Miss
Q4 sales rose 10% to $11.7B and backlog reached $95.7B. FY2025 free cash flow reached about $3.3B. The 2026 EPS midpoint was below consensus and buybacks were suspended after January.
[AS-054]Northrop Grumman
Q4 2025 / FY2025: Double-digit Q4 sales growth and a record backlog supported the production thesis, while a below-consensus 2026 EPS guide, higher capex and buyback pause restrained upside.
ResultMissGuidanceMixed / newly framedEnvironmentimproving
Investment snapshot
What happened and why it mattered
Mixed / newly framed
2026 sales were $43.5–44.0B, EPS $27.40–27.90, FCF $3.1–3.5B and capex about $1.65B.
[AS-054]Acceleration
The plan embedded continued growth and cash improvement, but higher capacity investment absorbed more cash and limited buybacks.
[AS-054]+2.7%
A modest gain reflected strong backlog and a clean B-21 quarter, offset by conservative EPS and capital allocation.
[MKT-001]Results versus expectations
The print and the three most important read-throughs
Q4 sales rose 10% to $11.7B and backlog reached $95.7B. FY2025 free cash flow reached about $3.3B. The 2026 EPS midpoint was below consensus and buybacks were suspended after January.
- 1
Q4 sales rose 10% to $11.7B and backlog reached $95.7B.
- 2
FY2025 free cash flow reached about $3.3B.
- 3
The 2026 EPS midpoint was below consensus and buybacks were suspended after January.
Guidance bridge
GuidanceMixed / newly framedLatest outlook and KPI implications
2026 sales were $43.5–44.0B, EPS $27.40–27.90, FCF $3.1–3.5B and capex about $1.65B.
| Metric | Prior | Latest | Consensus | Delta | Status | Reason / implication |
|---|---|---|---|---|---|---|
| 2026 sales | Preliminary mid-single-digit growth | $43.5–44.0B | Approximately $44.3B | Formalized | New | Production growthSlightly below Street |
| 2026 EPS | No prior formal range | $27.40–27.90 | Approximately $28.8 | New | New | Program mix and investmentBelow Street |
| 2026 free cash flow | $3.1–3.5B preliminary | $3.1–3.5B | Not consistently available | No change | Reiterated | Volume and working capitalCash growth |
| 2026 capex | 2025 below new plan | Approximately $1.65B | Not consistently available | Higher | New | B-21 and productionFunds capacity; delays returns |
| Share repurchases | Active in 2025 | Suspended after January | Not applicable | Paused | Lowered | Investment prioritiesLess EPS support |
Management signal — paraphrased
The environment supported 2027 acceleration and better long-term program returns, while keeping 2026 capex elevated and early-lot margins low.
Implied cadence
The plan embedded continued growth and cash improvement, but higher capacity investment absorbed more cash and limited buybacks.
Stock reaction
Why the shares moved
A modest gain reflected strong backlog and a clean B-21 quarter, offset by conservative EPS and capital allocation.
- 10% Q4 sales growth
- Record backlog
- EPS below Street and buyback pause
Did the reaction persist?
[MKT-001]The stock gained about 2.7% on day one.
Adjusted-close reaction
Independently calculated adjusted-close returns
| Window | Stock | vs benchmark | vs peers |
|---|---|---|---|
| 1D | +2.7% | +2.3% | +1.1% |
| 2D | +4.3% | +3.9% | +3.9% |
| 5D | +3.6% | +3.3% | +1.3% |
Market environment delta
EnvironmentimprovingWhat management said about the operating backdrop
Record backlog, international demand and funded capacity expansion improved the multi-year growth outlook, with cash timing still dependent on execution.
- Customer demand (international / IBCS)Improving
"Formal requests to acquire IBCS from over 20 countries"; ground-based radar contracts expected across Americas, Middle East, Asia Pacific
Outlook2-3 new IBCS awards expected in 2026, converting to sales in 2027; int'l book-to-bill "well above 1"KPI implicationUnderpins 2027 acceleration; int'l sales +20% in 2025 to ~$6bn (14% of sales)Statement · High confidence · AS-ME-054 - Volumes / order activityImproving
Record $95.7bn backlog on $46.3bn net awards; Space book-to-bill ~1.9x for two straight quarters
Outlook2026 book-to-bill guided to ~1.0x as elevated backlog normalizesKPI implicationBacklog +5% YoY; ~35% ($33.5bn) recognized as 2026 revenueQuantified datapoint · High confidence · AS-ME-054 - Regional / end-market (govt shutdown, budget)Improving
CFO confirmed "no major impact from shutdown" on 2025 P&L or cash; year exceeded top end of sales guide with $3.3bn FCF
OutlookStrong bipartisan support; reconciliation and FY26 appropriations expected to move forwardKPI implicationResolved a live pre-results overhang; reaffirms outlookStatement · High confidence · AS-ME-054
- Channel / backlog conversionImproving
Space backlog up ~$2.3bn on GEM 63, T3 Tracking, CRS and restricted awards; conversion weighted to 2H 2026
OutlookBacklog "takes time to ramp"; 2H 2026 ramp carries momentum into 2027KPI implicationSpace returned to +5% growth in Q4; supports ~$11bn 2026 Space guideStatement · Medium confidence · AS-ME-054 - Supply availability (SRM capacity)Improving
Advancing a further 50% expansion to "triple" tactical SRM capability at ABL by early 2027; Elkton, MD to triple by 2030
OutlookCapacity ahead of demand; positioned for second-source wins and munitions rampKPI implicationRequires incremental capex; enables weapons growth without supply constraintQuantified datapoint · High confidence · AS-ME-054 - Input costs / capacity (B-21 acceleration)Improving
Warden estimated $2-3bn multi-year investment to support an accelerated build rate, with government "bringing resources to the table"
OutlookFramework agreement expected "this quarter"; improves long-term program returnsKPI implicationHigher 2026 capex (~$1.65bn, ~4% of sales); near-zero early-lot marginStatement · Medium confidence · AS-ME-054
- Competition (SRM / munitions)Improving
Warden: NOC has "more capacity than we have orders," is qualifying as a second source on multiple missiles, and is "not afraid of competition"
OutlookRoom "for growth for many companies"; NOC positioned to take share as it qualifies on new programsKPI implicationSupports DS weapons growth (~10% of DS) as capacity converts to awardsStatement · Medium confidence · AS-ME-054 - Pricing (B-21 lots)Improving
Later framework expected to lift pricing on Lots 4-5 and 19 "NTE" aircraft to justify higher NOC capex
OutlookFaster path to higher-margin production lots and sustainment revenueKPI implicationAccretive to AS margin and long-term B-21 program returnsInference · Medium confidence · AS-ME-054
Evidence and confidence
Source map
Consensus snapshots are reconstructed from contemporaneous broker notes; the flattened AlphaSense export does not preserve stable document URLs.
AlphaSense synthesis
Open source ↗Official company source
Open source ↗AlphaSense market-environment synthesis
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