Northrop Grumman designs and builds stealth bombers, missiles, and satellites for the U.S. government, then gets paid again for decades to maintain and upgrade those same systems — a business that depends on the U.S. defense budget for 84% of its revenue.
How Northrop Grumman makes money
Northrop Grumman designs and builds weapons systems—stealth bombers, missiles, satellites—for the U.S. government, primarily the Department of Defense, and then gets paid again for decades to maintain and upgrade those same systems in the field.
+ allied governments
Mission (radar) · Space (satellites)
2.3x annual revenue
Simplified. A dashed feedback loop of decades-long maintenance and upgrade re-contracting feeds back into the same four segments. Source: 10-K FY2025, p.1–3, 6, 37.
Where the revenue comes from
Revenue by segment — FY2025
Aeronautics carries the lowest margin (6.3%) of the four, reflecting a $477M development-stage loss provision on the B-21 bomber program. Segment totals sum above consolidated revenue due to intersegment eliminations. Source: 10-K FY2025, p.33–36.
Source: 10-K FY2025, p.85–86.
Customers and competitors
Northrop is, in effect, a single-customer business: 84% of 2025 revenue came from the U.S. government (down from a peak of 87% in 2024), and half of all contracts are fixed-price, meaning Northrop itself absorbs any cost overrun.
- Lockheed Martin — the largest defense contractor by revenue, dominant in fighter jets (F-35), though Northrop holds a unique position in space systems and stealth bombers (B-21).
- RTX (Raytheon) — competes in missiles and sensors but also runs a commercial jet-engine business (Pratt & Whitney), giving it exposure to civil aviation cycles that Northrop, at 100% defense revenue, doesn't have.
- General Dynamics — competes in submarines and combat vehicles while also running a commercial business jet unit (Gulfstream); Northrop's lack of a commercial segment means greater exposure to the defense budget cycle.
The metric that matters most in this sector
For a defense prime, backlog moves before revenue or earnings do — it shows how many years of future work are already under contract — and book-to-bill (new orders divided by revenue) above 1.0x signals the order book is growing faster than the company can bill for it.
Backlog, two-year comparison
2025 net new orders were $46.3B, for a book-to-bill of 1.10x; backlog now sits at 2.3 times annual revenue. Source: 10-K FY2025, p.37.
Leadership and ownership
CEO Kathy J. Warden has led the company since January 2019 and added the board chair role that August — roughly seven years at the helm. An internal promotion who joined in 2008 and rose through the Mission Systems segment president role, she previously worked at General Dynamics and GE. There is no founder involvement; Northrop is a professionally managed company founded in 1939. The largest shareholders are index managers: State Street (9.8%), Vanguard (9.3%), and BlackRock (7.5%) — no controlling holder.
Source: DEF 14A 2026, p.16, 93–94.
Capital returns
Northrop yields 1.90% on its dividend, and the pace of increases has been accelerating: +8% in May 2023, +10% in May 2024, and +12% in May 2025 to $2.31 per share quarterly. Buybacks totaled $1.62B in 2025 (versus $2.51B in 2024 and $1.50B in 2023), and shares outstanding actually fell 2.0% (145.0M to 142.0M) — genuine retirement of shares, not just an offset to stock-based compensation.
Source: 10-K FY2025, p.25, 44, 51.
How this company could fail
- Single-customer (U.S. government) dependency — 84% of revenue. Budget cuts, shutdowns, or debt-ceiling standoffs delay payments and orders directly; a 43-day federal shutdown actually occurred in October 2025.
- Fixed-price development-contract cost overruns — the B-21 bomber's low-rate initial production has already absorbed a $1.56B loss provision in 2023 and a further $477M in Q1 2025. Similar risk could recur on other programs, including Sentinel.
- New entrants and changing procurement models — the Pentagon is increasingly using Other Transaction Authority to bring in lower-cost, more agile commercial-technology and startup competitors, challenging the traditional dominance of large primes.
Source: 10-K FY2025, Risk Factors, p.7–11; p.28, Note 9.
Five-year financials
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| Revenue | 35,667 | 36,602 | 39,290 | 41,033 | 41,954 |
| YoY growth | — | +2.6% | +7.3% | +4.4% | +2.2% |
| Operating income* | 5,651 | 3,601 | 2,537 | 4,370 | 4,511 |
| Operating margin | 15.8% | 9.8% | 6.5% | 10.6% | 10.8% |
| Free cash flow | 2,152 | 1,466 | 2,100 | 2,621 | 3,307 |
| Total debt | 12,783 | 12,877 | 13,856 | 16,274 | 15,696 |
Sources: 10-K FY2025, p.48, 50, 68; 10-K FY2024; 10-K FY2022 (for 2021–2022 figures). FCF = operating cash flow − capex.
What we still don't know
- Whether the B-21 low-rate-initial-production losses are fully behind the company — management says no further changes were identified after a fourth-quarter review, but pricing for units 21–40 (the "not-to-exceed" range) remains unnegotiated.
- The actual profit structure of the restructured Sentinel program after a favorable cost estimate revision in Q2 2025 — production and deployment-phase pricing is still unagreed.
- How much of the FY2026 defense budget is actually finalized beyond the continuing resolution running through Jan. 30, 2026 can't be determined from this filing alone.
Frequently asked questions
What does Northrop Grumman do?
Northrop Grumman designs and builds major weapons systems — stealth bombers, missiles, radar, and satellites — for the U.S. government and allied nations, then earns decades of follow-on revenue maintaining and upgrading those same systems.
How dependent is Northrop Grumman on the U.S. government?
About 84% of Northrop's 2025 revenue came from the U.S. government, and roughly half of its contracts are fixed-price, meaning the company itself absorbs any cost overrun.
What is Northrop Grumman's market cap?
As of this article's data (Sept. 10, 2026 close), Northrop Grumman traded at $518.95 per share, for a market cap of roughly $73.72 billion.