Northrop Grumman (NYSE: NOC) Posts Record $105B Backlog and EPS Beat in Q2 2026

Northrop Grumman (NYSE: NOC) reported Q2 2026 GAAP EPS of $7.68, beating the $6.89 analyst consensus by 11.5%, as the company also set a new company record with a $104.7 billion backlog. Revenue rose 5.1% year over year to $10.876 billion, driven by broad-based volume growth across all four business segments. Full-year sales guidance was raised to a range of $43.75 billion to $44.25 billion.

Q2 2026 Results

• GAAP EPS: $7.68, up from $6.89 consensus; prior-year Q2 GAAP EPS was $8.15, which included a $1.04 per-share benefit from the training services divestiture
• Revenue: $10.876 billion, up 5.1% year over year from $10.351 billion
• GAAP operating income: $1.096 billion, with an operating margin of 10.1%
• Backlog: $104.7 billion, a new company record, following $20.0 billion in net awards during the quarter
• Adjusted free cash flow: $978 million, up 54% year over year from $637 million

What Drove the Results

GAAP EPS of $7.68 beat the $6.89 consensus by 11.5%, and revenue of $10.876 billion met or slightly exceeded analyst expectations. However, GAAP operating income fell 23.1% year over year to $1.096 billion from $1.425 billion, a decline that is explained almost entirely by two prior-year items that do not recur: a $231 million gain on the sale of the training services business recorded in Q2 2025, and a FAS/CAS operating adjustment that dropped to $7 million from $63 million a year ago.

At the segment level, Aeronautics Systems and Mission Systems were the standouts. Aeronautics Systems grew revenue 13% to $3.519 billion, driven by higher volume on B-21, TACAMO, B-2, F-35, and E-2 programs, with segment operating income rising 13% to $362 million. Mission Systems added $60 million in operating income year over year, reaching $501 million on a 14% increase. Defense Systems and Space Systems moved in the other direction: Defense Systems operating income fell 38% to $156 million, and Space Systems operating income declined 16% to $236 million, compressing overall segment operating margin to 10.6% from 11.8%.

The company's effective tax rate fell sharply to 6.3% from 17.7% a year ago, primarily due to the remeasurement of uncertain tax positions tied to ongoing IRS resolution of previously filed federal income tax returns and refund claims. That tax benefit partially offset the lower operating income and helped support the bottom-line EPS beat.

On the demand side, Q2 net awards of $20.0 billion included $7.6 billion for the Sentinel intercontinental ballistic missile program, $4.3 billion for restricted programs, $1.0 billion for F-35, $0.8 billion for the Glide Phase Interceptor, and $0.7 billion for the Multi-role Electronically Scanned Array program.

Guidance Raised

Northrop raised its full-year 2026 sales guidance by $250 million to a range of $43.75 billion to $44.25 billion. MTM-adjusted EPS guidance was lifted by $1.20 to a range of $28.60 to $29.10. Operating income and adjusted free cash flow guidance were reaffirmed. CEO Kathy Warden noted the company is raising guidance based on confidence in demand for its technologies and momentum across its portfolio.

In a separate development reported earlier this month, Northrop broke ground on a new Legacy Building at its Roy Innovation Center in Utah, expanding the Sentinel-focused campus to six buildings covering more than 1,100,000 square feet with capacity for over 5,000 employees.

Wall Street View

Analyst consensus heading into the print was constructive, with the majority of covering analysts carrying Buy-equivalent ratings. No specific new price target actions were available in the source data following the release.

Investor Takeaway

The headline EPS beat of 11.5% above consensus and the record $104.7 billion backlog reflect genuine demand strength, but the 23.1% decline in GAAP operating income will require investors to look past the prior-year divestiture gain to assess underlying profitability. The more instructive signal may be the raised full-year guidance and the $20.0 billion in Q2 net awards, which together suggest the company's order pipeline is translating into durable revenue visibility well beyond the current fiscal year.