Financial Snapshot
What Does Northrop Grumman Corporation’s Latest Financial Snapshot Show?
Strong. The biggest strength is the $956B backlog, while the main concern is the -$182B Q1 2026 free cash flow outflow.
The latest verified period is Q1 2026, with balance-sheet data through 2026-03-31. This view combines growth, profitability, cash generation, balance-sheet capacity, and capital efficiency, so it shows both the earnings quality and the funding pressure behind Northrop Grumman Corporation’s defense program base. For mission context, see Mission Statement, Vision, & Core Values (2026) of Northrop Grumman Corporation (NOC).
$956B backlog as of March 31, 2026 deserves the first deeper review because it anchors future revenue visibility.
Revenue and Earnings Quality
Do Northrop Grumman Corporation's Revenue, Backlog, And EPS Confirm Durable Earnings?
Mixed. Northrop Grumman Corporation’s $956B backlog and recurring demand from major programs support durability, but Q1 2026 revenue, net income, and EPS were weaker than Q4 2025, and Space Systems sales fell 30% after the NGI wind-down and a $710M GEM 63XL charge.
Revenue quality is about more than growth quantity. Investors compare durable demand, operating income, net income, and diluted EPS across compatible periods because a single quarter can reflect seasonality, contract timing, or one-time charges. For Northrop Grumman Corporation, the link between backlog, program execution, and EPS matters more than headline sales alone.
| Measure | Latest Period | Previous Period | Quality Test | Investor Meaning |
|---|---|---|---|---|
| Revenue | $988B in Q1 2026 | $1171B in Q4 2025 | Organic and program-driven, but seasonality makes the quarter-to-quarter change hard to read | Repeat demand is visible, but one quarter does not show the full run rate |
| Operating Income | Not provided | Not provided | Unclear | Operating leverage cannot be tested from the supplied data |
| Net Income | $87500M in Q1 2026, with company-reported net earnings growth of 820% | $143B in Q4 2025 | Improvement is reported, but the operating and unusual-item drivers are not fully supplied | Final earnings direction is positive, but the quality of the jump is harder to verify |
| Diluted EPS | $614 in Q1 2026 | $999 in Q4 2025 | Per-share results were weaker than the prior quarter, so share-count help does not appear to be the main story | Shareholders did not see stronger per-share growth in the latest quarter |
How durable is Northrop Grumman Corporation's revenue?
Durability looks solid because of the $956B backlog and recurring program demand, but visibility is limited by program mix and Space Systems volatility from NGI wind-down effects and the $710M charge.
- Demand Quality: Recurring demand is supported by B-21, F-35, E-6B TACAMO, IBCS, SDA satellites, and mission systems.
- Pricing and Volume: The price-volume split is not fully provided; the main verified swing came from Space Systems and the 30% sales decline.
- Diversification: Demand is spread across several programs, but Space Systems remains a clear concentration risk.
That makes profitability and cash conversion the next test. The linked Mission Statement, Vision, & Core Values (2026) of Northrop Grumman Corporation (NOC) helps frame how the company’s strategy supports those results.
Profitability and cash
Are Northrop Grumman's profits converting into cash?
Not fully in Q1 2026: reported profit stayed strong, but free cash flow was -$182B, so earnings did not convert cleanly into cash that quarter. FY 2025 operating cash flow of $48B and free cash flow of $33B, plus FY 2026 free cash flow guidance of $31B–$35B, show the longer cash profile is still positive.
Gross profit, operating income, and net income show accounting profitability, but cash flow shows how much money actually came in after working capital and capital spending. Northrop Grumman Corporation also faced heavy Q1 outlays, while Depreciation And Amortization: $37200M, Interest Expense: $16200M, and Income Tax Expense: $15500M help explain why earnings and cash can move differently. For mission and culture context, see Mission Statement, Vision, & Core Values (2026) of Northrop Grumman Corporation (NOC).
| Measure | Latest Period | Previous Period | Verified Driver | Investor Meaning |
|---|---|---|---|---|
| Gross Margin | Unavailable; Q1 2026 gross profit was $196B. | Unavailable. | Gross profit was supplied, but no verified gross margin ratio was provided. | Product economics look profitable, but the margin trend cannot be confirmed from the supplied data. |
| Operating Margin | 108% in Q1 2026 segment operating margin. | Unavailable. | Segment operating margin was supplied; no verified companywide prior-period margin was provided. | Scale and mix look strong, but the figure is segment-based rather than a full-company margin test. |
| Net Margin | Unavailable; Q1 2026 net income was $87500M. | Unavailable. | Net income was supplied, but no verified net margin ratio was provided. | Final profitability is positive, but the margin trend cannot be verified from the supplied data. |
| Operating Cash Flow | $48B in FY 2025 | Unavailable. | Working-capital timing and seasonal patterns affected cash, especially around heavy Q1 outlays. | Earnings are backed by solid annual operating cash generation. |
| Free Cash Flow | -$182B in Q1 2026 | $33B in FY 2025 | Free cash flow was hit by seasonal pressure and capital spending needs, with FY 2026 capital expenditures projected at $165B. | Cash generation is still positive over the full year, but reinvestment needs are high. |
What most affects Northrop Grumman's cash conversion?
Seasonal working-capital swings and heavy Q1 cash outlays are the biggest drivers, with capital expenditures also weighing on conversion. That looks partly temporary, but the FY 2026 spending plan makes reinvestment a structural cash use.
- Main Driver: Q1 timing of receipts, inventory, and project spending; mostly temporary, but capital intensity is structural.
- Evidence Gap: The supplied data do not break out receivables, payables, or contract assets.
- Metric to Monitor: FY 2026 free cash flow versus the $31B–$35B guide.
Liquidity and leverage
Can Northrop Grumman Company support its obligations and investment needs with its balance sheet?
Mixed. Northrop Grumman has sizable current assets and cash, but the main protection is its asset base and working capital. The main financing concern is the heavy debt load, which makes refinancing and debt service worth monitoring.
Cash is only one part of the picture, so Northrop Grumman’s working capital, asset quality, debt service, solvency, liquidity, and refinancing needs all matter together. For background on the business, see Northrop Grumman Corporation (NOC): History, Ownership, Mission, How It Works & Makes Money.
| Area | Latest Evidence | Assessment | Investor Meaning |
|---|---|---|---|
| Cash and Working Capital | Cash And Cash Equivalents: $209B; Cash And Short Term Investments: $209B; Total Current Assets: $1457B; Total Current Liabilities: $1282B; Net Receivables: $1046B; Inventory: $145B. | Mixed | Near-term obligations look covered, but working capital is not so large that it removes pressure on funding discipline. |
| Total and Net Debt | Short Term Debt: $75800M; Long Term Debt: $1441B; Capital Lease Obligations Non Current: $191B; Total Debt: $1707B. | Weak | Leverage is high, so debt reduces flexibility even if operations remain stable. |
| Debt Service and Refinancing | No maturity schedule or interest cost was supplied, but liquidity is supported by current assets and operating scale against $1707B of total debt. | Mixed | Northrop Grumman should be able to operate, but investors should watch how easily it can roll debt and cover interest under stress. |
| Asset Quality | Total Assets: $5001B; Property Plant Equipment Net: $1217B; Goodwill: $1744B. | Mixed | Large fixed assets support operations, but heavy goodwill raises impairment risk if performance weakens. |
| Liabilities and Equity | Total Current Liabilities: $1282B; debt is high relative to liquid resources; shareholders' equity was not supplied in the prompt. | Mixed | Obligations are sizable, and the lack of verified equity data limits a full solvency read. |
Which balance-sheet risk matters most for Northrop Grumman Company?
Debt capacity is the main risk. The strongest concern is the $1707B total debt load, which leaves refinancing and interest coverage more exposed than day-to-day liquidity.
- Current Exposure: $1707B total debt versus $209B cash and $1457B current assets.
- Protection: $1457B of current assets and $5001B of total assets provide a large operating base.
- Warning Signal: Watch for rising refinancing pressure if debt grows faster than liquidity or asset quality weakens.
Capital Efficiency
Is Northrop Grumman Reinvesting Capital Efficiently?
Mixed. Northrop Grumman’s reinvestment looks disciplined, but the evidence is incomplete on ROIC, ROE, and ROA. Internal cash appears partly sufficient for reinvestment needs, supported by ongoing capital returns and steady spending, though the scale of planned investment leaves room for external funding pressure.
Return analysis has to account for leverage, asset intensity, capital spending, working capital, and any need for outside funding. That matters here because Northrop Grumman is pairing heavy reinvestment with shareholder payouts, so the key question is whether growth spending can stay productive without straining cash generation or balance sheet flexibility.
| Capital Measure | Latest Evidence | Quality Test | Investor Meaning |
|---|---|---|---|
| ROIC | Unavailable in the supplied data; total FY 2025 R&D and capital investment was $25B. | ROIC would be stronger if operating margins and capital spending convert into durable program execution. | If invested capital keeps supporting operating value, the reinvestment case stays credible. |
| ROE and ROA | Unavailable in the supplied data; weighted average shares growth was -056% and weighted average shares diluted growth was -028%. | ROE can reflect leverage, while ROA depends on how efficiently total assets support output. | Shareholder return quality is better when equity returns rise for operating reasons, not just financial leverage. |
| Maintenance and Growth Investment | R&D spending reached 35% of sales in 2025, and capital expenditures are projected at $165B for FY 2026. | The mix points to major growth reinvestment tied to B-21 production, SDA satellite lines, digital-first engineering, AI Factory deployment, JADC2, and quantum sensing. | Capital needs look high, but they are aimed at sustaining technical depth and future program capacity. |
| Internal Funding Capacity | In Q1 2026, dividends paid were $3330M and common stock repurchased were $680M; quarterly dividend was $247 per share, with a 23-year streak of consecutive dividend growth. | This suggests reinvestment is at least partly internally funded, but the full funding mix is not disclosed here. | Cash use for reinvestment and capital returns signals flexibility, but also means funding demands remain meaningful. |
Are Northrop Grumman’s returns on capital sustainable?
Probably, if B-21, SDA, and digital engineering programs keep supporting operating margins. Returns would weaken if capital spending rises faster than program execution, cash generation, or contract conversion.
- Operating Source: R&D-heavy mix and program-linked execution in B-21, SDA, and AI Factory deployment support operating efficiency.
- Funding Requirement: The largest verified capital need is the projected $165B FY 2026 capital expenditures.
- Durability Test: Watch ROIC and operating cash flow against rising reinvestment and shareholder payouts; weaker cash conversion would signal pressure.
If you’re using this topic for a paper or case study, a structured SWOT Analysis, PESTLE Analysis, or Business Model Canvas can help organize the reinvestment story clearly. For related ownership context, Exploring Northrop Grumman Corporation (NOC) Investor Profile: Who's Buying and Why? can add useful background.
Cash Flow Buffer
How resilient is Northrop Grumman Corporation, and which warning signs matter most?
Mixed. The main buffer is reaffirmed FY 2026 Free Cash Flow guidance of $31B–$35B, backed by FY 2025 Free Cash Flow of $33B. The most important verified warning sign is Q1 2026 Free Cash Flow of -$182B, which shows quarter-to-quarter cash volatility even if full-year guidance still holds.
Northrop Grumman Corporation can still protect liquidity and debt service because management kept full-year cash guidance intact, and that matters more than one weak quarter. The risk is whether weaker program mix, supply-chain friction, or higher investment needs start to show up in operating cash flow, not just in one period. For mission and value context, see Mission Statement, Vision, & Core Values (2026) of Northrop Grumman Corporation (NOC).
| Pressure | Financial Effect | Existing Protection | Warning Signal |
|---|---|---|---|
| Revenue or Margin Pressure | Q1 2026 Free Cash Flow of -$182B can reduce operating leverage, weaken near-term earnings conversion, and limit debt capacity if softness persists. | Reaffirmed FY 2026 Free Cash Flow guidance of $31B–$35B and FY 2025 Free Cash Flow of $33B show the business still expects strong annual cash generation. | Watch for lower revenue, margin compression, or weaker operating cash flow beyond a single quarter. |
| Working-Capital or Investment Pressure | Space Systems pressure, including Q1 2026 Sales of $248B, a 30% decline, the $980M revenue reduction from NGI wind-down, and the $710M GEM 63XL charge, can absorb cash and pressure investment priorities. | The offset is a pivot toward proliferated LEO constellations and SDA satellite commitments, which may rebuild backlog and support future production. | Monitor operating-cash-flow softness, rising receivables or inventory, and heavier capex or ramp-related cash use. |
| Interest or Refinancing Pressure | If cash volatility lasts, free cash flow compression could reduce financing flexibility and make debt service less comfortable. | Current protection is the reaffirmed full-year cash outlook, which suggests internal funding still covers most needs. | Watch debt, interest coverage, maturity, or liquidity pressure if quarterly cash generation stays weak. |
Which financial warning signs should investors monitor at Northrop Grumman Corporation?
The strongest signals are recurring negative free cash flow, continued Space Systems weakness, and any rise in working capital or capex strain. The first two are confirmed deterioration risks; supply-chain exposure is a future risk unless inventory, receivables, or production ramp data worsen.
Negative Free Cash Flow in the Quarter
Q1 2026 Free Cash Flow of -$182B is the clearest near-term warning. The offset is reaffirmed FY 2026 Free Cash Flow guidance of $31B–$35B, so the next metric is whether later quarters restore cash conversion.
Space Systems Revenue and Charge Pressure
Q1 2026 Sales of $248B, a 30% decline, plus the $980M revenue reduction and $710M GEM 63XL charge show real program pressure. The offset is the pivot toward proliferated LEO constellations and SDA satellite commitments, so watch segment sales and margin recovery.
Supply Chain Dependence for Rare Earth Magnets
Reliance on international supply chains for rare earth magnets could disrupt production or raise costs. The key mitigants are internal inventory and sourcing actions, while the next signals are inventory, receivables, capex, and production ramp disclosures.
Financial Health Scorecard
How should investors score Northrop Grumman Corporation’s financial health?
Northrop Grumman Corporation scores Mixed overall. The strongest factor is backlog-backed visibility, while the weakest is latest-quarter cash conversion. For investors, the most important condition is whether earnings can keep translating into free cash flow.
| Financial Factor | Rating | Evidence and Investor Meaning |
|---|---|---|
| Revenue and Earnings Quality | Strong | Backlog and a FY 2025 book-to-bill ratio of 110x support visibility, and that usually helps earnings hold up even when quarterly revenue is uneven. |
| Profitability and Cash | Mixed | Segment operating margin of 108% and net income of $87500M look positive, but Q1 2026 free cash flow of -$182B shows weak near-term cash conversion. |
| Balance Sheet and Liquidity | Mixed | Cash and cash equivalents of $209B support operations, but total debt of $1707B is material and keeps leverage and refinancing risk in focus. |
| Capital Efficiency | Mixed | Investment in B-21, satellites, R&D, dividends, and buybacks can create value, but returns have to justify heavy reinvestment before efficiency looks clearly strong. |
| Financial Resilience | Strong | $956B backlog and guidance support operating stability, so Northrop Grumman Corporation has a solid buffer even if cash generation stays uneven. |
- What Supports the Thesis: Large backlog, a 110x book-to-bill ratio, and stable defense demand give Northrop Grumman Corporation strong visibility; see Northrop Grumman Corporation (NOC): History, Ownership, Mission, How It Works & Makes Money.
- What Challenges the Thesis: Q1 2026 free cash flow of -$182B shows that earnings quality still needs to improve at the cash level.
- What to Monitor: Free Cash Flow, Segment Operating Margin, Total Backlog.
That mix of strong visibility and uneven cash conversion should shape forecast ranges, scenario analysis, and any DCF-based valuation work.
FAQ
What Do Investors Ask About 's Financial Health?
Investors most often ask about the company's revenue quality, profitability, cash generation, debt, liquidity, capital efficiency, and ability to withstand financial pressure.
What does Northrop Grumman's 110x book-to-bill mean?
A 110x book-to-bill means FY 2025 orders were above sales on the company's measure For financial health, it supports backlog visibility and future revenue conversion, but it does not guarantee margin quality or cash timing
Why does Space Systems pressure margins?
Space Systems reported Q1 2026 Sales: $248B, a 30% decline, plus a $710M GEM 63XL charge and $980M revenue reduction tied to NGI wind-down Investors should separate program mix pressure from companywide segment margin
Why did Q1 free cash flow turn negative?
Q1 2026 Free Cash Flow: -$182B reflected seasonal patterns and heavy Q1 outlays The key investor test is whether full-year cash conversion tracks reaffirmed FY 2026 Free Cash Flow guidance of $31B–$35B
How meaningful is the current liquidity buffer?
Liquidity is meaningful but not unlimited FMP lists Cash And Cash Equivalents: $209B, Total Current Assets: $1457B, and Total Current Liabilities: $1282B at 2026-03-31 Debt service still matters because Total Debt: $1707B
How should investors read R&D investment?
R&D and capital investment support future program competitiveness, not just current expenses Northrop Grumman reported Total FY 2025 R&D and Capital Investment: $25B, with R&D spending reached 35% of sales in 2025, focused on JADC2 and quantum sensing