What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-01-27 compared with 2025-01-30 · 230 added, 188 removed, 1194 unchanged (26% of the section changed)

21 unchanged sentences

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit and risk committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimates of Revenue and Cost at Completion for Select Long-Term Contracts - Refer to Note 1 to the financial statements

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As further described in Note 1 to the financial statements, the Company recognizes revenue as control is transferred to the customer, which for long-term contracts is generally over-time using the cost-to-cost method (cost incurred relative to total cost estimated at completion).

Use of the cost-to-cost-method requires the Company to make reasonably dependable estimates regarding the revenue and costs associated with the design, manufacture and delivery of their products or services.

Use of the cost-to-cost-method requires the Company to make reasonable estimates regarding the revenue and costs associated with the design, manufacture and delivery of their products or services.

The Company estimates profit on these contracts as the difference between total estimated revenue and total estimated costs at completion and recognizes that profit as costs are incurred.

If it is determined

NORTHROP GRUMMAN CORPORATION

analyzed the Company’s contract portfolio to identify contracts that we believe had elevated financial or performance risk.

that a loss is expected to result on an individual performance obligation, the entire amount of the estimable future loss, including an allocation of G&A costs, is charged against income in the period the loss is identified.

We analyzed the Company’s contract portfolio to identify contracts that we believe had elevated financial or performance risk.

For those contracts identified, the evaluation of one or more of the assumptions used to recognize revenue required extensive audit effort due to the complexity of the contracts and a high degree of auditor judgment.

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Our audit procedures related to the revenue and cost estimates for these contracts identified included the following, among others:

• We tested the operating effectiveness of controls over the significant assumptions and judgments underlying the estimates of revenues and costs to completion associated with these long-term contracts.

• We tested the design and operating effectiveness of controls over the significant assumptions and judgments underlying the estimates of revenues and costs to completion associated with these long-term contracts.

• Based on the risk characteristic identified on an individual contract, we evaluated certain revenue and cost assumptions by:

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– Assessing the timing of recognition of any incentive fees or award fees based on contract terms and relevant historical trends.

– Evaluating management’s ability to achieve the estimates of remaining revenue and costs by performing inquiries with the Company’s program and business management regarding their basis of estimates including work plans, engineering specifications, program labor and suppliers, challenges or opportunities related to the program, actual performance to date compared to plan, and any recent correspondence between the Company and the customer on changes in scope or contractual terms.

– Evaluating selected changes to the estimates of costs to completion and obtaining supporting documentation on the appropriateness of the timing and amounts of these changes in estimates.

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Total operating costs and expenses 37,674 36,663 36,753

Gain on sale of business

Operating income 4,511 4,370 2,537

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Net earnings (from above) $ 4,182 $ 4,174 $ 2,056

Other comprehensive (loss) income, net of tax

Other comprehensive income (loss), net of tax

Change in cumulative translation adjustment 9 ( 2 ) 23

Change in other, net 17 ( 22 ) 2

Other comprehensive (loss) income, net of tax ( 24 ) 25 ( 10 )

Other comprehensive income (loss), net of tax 26 ( 24 ) 25

Comprehensive income $ 4,208 $ 4,150 $ 2,081

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Property, plant and equipment, net of accumulated depreciation of $ 9,648 for 2025 and $ 8,733 for 2024

10,972 10,536

Operating lease right-of-use assets 1,859 1,770

Goodwill 17,437 17,512

Intangible assets, net 254 305

Deferred tax assets 1,051 1,599

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Depreciation and amortization 1,472 1,370 1,338

Mark-to-market pension and OPB (benefit) expense ( 443 ) 422 ( 1,232 )

Stock-based compensation 119 101 87

Deferred income taxes 548 ( 582 ) ( 988 )

B-21 charge — 1,559 —

B-21 loss provisions

Gain on sale of business ( 231 ) — —

Mark-to-market pension and OPB (benefit) expense ( 527 ) ( 443 ) 422

Net periodic pension and OPB income ( 346 ) ( 438 ) ( 308 )

5 unchanged sentences

Prepaid expenses and other assets 8 35 ( 86 )

Accounts payable and other liabilities ( 513 ) 519 572

Trade accounts payable

646 485 ( 469 )

Advance payments and billings in excess of costs incurred

19 ( 123 ) 587

Other liabilities

( 212 ) ( 875 ) 401

Income taxes payable, net ( 559 ) 1,143 ( 658 )

Other, net 61 ( 8 ) 46

Other operating activities 56 61 ( 8 )

Net cash provided by operating activities

4,757 4,388 3,875

Investing activities

Capital expenditures ( 1,450 ) ( 1,767 ) ( 1,775 )

Proceeds from sale of equipment to a customer — — 155

Divestiture of training services business 333 — —

Proceeds from sale of minority investments — — 197

Other, net 18 ( 4 ) 39

Other investing activities ( 38 ) 18 ( 4 )

Net cash used in investing activities ( 1,155 ) ( 1,749 ) ( 1,582 )

5 unchanged sentences

Payments of employee taxes withheld from share-based awards ( 39 ) ( 58 ) ( 52 )

Other, net ( 132 ) ( 38 ) ( 7 )

Other financing activities ( 94 ) ( 132 ) ( 38 )

Net cash used in financing activities

Increase (decrease) in cash and cash equivalents 1,244 532 ( 953 )

( 3,552 ) ( 1,395 ) ( 1,761 )

Increase in cash and cash equivalents 50 1,244 532

Cash and cash equivalents, beginning of year 4,353 3,109 2,577

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Common stock repurchased ( 3 ) ( 5 ) ( 3 )

Shares issued for employee stock awards and options — — 1

End of year 142 145 150

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Beginning of year ( 152 ) ( 128 ) ( 153 )

Other comprehensive (loss) income, net of tax ( 24 ) 25 ( 10 )

Other comprehensive income (loss), net of tax 26 ( 24 ) 25

End of year ( 126 ) ( 152 ) ( 128 )

9 unchanged sentences

and international customers, and principally to the U.S.

Department of Defense and intelligence community.

Department of War and intelligence community.

Our broad portfolio is aligned to support national security priorities and our solutions equip our customers with capabilities they need to connect, protect and advance humanity.

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For classification of certain current assets and liabilities, we consider the duration of our customer contracts when defining our operating cycle, which is generally longer than one year.

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.

During the fourth quarter of 2025, we modified our presentation of the changes in liabilities in the operating cash flow section of the consolidated statement of cash flows by disaggregating Accounts payable and other liabilities into three separate line items:

Accounts payable, Advance payments and billings in excess of costs incurred, and Other liabilities.

Prior period amounts have been conformed to current period presentation.

The modified presentation does not impact previously reported cash provided by operating activities.

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.

Subsequent Realignment - 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 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.

On May 24, 2025 (the “Divestiture date”), the company completed its previously announced sale of substantially all of the Immersive Mission Solutions (IMS) operating unit of Defense Systems (the “training services” business or “divestiture”) for $ 333 million in cash and recorded a pre-tax gain on sale of $ 231 million.

IMS is a provider of mission training and satellite ground network communications software for U.S.

government customers.

Operating results include sales and operating income for the training services business prior to the Divestiture date.

Accounting Estimates

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These contracts generally require significant integration of a group of goods and/or services to deliver a combined output.

In some contracts, the company provides multiple distinct goods or services to a customer, most commonly when a contract covers multiple phases of the product life cycle (e.g., development, production, sustainment, etc.).

In some contracts, the company provides multiple distinct goods or services

NORTHROP GRUMMAN CORPORATION

to a customer, most commonly when a contract covers multiple phases of the product life cycle (e.g., development, production, sustainment, etc.).

In those cases, the company accounts for the distinct contract deliverables as separate performance obligations and allocates the transaction price to each performance obligation based on its relative standalone selling price, which is generally estimated using cost plus a reasonable margin.

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Assets recognized from the costs to obtain or fulfill a contract are not material.

NORTHROP GRUMMAN CORPORATION

The company recognizes revenue as control is transferred to the customer, either over time or at a point in time.

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Contract Estimates

Use of the cost-to-cost method requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services.

Use of the cost-to-cost method requires us to make reasonable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services.

The company estimates profit on these contracts as the difference between total estimated sales and total estimated cost at completion and recognizes that profit as costs are incurred.

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We recognize changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis.

Cumulative EAC adjustments represent the cumulative effect of the changes on current and prior periods;

Net EAC adjustments represent the cumulative effect of the changes on current and prior periods;

sales and operating margins in future periods are recognized as if the revised estimates had been used since contract inception.

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During the fourth quarter of 2023, we recognized a projected loss of $ 1.56 billion across the five LRIP options of the B-21 program.

As of December 31, 2024, the remaining loss accrual is $ 1.3 billion, which is included in Other current liabilities.

During the first quarter of 2025, we recognized an additional $ 477 million loss across the five LRIP options.

As of December 31, 2025, the remaining loss accrual on the B-21 program totaled $ 1.3 billion, which is included in Other current liabilities.

Net EAC Adjustments

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(1) Based on a 21% federal statutory tax rate.

NORTHROP GRUMMAN CORPORATION

EAC adjustments on a single performance obligation can have a significant effect on the company’s financial statements.

When such adjustments occur, we generally disclose the nature, underlying conditions and financial impact of the adjustments.

During the third quarter of 2024, we recorded a $ 39 million favorable EAC adjustment on the HALO program at Space Systems related to the resolution of an engineering change proposal (ECP) as previously disclosed.

During 2023, we recorded a $ 143 million unfavorable EAC adjustment on the first LRIP lot of the B-21 program at Aeronautics Systems and $ 100 million of unfavorable EAC adjustments on the HALO program at Space Systems.

During 2022, we recorded $ 133 million of favorable EAC adjustments on the EMD phase of the

NORTHROP GRUMMAN CORPORATION

B-21 program at Aeronautics Systems.

No other such adjustments were significant to the financial statements during the years ended December 31, 2024, 2023 and 2022.

During the years ended December 31, 2025, 2024 and 2023, the company recorded the following significant EAC adjustments:

2025 – The company recorded unfavorable EAC adjustments of $ 226 million and $ 122 million on the first and second LRIP lots of the B-21 program at Aeronautics Systems.

As previously disclosed, the $122 million adjustment was largely offset by a reduction in our loss contingency accrual on the remaining LRIP lots due to a contract restructure that occurred during the third quarter of 2025.

The company also recorded a $ 76 million favorable EAC adjustment on the engineering and manufacturing development (EMD) phase of the Sentinel program at Defense System and a $ 68 million favorable EAC adjustment in the restricted advanced microelectronics portfolio at Mission Systems.

2024 – The company recorded a $ 39 million favorable EAC adjustment on the HALO program at Space Systems.

2023 – The company recorded a $ 143 million unfavorable EAC adjustment on the first LRIP lot of the B-21 program at Aeronautics Systems and $ 100 million of unfavorable EAC adjustments on the HALO program at Space Systems.

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.

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Unexercised contract options and IDIQ contracts are not included in backlog until the time an option or IDIQ task order is exercised or awarded.

Company backlog as of December 31, 2024 was $ 91.5 billion.

Company backlog as of December 31, 2025 was $ 95.7 billion and reflects a $ 150 million reduction to backlog in connection with the training services divestiture during the second quarter of 2025.

Of our December 31, 2025 backlog, we expect to recognize approximately 35 percent as revenue over the next 12 months and 60 percent as revenue over the next 24 months, with the remainder to be recognized thereafter.

During 2024, the company reduced unfunded backlog by $ 1.6 billion and $ 0.7 billion related to terminations for convenience in our restricted space business and on the NGI program at Space Systems, respectively.

Contract Assets and Liabilities

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Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements.

NORTHROP GRUMMAN CORPORATION

Net contract assets are as follows:

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Changes in the company’s contract assets and liabilities primarily result from timing differences between revenue recognition and customer billings and/or payments.

Net contract assets as of December 31, 2024 increased 23 percent from the prior year, primarily due to the burn down of advances on certain Aeronautics Systems programs and an increase in unbilled receivables on several programs at Space Systems.

Net contract assets as of December 31, 2025 increased 34 percent from the prior year, primarily due to increases in unbilled receivables driven by the timing of deliveries and achievement of billing milestones on certain programs at Defense Systems.

The amount of revenue recognized for the years ended December 31, 2025, 2024 and 2023 that was included in the contract liability balance at the beginning of each year was $ 3.3 billion, $ 3.6 billion and $ 3.1 billion, respectively.

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We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

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General and Administrative Expenses

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government contracts and are, therefore, recorded in operating costs and expenses.

The company generally recognizes changes in deferred state taxes and unrecognized state tax benefits in unallocated corporate expenses.

The company generally recognizes changes in deferred state taxes and unrecognized state tax benefits in unallocated corporate expense within operating income.

Uncertain tax positions reflect the company’s expected treatment of tax positions taken in a filed tax return, or planned to be taken in a future tax return or claim.

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Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions.

NORTHROP GRUMMAN CORPORATION

These two types of inputs create the following fair value hierarchy:

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Level 3 - Significant inputs to the valuation model are unobservable.

The company holds a portfolio of marketable securities to partially fund non-qualified employee benefit plans.

The company holds a portfolio of marketable securities including investments to partially fund non-qualified employee benefit plans as well as investments in companies that are advancing or developing technologies applicable to our business.

A portion of these securities are held in common/collective trust funds and are measured at fair value using NAV per share as a practical expedient.

Marketable securities accounted for as trading are recorded at fair value on a recurring basis and are included in Other non-current assets in the consolidated statements of financial position.

Changes in unrealized gains and losses on trading securities are included in Other, net in the consolidated statements of earnings and comprehensive income.

Marketable securities are recorded at fair value on a recurring basis and are included in Other non-current assets in the consolidated statements of financial position.

Changes in unrealized gains and losses on marketable securities are included in Other, net in the consolidated statements of earnings and comprehensive income.

Investments in held-to-maturity instruments with original maturities greater than three months are recorded at amortized cost.

Derivative financial instruments are recognized as assets or liabilities in the financial statements and measured at fair value on a recurring basis.

Changes in the fair value of derivative financial instruments that are designated as fair value hedges are recorded in Other, net in the consolidated statements of earnings and comprehensive income, while changes in the fair value of derivative financial instruments that are designated as cash flow hedges are recorded as a

NORTHROP GRUMMAN CORPORATION

component of other comprehensive income until the hedged transaction is recognized in earnings.

For derivative financial instruments not designated as hedging instruments, gains or losses resulting from changes in the fair value are reported in Other, net in the consolidated statements of earnings and comprehensive income.

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As of December 31, 2025 and 2024, the carrying values associated with these policies were $ 447 million and $ 416 million, respectively, and are recorded in Other non-current assets in the consolidated statements of financial position.

NORTHROP GRUMMAN CORPORATION

Property, Plant and Equipment

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However, the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations is recorded in unallocated corporate expense within operating income as such depreciation is not allocable to government contracts and not considered part of management’s evaluation of segment operating performance.

Substantially all of the company’s long-lived assets are located in the U.S.

Major classes of PP&E and their useful lives are as follows:

NORTHROP GRUMMAN CORPORATION

Useful life in years, $ in millions Useful Life 2025 2024

2 unchanged sentences

Machinery and other equipment Up to 30

10,931 10,389

Capitalized software costs 3 - 7

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(2) Leasehold improvements are depreciated over the shorter of the useful life of the asset or lease term.

During the fourth quarter of 2020, the company completed a sale of equipment to a customer on a restricted Aeronautics Systems program for $ 444 million.

The company previously intended to use the equipment for internal purposes so we recognized the acquisition costs as capital expenditures and included the equipment in PP&E.

As we regularly sell this type of equipment to customers in the ordinary course of business, we recorded the sale as a revenue transaction and included the net book value of the equipment in Operating costs and expenses.

Although we generally classify proceeds from revenue transactions as cash inflows from operating activities, we recognized the proceeds from this transaction as cash inflows from investing activities, consistent with our prior recognition of the cost to acquire the equipment as capital expenditures.

The company received the final cash payment of $ 155 million related to the equipment sale during 2022 and included it in Proceeds from sale of equipment to a customer in the consolidated statements of cash flows.

During the year ended December 31, 2022, the company acquired $ 46 million of internal use software through long-term financing directly with the supplier.

The software was recorded in PP&E as a non-cash investing activity and the related liability was recorded in long-term debt as a non-cash financing activity.

During the year ended December 31, 2023, the company received lease incentives for landlord funded leasehold improvements of $ 55 million related to Space Systems real estate leases, which were recorded in PP&E and included in non-cash investing activities.

On December 28, 2022 the company acquired certain leased land in exchange for company-owned land, which had been used previously for production-related activities at Space Systems.

The exchange was accounted for as a nonmonetary transaction, and the acquired land, valued at approximately $ 155 million, was recorded in PP&E as a non-cash investing activity.

The transaction resulted in a $ 96 million gain, which was reflected in operating costs and expenses in the consolidated statements of earnings and comprehensive income.

Non-cash investing activities also include capital expenditures incurred but not yet paid of $ 280 million, $ 242 million and $ 75 million as of December 31, 2025, 2024 and 2023, respectively.

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Goodwill and other purchased intangible asset balances are included in the identifiable assets of their assigned business segment.

However, the company includes the amortization of other purchased intangible assets in unallocated corporate expense within operating income as such amortization is not allocable to government contracts and not considered part of management’s evaluation of segment operating performance.

Goodwill is presented on a separate line in the consolidated statements of financial position;

other purchased intangible assets are included in Other non-current assets.

The company includes the amortization of other purchased intangible assets in unallocated corporate expense within operating income as such amortization is not allocable to government contracts and not considered part of management’s evaluation of segment operating performance.

The company’s customer-related intangible assets are generally amortized over their respective useful lives based on the pattern in which the future economic benefits of the intangible assets are expected to be consumed.

Other intangible assets are generally amortized on a straight-line basis over their estimated useful lives.

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The company leases certain buildings, land and equipment.

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The company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term at commencement date.

We use our incremental borrowing rate based on the information available at commencement date to determine the present value of future payments and the appropriate lease classification.

We use our incremental borrowing rate based on the information available at commencement date to determine the present value of future

NORTHROP GRUMMAN CORPORATION

payments and the appropriate lease classification.

Many of our leases include renewal options aligned with our contract terms.

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Many of the company’s real property lease agreements contain incentives for tenant improvements, rent holidays or rent escalation clauses.

For tenant improvement incentives received, if the incentive is determined to be a leasehold improvement owned by the company, we generally record the incentives as a reduction to the right-of-use asset, which reduces rent expense over the lease term.

For tenant improvement incentives received, if the incentives are determined to be leasehold improvements owned by the company, we generally record the incentives as a reduction to the right-of-use asset, which reduces rent expense over the lease term.

For rent holidays and rent escalation clauses during the lease term, the company records rental expense on a straight-line basis over the term of the lease.

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Litigation, Commitments and Contingencies

We accrue for litigation, commitments and contingencies when management, after considering the facts and circumstances of each matter as then known to management, has determined it is probable a liability will be found to have been incurred and the amount of the loss can be reasonably estimated.

When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is recorded.

We accrue for litigation, commitments and contingencies when management, after considering the facts and circumstances of each matter known to management, has determined it is probable the company will incur a liability and the amount of the loss is reasonably estimable.

When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is accrued.

Legal fees are generally expensed as incurred.

1 unchanged sentence

Environmental Costs

We accrue for environmental liabilities when management determines that, based on the facts and circumstances known to the company, it is probable the company will incur costs to address environmental impacts and the costs are reasonably estimable.

When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, we record the low end of the range.

We accrue for environmental liabilities when management, after considering the facts and circumstances of each matter known to management, has determined it is probable the company will incur costs to address environmental impacts and the costs are reasonably estimable.

When only a range of amounts is reasonably estimable and no amount within the range is more likely than another, the low end of the range is accrued.

The company typically projects environmental costs for up to 30 years, records environmental liabilities on an undiscounted basis, and excludes asset retirement obligations and certain legal costs.

At sites involving multiple parties, we accrue environmental liabilities based upon our expected share of liability, considering the financial viability of other liable parties.

For the portion of environmental liabilities the company expects to be recoverable through overhead charges on U.S.

government contracts, the company records a deferred asset until amounts are charged to contracts.

Retirement Benefits

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Measuring plan obligations under FAS and CAS also includes different assumptions and models, such as in estimating returns on plan assets, calculating interest expense and the periods over which gains/losses related to pension assets and actuarial changes are recognized.

As a result, annual retiree benefit plan expense amounts for

NORTHROP GRUMMAN CORPORATION

FAS are different from the amounts for CAS in any given reporting period even though the ultimate cost of providing benefits over the life of the plans is the same under each method.

As a result, annual retiree benefit plan expense amounts for FAS are different from the amounts for CAS in any given reporting period even though the ultimate cost of providing benefits over the life of the plans is the same under each method.

CAS retiree benefit plan costs are charged to contracts and are included in segment operating income, and the difference between the service cost component of FAS expense and total CAS expense (the “FAS/CAS operating adjustment”) is recorded in operating income at the consolidated company level.

Not all net periodic pension expense is recognized in net earnings in the year incurred because it is allocated as production costs and a portion remains in inventory at the end of any given reporting period.

NORTHROP GRUMMAN CORPORATION

Actuarial gains and losses are immediately recognized in net periodic benefit cost for FAS through MTM benefit (expense) upon annual remeasurement in the fourth quarter, or on an interim basis as triggering events warrant remeasurement.

Prior service credits are recognized as a component of Accumulated other comprehensive loss and amortized into earnings in future periods.

In general, prior service credits are recognized as a component of Accumulated other comprehensive loss and amortized into earnings in future periods.

Stock Compensation

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The fair value of stock awards and performance stock awards is determined based on the closing market price of the company’s common stock on the grant date.

The fair value of market-based stock awards is determined at the grant date using a Monte Carlo simulation model.

For purposes of measuring compensation expense for performance awards, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.

The fair value of market-based stock awards is determined at the grant date using a Monte Carlo simulation model.

For purposes of measuring compensation expense for market-based awards, the expense is generally based on the fair value as of the grant date with no adjustments for the number of shares ultimately expected to vest.

At each reporting date, the number of shares used to calculate compensation expense and diluted earnings per share is adjusted to reflect the number ultimately expected to vest.

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Accounting Standards Updates

On November 27, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker.

We adopted the standard effective January 1, 2024 and applied the disclosure requirements retrospectively to all prior periods presented in the financial statements.

Adoption of ASU 2023-07 did not have an impact on the company’s consolidated financial position, results of operations and/or cash flows.

On December 14, 2023, the FASB issued ASU No.

On December 14, 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2023-09 Income Taxes (Topic 740):

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In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid.

ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively.

We are evaluating the disclosure impact of ASU 2023-09;

however, the standard will not have an impact on the company’s consolidated financial position, results of operations and/or cash flows.

We adopted the standard and applied the disclosure requirements on a prospective basis effective for the year ended December 31, 2025.

Adoption of ASU 2023-09 did not have an impact on the company’s consolidated financial position, results of operations or cash flows.

On November 4, 2024, the FASB issued ASU No.

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We are evaluating the disclosure impact of ASU 2024-03;

however, we do not

however, the standard will not have an impact on the company’s consolidated financial position, results of operations or cash flows.

On September 18, 2025, the FASB issued ASU No.

2025-06 Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40) .

ASU 2025-06 removes references to prescriptive and sequential software development stages, requiring companies to capitalize internal-use software costs when management commits to funding the software project and it is probable the project will be completed.

ASU 2025-06 will be effective for annual and interim periods beginning January 1, 2028, and can be applied on a prospective, modified prospective, or retrospective basis.

We are currently evaluating the potential impact of ASU 2025-06 on the company’s consolidated financial position, results of operations and cash flows.

On December 8, 2025, the FASB issued ASU No.

2025-11 Interim Reporting (Topic 270):

Narrow-Scope Improvements .

ASU 2025-11 clarifies the applicability of Topic 270 and the form and content of interim financial statements.

In addition, ASU 2025-11 requires entities to disclose material events occurring since the last annual reporting period.

ASU 2025-11 will be effective for interim periods beginning January 1, 2028, and can be applied

NORTHROP GRUMMAN CORPORATION

expect the standard will have a material impact on the company’s consolidated financial position, results of operations and/or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after December 31, 2024, are not expected to have a material effect on the company’s consolidated financial position, annual results of operations and/or cash flows.

on a prospective or retrospective basis.

We are evaluating the disclosure impact of ASU 2025-11;

however, the standard will not have an impact on the company’s consolidated financial position, results of operations or cash flows.

Other accounting standards updates adopted and/or issued, but not effective until after December 31, 2025, are not expected to have a material effect on the company’s consolidated financial position, results of operations and/or cash flows.

EARNINGS PER SHARE, SHARE REPURCHASES AND DIVIDENDS ON COMMON STOCK

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On December 6, 2023, the company’s board of directors authorized a new share repurchase program of up to an additional $ 2.5 billion in share repurchases of the company’s common stock (the “2023 Repurchase Program”).

Repurchases under the 2023 Repurchase Program commenced in February 2024 upon completion of the 2022 Repurchase Program.

Repurchases under the 2023 Repurchase Program commenced in February 2024 and were completed in September 2025.

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 (the “2024 Repurchase Program”).

Repurchases under the 2024 Repurchase Program commenced in September 2025 upon completion of the 2023 Repurchase Program.

As of December 31, 2025, repurchases under the 2024 Repurchase Program totaled $ 0.5 billion;

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By its terms, the 2024 Repurchase Program will expire when we have used all authorized funds for repurchases.

Repurchases under the 2024 Repurchase Program will commence upon completion of the 2023 Repurchase Program and will expire when we have used all authorized funds for repurchases.

As of December 31, 2024, there have been no repurchases under the 2024 Repurchase Program and the company’s total outstanding share repurchase authorization was $ 4.1 billion.

Accelerated Share Repurchase Agreements

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$ 2,000 4.4 $ 455.01 February 2024 — 2.5 1.9

December 6, 2023 $ 2,500 2.9 $ 472.26 2.9 — —

December 6, 2023 $ 2,500 5.2 $ 482.41 September 2025 2.3 2.9 —

December 11, 2024 $ 3,000 0.8 $ 575.31 0.8 — —

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INVENTORIED COSTS, NET

Inventoried costs are principally associated with contracts where the U.S.

Inventoried costs, net are principally associated with contracts where the U.S.

government is the primary customer, therefore the company does not believe it has significant exposure to recoverability risk related to these amounts.

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Inventoried costs, net $ 1,309 $ 1,455

Inventoried costs, net increased $ 346 million, or 31 percent, largely due to an increase in costs incurred for specific anticipated contracts to reduce customer delivery lead times.

The company recorded write-downs of commercial business inventory at Space Systems for which its cost exceeded net realizable value of $ 43 million during the year ended December 31, 2023.

In addition, the company recognized a $ 45 million reduction of inventoried costs related to the B-21 program at Aeronautics Systems during the year ended December 31, 2023.

Inventoried costs, net decreased $ 146 million, or 10 percent, largely due to the liquidation of costs, which were previously incurred and inventoried for specific anticipated contracts, upon receipt of those contract awards.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted.

Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures under Internal Revenue Code (IRC) Section 174 (reinstating full expensing beginning in 2025), extension of bonus depreciation, and revisions to international tax regimes.

The company recognized the income tax effects of the OBBBA in its 2025 financial statements, including an increase of $ 319 million to taxes receivable and a decrease of $ 387 million to deferred tax assets as of December 31, 2025.

As part of enactment of the OBBBA, the company became subject to the corporate alternative minimum tax (CAMT) and recorded CAMT credit carryforwards of $ 187 million during 2025.

These CAMT credit carryforwards do not expire and may be used to offset future regular U.S.

federal income tax liabilities.

Given the company’s future taxable income projections, CAMT did not impact the company’s quarterly or annual effective tax rates during 2025.

As described in Note 1, effective for the year ended December 31, 2025, we adopted ASU 2023-09 and applied the disclosure requirements on a prospective basis.

In accordance with prospective application, we did not recast prior period disclosures.

NORTHROP GRUMMAN CORPORATION

Federal and Foreign Income Tax Expense

Federal and foreign income tax expense consisted of the following:

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Total foreign income tax expense 33 10 11

Total federal and foreign income tax expense $ 842 $ 290 $ 940

Total federal and foreign income taxes $ 886 $ 842 $ 290

Earnings before income taxes associated with the company’s foreign operations are not material in the periods presented.

Income tax expense differs from the amount computed by multiplying earnings before income taxes by the statutory federal income tax rate due to the following:

$ in millions Year Ended December 31, 2025

federal statutory tax rate $ 1,064 21.0 %

Foreign tax effects 15 0.3

Enactment of new tax laws — —

Effect of cross-border tax laws:

Foreign derived intangible income, net of reserve ( 49 ) ( 1.0 )

Research and development, net of reserve ( 242 ) ( 4.7 )

Other ( 2 ) —

Changes in valuation allowances — —

Nontaxable or nondeductible items 11 0.2

Changes in unrecognized tax benefits:

Net interest expense 69 1.4

Other adjustments 2 —

Total federal and foreign income taxes $ 886 17.5 %

Year ended December 31

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Foreign derived intangible income 13 0.3 ( 63 ) ( 2.7 )

Settlements with taxing authorities — — ( 1 ) — ( 86 ) ( 1.5 )

Net interest expense 145 2.9 69 2.9

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Total federal and foreign income taxes $ 842 16.8 % $ 290 12.4 %

The 2024 ETR increased to 16.8 percent from 12.4 percent in 2023 primarily due to the impact of the prior year B-21 charge and the MTM adjustment on our ETR.

The 2024 MTM benefit increased the 2024 ETR by 0.4 percentage points, whereas the prior year B-21 charge and MTM expense collectively reduced the 2023 ETR by 3.8 percentage points.

The 2024 ETR also reflects a net reduction in tax reserves largely due to a recent federal court decision, partially offset by higher interest expense on unrecognized tax benefits.

The 2023 ETR decreased to 12.4 percent from 16.1 percent in 2022 primarily due to lower earnings before income taxes as a result of the B-21 charge and MTM expense, which collectively reduced the 2023 ETR by 3.8 percentage points.

The 2022 MTM benefit increased the 2022 ETR by 1.2 percentage points.

Income tax payments, net of refunds received, were $ 880 million, $ 1.2 billion and $ 1.5 billion for the years ended December 31, 2024, 2023 and 2022, respectively.

Taxes receivable, which are included in Prepaid expenses and other current assets in the consolidated statements of financial position, were $ 517 million and $ 1.5 billion as of December 31, 2024 and 2023, respectively.

NORTHROP GRUMMAN CORPORATION

2025 income tax expense increased $ 44 million, or 5 percent, due to a higher ETR and higher earnings before income taxes.

The 2025 ETR increased to 17.5 percent from 16.8 percent in 2024 primarily due to a net reduction in tax reserves in the prior year, lower research credits principally due to enactment of the OBBBA, and additional income tax expense related to nondeductible goodwill in the divested training services business.

These increases were partially offset by lower interest expense on unrecognized tax benefits.

The MTM benefit in both 2025 and 2024 increased each respective year’s ETR by 0.4 percentage points.

2024 income tax expense increased $ 552 million, or 190 percent, due to higher earnings before income taxes and a higher ETR.

The 2024 ETR increased to 16.8 percent from 12.4 percent in 2023 primarily due to the impact of the prior year B-21 loss provision and the MTM adjustment on our ETR.

The 2024 MTM benefit increased the 2024 ETR by 0.4 percentage points, whereas the prior year B-21 loss provision and MTM expense collectively reduced the 2023 ETR by 3.8 percentage points.

The 2024 ETR also reflects a net reduction in tax reserves largely due to a federal court decision in 2024, partially offset by higher interest expense on unrecognized tax benefits.

Net interest expense within the company’s federal, foreign and state income tax provisions was $ 106 million, $ 164 million and $ 62 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The Organization for Economic Co-operation and Development issued Pillar Two model rules for a global minimum tax of 15% effective January 1, 2024.

While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two.

Pillar Two had no impact on our 2024 ETR, and we do not currently expect Pillar Two to significantly impact our ETR going forward.

NORTHROP GRUMMAN CORPORATION

Pillar Two had no impact on our 2025 or 2024 ETR, and we do not currently expect Pillar Two to significantly impact our ETR going forward.

Income Taxes Paid

Income taxes paid, net of refunds received, consisted of the following:

$ in millions Year Ended December 31, 2025

Federal $ 412

State and local

California 151

Income taxes paid, net of refunds received

Income tax payments, net of refunds received, were $ 880 million and $ 1.2 billion for the years ended December 31, 2024 and 2023, respectively.

Taxes receivable, which are included in Prepaid expenses and other current assets in the consolidated statements of financial position, were $ 924 million and $ 517 million as of December 31, 2025 and 2024, respectively.

Uncertain Tax Positions

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federal jurisdiction and in various state and foreign jurisdictions.

During the fourth quarter of 2024, the company entered into an agreed RAR for certain matters related to the company’s 2018-2020 federal income tax returns, largely related to our methods of accounting associated with the timing of revenue recognition and related costs under IRC Section 451(b), resulting in a $ 766 million reduction to our unrecognized tax benefits and an immaterial impact to income tax expense.

During the fourth quarter of 2024, the company entered into an agreed Revenue Agent’s Report (“RAR”) for certain matters related to the company’s 2018-2020 federal income tax returns, largely related to our methods of accounting associated with the timing of revenue recognition and related costs under IRC Section 451(b), resulting in a $ 766 million reduction to our unrecognized tax benefits and an immaterial impact to income tax expense.

The matters not addressed by the agreed RAR related to the company’s 2018-2020 federal tax returns are currently under Internal Revenue Service (IRS) examination.

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The matters not addressed by the agreed RAR related to the company’s 2014-2017 federal income tax returns and refund claims related to its 2007-2016 federal tax returns are currently under review by the IRS Appeals Office.

In the second quarter of 2023, the California Franchise Tax Board approved a resolution of the state examination primarily related to California state apportionment in the company’s 2007 to 2016 tax years, resulting in a $ 95 million reduction to our unrecognized tax benefits and an $ 11 million reduction to unallocated corporate expense.

Tax returns for open tax years related to state and foreign jurisdictions remain subject to examination.

As state income taxes are generally considered allowable and allocable costs, any individual or aggregate state examination impacts are not expected to have a material impact on our financial results.

As state income taxes are generally considered allowable and allocable costs, any individual or aggregate state examination

NORTHROP GRUMMAN CORPORATION

impacts are not expected to have a material impact on our financial results.

Amounts currently subject to examination related to foreign jurisdictions are not material.

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Settlements with taxing authorities ( 2 ) ( 766 ) ( 189 )

Other, net ( 1 ) ( 1 ) ( 1 )

Decreases from lapse in statutes of limitations ( 48 ) ( 1 ) ( 1 )

Net change in unrecognized tax benefits 193 ( 547 ) 331

Unrecognized tax benefits at end of the year $ 1,640 $ 1,447 $ 1,994

The 2024 decrease in unrecognized tax benefits was primarily related to the settlement of certain matters related to the company’s methods of accounting associated with the timing of revenue recognition under IRC Section 451(b) as discussed above, partially offset by additional reserves on current year tax positions related to 451(b) (prior to settlement) and research credits.

It is reasonably possible that within the next 12 months the company’s unrecognized tax benefits may increase by approximately $ 100 million.

If the income tax benefits from these tax positions are ultimately realized, $ 914 million of federal and foreign tax benefits would reduce the company’s ETR.

Inclusive of accrued interest and penalties, the company’s current unrecognized tax benefits of $ 345 million and $ 964 million as of December 31, 2024 and 2023, respectively, are included in Other current liabilities in the consolidated statements of financial position.

The 2025 increase in unrecognized tax benefits was primarily related to additional reserves on current year tax positions related to research credits and state apportionment.

If the income tax benefits from these tax positions are ultimately realized, $ 1.0 billion of federal and foreign tax benefits (and related interest and penalties) would reduce the company’s ETR.

NORTHROP GRUMMAN CORPORATION

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Deferred Tax Assets

Retiree benefits $ — $ 115

Capitalized research and experimental expenditures $ 3,473 $ 4,816

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The company believes it is more-likely-than-not our net deferred tax assets will be realized.

At December 31, 2024, the company has available tax credits and unused net operating losses of $ 627 million and $ 318 million, respectively, that may be applied against future taxable income.

The majority of tax credits and net operating losses expire between 2025 and 2047, however, some may be carried forward indefinitely.

At December 31, 2025, in addition to the $ 187 million of CAMT credits noted above, the company has available tax credits and unused net operating losses of $ 717 million and $ 584 million, respectively, that may be applied against future taxable income.

The majority of tax credits expire between 2026 and 2047, while some may be carried forward indefinitely.

Most net operating losses may also be carried forward indefinitely.

Due to the uncertainty of the realization of the tax credits and net operating losses, the company has recorded valuation allowances of $ 358 million and $ 62 million, respectively, as of December 31, 2025.

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Balance as of December 31, 2023 $ 3,974 $ 3,722 $ 5,881 $ 3,940 $ 17,517

— ( 5 ) — — ( 5 )

Balance as of December 31, 2024 $ 3,974 $ 3,717 $ 5,881 $ 3,940 $ 17,512

Divestiture of training services business

— ( 80 ) — — ( 80 )

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NORTHROP GRUMMAN CORPORATION

During the third quarter of 2025, the company transferred $ 50 million of securities from Level 3 to Level 1 in connection with the initial public offering (“IPO”) of a company in which we hold an investment.

As of December 31, 2025, the company’s investment was valued at $ 68 million.

The company is prohibited from selling this investment until the first quarter of 2026.

There were no other transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2025 and 2024.

Unrealized gains and losses from marketable securities, which are reflected in Other, net on the consolidated statement of earnings and comprehensive income, were $ 45 million for the year ended December 31, 2025.

Unrealized gains and losses from marketable securities were not material for the years ended December 31, 2024 and 2023.

The notional value of the company’s foreign currency forward contracts at December 31, 2025 and 2024 was $ 308 million and $ 399 million, respectively.

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The derivative fair values and related unrealized gains/losses at December 31, 2025 and 2024 were not material.

There were no transfers of financial instruments into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2024 and 2023.

The carrying value of cash and cash equivalents approximates fair value.

Commercial Paper

The company maintains a commercial paper program that serves as a source of short-term financing with capacity to issue unsecured commercial paper notes up to $ 2.5 billion.

The company maintains a commercial paper program that serves as a source of short-term financing.

In September 2025, the company amended its commercial paper program to increase its capacity to issue unsecured commercial paper notes from $ 2.5 billion to $ 3.0 billion.

There were no commercial paper borrowings outstanding at December 31, 2025 and December 31, 2024, respectively.

Credit Facility

The company maintains a five-year senior unsecured credit facility in an aggregate principal amount of $ 2.5 billion (the “2022 Credit Agreement”) that matures in August 2027.

In September 2025, the company entered into a new five-year senior unsecured revolving credit facility in an aggregate principal amount of $ 3.0 billion (the “2025 Credit Agreement”).

The 2025 Credit Agreement replaced the company’s prior five-year, $ 2.5 billion revolving credit facility entered into in August 2022.

The revolving credit facility established under the 2025 Credit Agreement is intended to support the company’s commercial paper program and other general corporate purposes.

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Issuance of Senior Notes

In May 2025, the company issued $ 1.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

• $ 500 million of 4.65 % senior notes due 2030 (the “2030 Notes”) and

• $ 500 million of 5.25 % senior notes due 2035 (the “2035 Notes”).

In January 2024, the company issued $ 2.5 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

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• $ 1.15 billion of 5.20 % senior notes due 2054 (the “2054 Notes”).

In February 2023, the company issued $ 2.0 billion of unsecured senior notes for general corporate purposes, including debt repayment, share repurchases, and working capital, as follows:

• $ 1.0 billion of 4.70 % senior notes due 2033 (the “2033 Notes”) and

• $ 1.0 billion of 4.95 % senior notes due 2053 (the “2053 Notes”).

We refer to the 2029 Notes, 2030 Notes, 2034 Notes, 2035 Notes, and 2054 Notes, together, as the “notes.” Interest on the notes is payable semi-annually in arrears.

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Repayments of Senior Notes

In August 2023, the company repaid $ 1.05 billion of 3.25 percent unsecured senior notes upon maturity.

Subsequent Event - In January 2025, the company repaid $ 1.5 billion of 2.93 percent unsecured senior notes upon maturity.

In January 2025, the company repaid $ 1.5 billion of 2.93 percent unsecured senior notes upon maturity.

Long-term debt consists of the following:

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2053 4.95 % 1,000 1,000

2054 5.20 % 1,150 1,150

Other Various 184 264

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We are also a party to various individual lawsuits and a putative class action in the Eastern District of New York alleging personal injury and property damage related to the legacy Bethpage environmental conditions (the “Bethpage EDNY cases”).

The court has stayed the filed individual lawsuits, pending its decision on class certification, which the court will undertake if an ongoing mediation between the parties is unsuccessful.

The court has stayed the filed individual lawsuits, pending its decision on class certification.

Although the court has ordered supplemental briefing on pending class certification and expert motions in the putative class action, the parties remain engaged in a mediation.

We are also a party, and may become a party, to other lawsuits brought by or against insurance carriers, and by other individual plaintiffs and/or putative classes, as well as other parties.

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The company received from the U.S.

Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost accounting and controls that appears focused on the interest rate assumptions the company used to determine our U.S.

Department of Justice (DOJ) a criminal subpoena on December 9, 2022, and a civil investigative demand (CID) on February 2, 2023, both seeking information regarding financial and cost accounting and controls focused on the interest rate assumptions the company used to determine our U.S.

Government Cost Accounting Standards (CAS) pension expense, which we discuss in Note 11 below.

The company is engaging with the government and responding to the requests.

The company has responded to requests and expects to continue to engage with the government as these matters progress.

We cannot at this point predict the outcome of these matters.

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When such findings are presented, the company and U.S.

government representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to

NORTHROP GRUMMAN CORPORATION

assess the amounts being claimed.

representatives engage in discussions to enable the company to evaluate the merits of these claims, as well as to assess the amounts being claimed.

Where appropriate, provisions are made to reflect the company’s estimated exposure for such potential disallowed costs.

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On February 15, 2024, DCMA sent to the company a Contracting Officer’s determination of noncompliance with CAS, which is an interim, non-final determination, and the parties engaged in discussions.

As noted in Note 10 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information that appears related to the interest rate assumptions at issue in our discussions with DCMA.

The company has responded to requests and expects to continue discussions with the DOJ and DCMA as these matters progress.

In addition, as noted in Note 10 above, the company received from the DOJ a criminal subpoena on December 9, 2022 and a CID on February 2, 2023, both seeking information related to the interest rate assumptions at issue in our discussions with DCMA.

The company has responded to requests and expects to continue to engage with the government as these matters progress.

We cannot at this point predict the outcome of these matters.

The sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of the DCMA matter could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.

The sensitivity to changes in interest rate assumptions makes it reasonably possible the outcome of these matters could have a material adverse effect on our financial position, results of operations and/or cash flows, although we are not currently able to estimate a range of any potential loss.

Environmental Matters

The table below summarizes the amount accrued for environmental remediation costs, management’s estimate of the amount of reasonably possible future costs in excess of accrued costs and the deferred costs expected to be recoverable through overhead charges on U.S.

government contracts as of December 31, 2024 and 2023:

$ in millions Accrued Costs (1)(2)

Reasonably Possible Future Costs in Excess of Accrued Costs (2)

The table below summarizes the amount of accrued and deferred costs associated with the company’s environmental remediation liabilities as of December 31, 2025 and 2024:

$ in millions 2025 2024

Accrued costs (1)

Deferred costs (2)

December 31, 2024 $ 546 $ 377 $ 507

December 31, 2023 584 387 518

(1) As of December 31, 2024, $ 196 million is recorded in Other current liabilities and $ 350 million is recorded in Other non-current liabilities.

(1) As of December 31, 2025, $ 204 million is recorded in Other current liabilities and $ 343 million is recorded in Other non-current liabilities in the consolidated statements of financial position.

Estimated remediation costs are not discounted to present value.

The reasonably possible future costs in excess of accrued costs do not take into consideration amounts expected to be recoverable through overhead charges on U.S.

(2) The company defers the portion of environmental remediation costs we expect to be recoverable through overhead charges on U.S.

government contracts.

(3) As of December 31, 2024, $ 186 million is deferred in Prepaid expenses and other current assets and $ 321 million is deferred in Other non-current assets.

These amounts reflect a $ 26 million increase during the second quarter of 2024 in our estimated recovery of certain environmental remediation costs and are evaluated for recoverability on a routine basis.

As of December 31, 2025, $ 189 million is deferred in Prepaid expenses and other current assets and $ 313 million is deferred in Other non-current assets in the consolidated statements of financial position.

These amounts are routinely evaluated for recoverability.

Reasonably possible future costs in excess of accrued costs were $ 380 million and $ 377 million as of December 31, 2025 and 2024, respectively.

Reasonably possible remediation costs in excess of accrued costs do not take into consideration amounts expected to be recoverable through overhead charges on U.S.

government contracts.

However, the recoverability of these costs is expected to be similar in proportion to the recoverability of the company’s accrued costs.

Although management cannot predict whether (i) new information gained as our environmental remediation projects progress, (ii) changes in remediation standards or other requirements to which we are subject, or (iii) other changes in facts and circumstances will materially affect the estimated liability accrued, we do not anticipate that future remediation expenditures associated with our currently identified projects will have a material adverse effect on the company’s consolidated financial position as of December 31, 2025, or its annual results of operations and/or cash flows.

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At December 31, 2025, there were $ 595 million of stand-by letters of credit and guarantees and $ 271 million of surety bonds outstanding.

NORTHROP GRUMMAN CORPORATION

Indemnifications

The company has provided indemnifications for certain environmental, income tax and other potential liabilities in connection with certain of its divestitures.

The settlement of these liabilities is not expected to have a material

NORTHROP GRUMMAN CORPORATION

adverse effect on the company’s consolidated financial position as of December 31, 2024, or its annual results of operations and/or cash flows.

The settlement of these liabilities is not expected to have a material adverse effect on the company’s consolidated financial position as of December 31, 2025, or its annual results of operations and/or cash flows.

RETIREMENT BENEFITS

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Certain covered employees and dependents are eligible to participate in plans upon retirement if they meet specified age and years of service requirements.

The company provides subsidies to reimburse certain retirees for a portion of the cost of individual Medicare-supplemental coverage purchased directly by the retiree through a private insurance exchange.

The company provides subsidies to reimburse certain retirees for a portion of the cost of individual coverage purchased directly by the retiree through a private insurance exchange.

The company has capped the amount of its contributions for substantially all its remaining postretirement medical and life benefit plans.

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Decrease (increase) in unamortized prior service credit – 2023 — 1 1

Amortization of prior service credit — 1 1

Tax expense — — —

Decrease (increase) in unamortized prior service credit – 2023 — 1 1

(Increase) decrease in prior service credit — ( 12 ) ( 12 )

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(Increase) decrease in unamortized prior service credit – 2024 — ( 9 ) ( 9 )

Amortization of prior service credit — 3 3

Tax expense — ( 1 ) ( 1 )

Decrease (increase) in unamortized prior service credit – 2025 $ — $ 2 $ 2

The following table sets forth the funded status and amounts recognized in the consolidated statements of financial position for the company’s defined benefit retirement plans.

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Participant contributions 9 6 2 26

Actuarial (gain) loss ( 1,295 ) 1,447 ( 19 ) 42

Actuarial loss (gain) 578 ( 1,295 ) 31 ( 19 )

Benefits paid ( 2,000 ) ( 1,942 ) ( 117 ) ( 157 )

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Funded status $ 1,703 $ 777 $ 150 $ 87

The decrease in the fair value of plan assets for the year ended December 31, 2024 was principally driven by $ 2.1 billion of benefit payments, partially offset by net returns on plan assets of 4.7 percent.

The decrease in our projected benefit obligation for the year ended December 31, 2024, was primarily driven by $ 2.1 billion of benefit payments and a 58 basis point increase in the discount rate from year end 2023, partially offset by $ 1.6 billion of interest cost.

The increase in the fair value of plan assets for the year ended December 31, 2025 was primarily driven by net returns on pension plan assets of 11.3 percent, partially offset by $ 2.1 billion of benefit payments.

The increase in our projected benefit obligation for the year ended December 31, 2025, was primarily driven by $ 1.7 billion of interest cost and a 15 basis point decrease in the pension discount rate from year-end 2024, partially offset by $ 2.1 billion of benefit payments.

NORTHROP GRUMMAN CORPORATION

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Alternative investments 8 % - 46 %

Private credit 0 % - 15 %

The table below provides the fair values of the company’s pension and Voluntary Employees’ Beneficiary Association (VEBA) trust plan assets at December 31, 2025 and 2024, by asset category.

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Fixed-income funds 3,664 3,559

Hedge funds 32 38

Opportunistic investments 1,816 3,176

Private equity funds 2,950 3,521

Real estate funds 1,560 1,860

Private credit 1,779 —

Other alternatives 4,094 3,627

Payables, net ( 709 ) ( 541 )

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There were no transfers of plan assets into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2025 and 2024.

NORTHROP GRUMMAN CORPORATION

Generally, investments are valued based on information in financial publications of general circulation, statistical and valuation services, records of security exchanges, appraisal by qualified persons, transactions and bona fide offers.

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and international equities consist primarily of common stocks and institutional common trust funds.

Investments in certain equity securities, which include domestic and international securities and registered investment companies, and exchange-traded funds with fixed income strategies are valued at the last reported sales or quoted price on the last business day of the reporting period.

Investments in certain equity securities, which include domestic and international securities and registered investment companies,

NORTHROP GRUMMAN CORPORATION

and exchange-traded funds with fixed income strategies are valued at the last reported sales or quoted price on the last business day of the reporting period.

Fair values for certain fixed-income securities, which are not exchange-traded, are valued using third-party pricing services.

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Certain derivative financial instruments within the pension trust are subject to master netting agreements with certain counterparties.

Investments in certain equity and fixed-income funds, which include common/collective trust funds, and alternative investments, including hedge funds, opportunistic investments, private equity funds and real estate funds, are valued based on the NAV derived by the investment managers, as a practical expedient, and are described further below.

Investments in certain equity and fixed-income funds, which include common/collective trust funds, and alternative investments are valued based on the NAV derived by the investment managers, as a practical expedient, and are described further below.

and International equities:

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As o f December 31, 2025 and 2024 there were no unfunded commitments.

Consist of closed-end funds with a 5 - 10 year life as well as funds that allow redemption requests subject to the liquidity limitations of the underlying investments.

As of December 31, 2024 and 2023, unfunded commitments were $ 6 million.

Opportunistic investments:

Consist of closed-end funds with a 5 - 10 year life as well as funds that allow redemption requests subject to the liquidity limitations of the underlying investments.

As of December 31, 2024 and 2023, unfunded commitments were $ 1.3 billion and $ 1.6 billion, respectively.

Private equity funds:

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A s of December 31, 2025 and 2024, unfunded commitments were $ 124 million and $ 24 million, respectively.

Private credit:

Other alternatives:

Consist of closed-end funds with a 5 - 10 year life as well as funds that allow redemption requests subject to the liquidity limitations of the underlying investments.

As of December 31, 2024, unfunded commitments were $ 721 million.

At December 31, 2024 and 2023, the defined benefit pension trust held $ 1 million and $ 0 , respectively, of Northrop Grumman common stock.

As of December 31, 2025 and 2024, unfunded commitments were $ 3.0 billion and $ 2.0 billion, respectively.

At December 31, 2025 and 2024, the defined benefit pension trust held $ 0 and $ 1 million, respectively, of Northrop Grumman common stock.

At December 31, 2025 and 2024, the VEBA trust did not hold any Northrop Grumman common stock.

NORTHROP GRUMMAN CORPORATION

Benefit Payments

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At December 31, 2025, the company had stock-based compensation awards outstanding under the following shareholder-approved plans:

the 2024 Long-Term Incentive Stock Plan (2024 Plan) and the 2011 Long-Term Incentive Stock Plan (2011 Plan), both applicable to employees and non-employee directors, and the 1993 Stock Plan for Non-Employee Directors (1993 SPND).

the 2024 Long-Term Incentive Stock Plan (2024 Plan) and the 2011 Long-Term

NORTHROP GRUMMAN CORPORATION

Incentive Stock Plan (2011 Plan), both applicable to employees and non-employee directors, and the 1993 Stock Plan for Non-Employee Directors (1993 SPND).

Employee Plans – On May 15, 2024, the company’s shareholders approved the company’s new 2024 Plan, which replaced the 2011 Plan.

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Stock units awarded under the Amended Director Program and Restated Director Program are paid out in an equivalent number of shares of Northrop Grumman common stock.

Directors are credited with dividend equivalents

NORTHROP GRUMMAN CORPORATION

in connection with the accumulated stock units until the shares of common stock relating to such stock units are issued.

Directors are credited with dividend equivalents in connection with the accumulated stock units until the shares of common stock relating to such stock units are issued.

Compensation Expense

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These amounts are expected to be charged to expense over a weighted-average period of 1.3 years.

NORTHROP GRUMMAN CORPORATION

Stock award activity for the years ended December 31, 2023, 2024 and 2025, is presented in the table below.

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Weighted average discount rate 4.3 % 4.0 %

NORTHROP GRUMMAN CORPORATION

Maturities of Lease Liabilities

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Present value of operating lease liabilities $ 2,188

As of December 31, 2024, we have approximately $ 498 million in rental commitments for real estate leases that have not yet commenced.

As of December 31, 2025, we have approximately $ 1.3 billion in rental commitments for real estate leases that have not yet commenced.

These leases are expected to commence in 2026 and 2027 with lease terms of 4 to 26 years.

NORTHROP GRUMMAN CORPORATION

SEGMENT INFORMATION

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Unallocated corporate expense

( 124 ) ( 214 ) ( 141 )

Total operating income $ 4,511 $ 4,370 $ 2,537

10 unchanged sentences

NORTHROP GRUMMAN CORPORATION

Unallocated Corporate (Expense) Income

Unallocated corporate (expense) income includes the portion of corporate costs not considered allowable or allocable under applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs.

Unallocated corporate (expense) income also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations, as well as certain compensation and other costs.

Unallocated Corporate Expense

Unallocated corporate expense includes the portion of corporate costs not considered allowable or allocable under applicable FAR and CAS requirements, and therefore not allocated to the segments, such as changes in deferred state income taxes and a portion of management and administration, legal, environmental, compensation, retiree benefits, advertising and other corporate unallowable costs.

Unallocated corporate expense also includes costs not considered part of management’s evaluation of segment operating performance, such as amortization of purchased intangible assets and the additional depreciation expense related to the step-up in fair value of PP&E acquired through business combinations, as well as certain compensation and other costs.

During the second quarter of 2025, the $ 231 million pre-tax gain on the sale of our training services business and $ 19 million of unallowable state taxes and transaction costs associated with the divestiture were recorded in Unallocated corporate expense.

NORTHROP GRUMMAN CORPORATION

76 unchanged sentences

NORTHROP GRUMMAN CORPORATION

Sales by Geographic Region Year Ended December 31

Sales by Geographic Region (1)

Year Ended December 31

2025 2024 2023

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United States $ 10,500 82 % $ 10,386 85 % $ 9,414 85 %

$ 10,109 86 % $ 9,167 87 % $ 8,948 87 %

Asia/Pacific 920 7 % 744 6 % 712 7 %

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United States 6,455 83 % 6,127 85 % 5,775 82 %

6,404 83 % 6,022 80 % 5,477 80 %

Asia/Pacific 374 5 % 294 4 % 314 4 %

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United States 8,947 81 % 8,413 82 % 8,084 82 %

8,413 82 % 8,084 82 % 7,572 81 %

Asia/Pacific 550 5 % 472 5 % 460 5 %

6 unchanged sentences

United States 10,062 98 % 11,107 98 % 11,112 98 %

11,107 98 % 11,112 98 % 9,757 97 %

Asia/Pacific 75 1 % 42 1 % 82 1 %

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United States 35,964 86 % 36,033 88 % 34,385 88 %

36,033 88 % 34,385 88 % 31,754 87 %

Asia/Pacific 1,919 4 % 1,552 4 % 1,568 4 %

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Total Sales $ 41,954 $ 41,033 $ 39,290

(1) Sales are attributed to countries based on the ultimate customer’s location.

No country other than the United States represents greater than 10% of total company sales.

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NORTHROP GRUMMAN CORPORATION

SUBSEQUENT EVENT

On January 29, 2025, the company entered into a definitive agreement to sell substantially all of the Immersive Mission Solutions (IMS) operating unit of Defense Systems for $ 327 million in cash.

IMS is a provider of mission training and satellite ground network communications software for U.S.

government customers.

The transaction, which is subject to final government approvals and closing conditions, is expected to be completed mid-year 2025.

We expect to recognize an after-tax gain of approximately $ 150 million when the transaction closes.

NORTHROP GRUMMAN CORPORATION

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data