
Impairment assessment inherently involves management judgments as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Due to the many variables inherent in developing the estimates used in our impairment analyses, differences in assumptions may have a material effect on the results of those impairment analyses. -44- Table of Contents NORTHROP GRUMMAN CORPORATION
Year Ended December 31 % Change in $ in millions 2024 2023 2022 2024 2023 Sales $ 11,731 $ 11,873 $ 10,570 (1) % 12 % Operating income 1,254 1,130 1,078 11 % 5 % Operating margin rate 10.7 % 9.5 % 10.2 % Sales 2024 sales decreased $142 million, or 1 percent, primarily due to wind-down of work on the restricted space and NGI programs, which reduced sales by $595 million.
Year Ended December 31 % Change in $ in millions 2025 2024 2023 2025 2024 Sales $ 10,771 $ 11,731 $ 11,873 (8) % (1) % Operating income 1,183 1,254 1,130 (6) % 11 % Operating margin rate 11.0 % 10.7 % 9.5 % Sales 2025 sales decreased $960 million, or 8 percent, primarily due to wind-down of work on the restricted space and NGI programs, which reduced sales by $738 million, as well as a $172 million decrease for the SDA satellite programs due to the timing of materials and a $102 million decrease driven by lower volume on the SLS Booster program.
Net EAC adjustments can have a significant effect on reported sales and operating income and the aggregate amounts are presented in the table below: Year Ended December 31 $ in millions 2024 2023 2022 Favorable EAC adjustments $ 1,461 $ 1,314 $ 1,337 Unfavorable EAC adjustments (1,111) (1,230) (977) Net EAC adjustments $ 350 $ 84 $ 360 -33- NORTHROP GRUMMAN CORPORATION Net EAC adjustments by segment are presented in the table below: Year Ended December 31 $ in millions 2024 2023 2022 Aeronautics Systems $ 151 $ (44) $ 174 Defense Systems 96 91 104 Mission Systems 59 149 138 Space Systems 42 (101) (31) Eliminations 2 (11) (25) Net EAC adjustments $ 350 $ 84 $ 360 AERONAUTICS SYSTEMS Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization of military aircraft systems for the U.S.
The aggregate favorable and unfavorable EAC adjustments are presented in the table below: Year Ended December 31 $ in millions 2025 2024 2023 Favorable EAC adjustments $ 1,696 $ 1,461 $ 1,314 Unfavorable EAC adjustments (1,487) (1,111) (1,230) Net EAC adjustments $ 209 $ 350 $ 84 Net EAC adjustments by segment are presented in the table below: Year Ended December 31 $ in millions 2025 2024 2023 Aeronautics Systems $ (186) $ 157 $ (38) Defense Systems 168 90 82 Mission Systems 192 59 149 Space Systems 47 42 (101) Eliminations (12) 2 (8) Net EAC adjustments $ 209 $ 350 $ 84 AERONAUTICS SYSTEMS Aeronautics Systems is a leader in the design, development, production, integration, sustainment and modernization of military aircraft systems for the U.S.
Refer to the respective notes to the consolidated financial statements for further information about our share repurchase programs (Note 2), commercial paper, credit facilities and long-term debt (Note 9), standby letters of credit and guarantees (Note 11), future minimum contributions for the company’s pension and OPB plans (Note 12), and lease payment obligations (Note 14).
Refer to the respective notes to the consolidated financial statements for further information about our share repurchase programs (Note 2), commercial paper, credit facilities and long-term debt (Note 9), standby letters of credit and guarantees (Note 11), future minimum contributions for the company’s pension and OPB plans (Note 12), and lease payment obligations (Note 14). -38- Table of Contents NORTHROP GRUMMAN CORPORATION Cash Flow Measures In addition to our cash position, we consider various cash flow measures in capital deployment decision-making, including cash provided by operating activities and free cash flow, a non-GAAP measure described in more detail below.
However, the cost of PP&E utilized in support of our commercial business, including approximately $575 million of PP&E used in our commercial space business, is not allocable to government contracts and is therefore subject to greater recoverability risk. Impairment Testing – We test for impairment of goodwill annually at each of our reporting units, which comprise our operating segments.
However, the cost of PP&E utilized in support of our commercial business, including approximately $600 million of PP&E used in our -43- Table of Contents NORTHROP GRUMMAN CORPORATION commercial space business, is not allocable to government contracts and is therefore subject to greater recoverability risk.
We anticipate that issues related to budgetary priorities and defense spending levels, the debt ceiling, and the spending caps imposed by the Fiscal Responsibility Act of 2023 (FRA), particularly with respect to discretionary spending, will continue to be a subject of considerable debate, with a potentially significant impact on our programs and the company.
The U.S. political environment may also impact defense budgets and priorities, issues related to the national debt, and government spending more broadly. We anticipate that issues related to budgetary priorities, defense spending levels and the debt ceiling will continue to be subjects of considerable debate, with a potentially significant impact on our programs and the company.
Year Ended December 31 % Change in $ in millions 2024 2023 2022 2024 2023 Sales $ 11,399 $ 10,895 $ 10,396 5 % 5 % Operating income 1,598 1,609 1,618 (1) % (1) % Operating margin rate 14.0 % 14.8 % 15.6 % Sales 2024 sales increased $504 million, or 5 percent, primarily due to higher volume on restricted advanced microelectronics and technology programs, increased marine systems sales due, in part, to the timing of materials, and higher Ground/Air Task Oriented Radar (G/ATOR) volume due to continued ramp-up on full-rate production (FRP) awards.
Year Ended December 31 % Change in $ in millions 2025 2024 2023 2025 2024 Sales $ 12,506 $ 11,399 $ 10,895 10 % 5 % Operating income 1,827 1,598 1,609 14 % (1) % Operating margin rate 14.6 % 14.0 % 14.8 % Sales 2025 sales increased $1.1 billion, or 10 percent, primarily due to continued ramp-up on restricted airborne radar programs, as well as higher sales of $161 million on marine systems programs, $141 million on international ground-based radar programs and $105 million on communications programs, as several programs ramp up following new awards.
We also had provisions for uncertain tax positions of $1.4 billion, some or all of which could result in future cash payments to various taxing authorities. At this time, we are unable to estimate the timing and amount of any future cash outflows related to these uncertain tax positions.
At this time, we are unable to estimate the timing and amount of any future cash outflows related to these uncertain tax positions.
The results of those debates could have material impacts on defense spending broadly and the company’s programs in particular. B-21 Program In 2015, the U.S. Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for engineering and manufacturing development (EMD) and five low-rate initial production (LRIP) options for a baseline total of 21 aircraft.
Air Force awarded Northrop Grumman the B-21 contract, which includes a base contract for engineering and manufacturing development (EMD) and five low-rate initial production (LRIP) options for a baseline total of 21 aircraft. The EMD phase of the program is largely cost type and began at contract award.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe terms of our fixed-rate debt obligations do not generally allow investors to demand payment of these obligations prior to maturity. Therefore, we do not have significant exposure to interest rate risk for our fixed-rate debt; however, we do have exposure to fair value risk if we repurchase or exchange long-term debt prior to maturity.
Biggest changeTherefore, we do not have significant exposure to interest rate risk for our fixed-rate debt; however, we do have exposure to fair value risk if we repurchase or exchange long-term debt prior to maturity. Additionally, if we were to refinance our long-term debt, it may be refinanced at higher interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk EQUITY RISK We have been and continue to be exposed to market risk with respect to our portfolio of marketable securities with a fair value of $347 million at December 31, 2024. These securities are exposed to market volatilities, changes in price and interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk EQUITY RISK We have been and continue to be exposed to market risk with respect to our portfolio of marketable securities with a fair value of $483 million and $347 million at December 31, 2025 and 2024, respectively. These securities are exposed to market volatilities, changes in price and interest rates.
Certain of our fixed-price contracts include economic price adjustment (EPA) clauses to help protect the company against inflationary pressures. However, these EPA clauses may not be able to fully mitigate adverse impacts of rising inflation on the company’s financial position, results of operations and/or cash flows. -46-
Certain of our fixed-price contracts include economic price adjustment (EPA) clauses to help protect the company against inflationary pressures. However, these EPA clauses may not be able to fully mitigate adverse impacts of rising inflation on the company’s financial position, results of operations and/or cash flows. -45- Table of Contents NORTHROP GRUMMAN CORPORATION
We do not hold or issue derivative financial instruments for trading purposes. At December 31, 2024, foreign currency forward contracts with a notional amount of $399 million were outstanding. At December 31, 2024, a 10 percent unfavorable foreign exchange rate movement would not have a material impact on our consolidated financial position, annual results of operations and/or cash flows.
At December 31, 2025 and 2024, foreign currency forward contracts with a notional amount of $308 million and $399 million, respectively, were outstanding. At December 31, 2025 and 2024, a 10 percent unfavorable foreign exchange rate movement would not have a material impact on our consolidated financial position, annual results of operations and/or cash flows.
INTEREST RATE RISK We are exposed to interest rate risk on variable-rate short-term credit facilities for which there were no borrowings outstanding at December 31, 2024. At December 31, 2024, we have $16.3 billion of long-term debt, primarily consisting of fixed-rate debt, with a fair value of approximately $15.3 billion.
INTEREST RATE RISK We are exposed to interest rate risk on variable-rate short-term credit facilities for which there were no borrowings outstanding at December 31, 2025 and 2024.
Additionally, if we were to refinance our long-term debt, it may be refinanced at higher interest rates. FOREIGN CURRENCY RISK In certain circumstances, we are exposed to foreign currency risk. We enter foreign currency forward contracts to manage a portion of the exchange rate risk related to receipts from customers and payments to suppliers denominated in foreign currencies.
FOREIGN CURRENCY RISK In certain circumstances, we are exposed to foreign currency risk. We enter foreign currency forward contracts to manage a portion of the exchange rate risk related to receipts from customers and payments to suppliers denominated in foreign currencies. We do not hold or issue derivative financial instruments for trading purposes.
Added
At December 31, 2025 and 2024, we had long-term debt of $15.7 billion and $16.3 billion, respectively, primarily consisting of fixed-rate debt, with a fair value of approximately $15.1 billion and $15.3 billion, respectively. The terms of our fixed-rate debt obligations do not generally allow investors to demand payment of these obligations prior to maturity.

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