NORTHROP GRUMMAN CORP /DE/

For purposes of the operating results discussion below, we assess our performance using certain financial measures that are not calculated in accordance with GAAP. Organic sales is defined as total sales excluding sales attributable to the company's training services business. This measure may be useful to investors and other users of our financial statements as a supplemental measure in evaluating the company’s underlying sales growth as well as in understanding our ongoing business and future sales trends by presenting the company’s sales adjusted for the impact of the divestiture.

We reconcile this non-GAAP financial measure to its most directly comparable GAAP financial measure below. This non-GAAP measure may not be defined and calculated by other companies in the same manner and should not be considered in isolation or as an alternative to operating results presented in accordance with GAAP.

Selected financial highlights are presented in the table below:

Sales

The table below reconciles sales to organic sales:

Second quarter 2025 sales increased $133 million, or 1 percent, primarily driven by higher sales at Mission Systems, Defense Systems and Aeronautics Systems, partially offset by lower sales at Space Systems due, in part, to the wind-down of work on certain Space programs, as discussed in our segment operating results below.

Year to date 2025 sales decreased $532 million, or 3 percent, primarily driven by lower sales at Space Systems due, in part, to the wind-down of work on certain Space programs, and lower sales at Aeronautics Systems, partially offset by higher sales at Mission Systems and Defense Systems.

See “Segment Operating Results” below for further information by segment and “Product and Service Analysis” for product and service detail. See Note 10 to the financial statements for information regarding the company’s sales by customer type, contract type and geographic region for each of our segments.

-25-

Operating Income and Margin Rate

Second quarter 2025 operating income increased $335 million, or 31 percent, primarily due to the training services divestiture, including a $231 million gain on sale and $19 million of unallocated corporate expense for unallowable state taxes and transaction costs. Operating income also increased due to $118 million of higher segment operating income and a $57 million increase in the FAS/CAS operating adjustment, partially offset by a $52 million increase in non-divestiture-related unallocated corporate expense. Operating margin rate increased to 13.8 percent from 10.7 percent reflecting the items above.

Second quarter 2025 general and administrative (G&A) costs as a percentage of sales decreased to 9.8 percent from 10.8 percent in the prior year period primarily due to cost management and higher sales.

Year to date 2025 operating income decreased $163 million, or 8 percent, due to a $418 million decrease in segment operating income, primarily driven by a $477 million loss provision recorded on the B-21 program at Aeronautics Systems in the first quarter of 2025 and a $70 million increase in non-divestiture-related unallocated corporate expense. These decreases were partially offset by higher operating income due to the training services divestiture, including a $231 million pre-tax gain on sale and $20 million of unallocated corporate expense for unallowable state taxes and transaction costs, and a $114 million increase in the FAS/CAS operating adjustment. Operating margin rate declined to 10.1 percent from 10.6 percent reflecting the items above.

Year to date 2025 G&A costs as a percentage of sales decreased to 10.2 percent from 10.6 percent in the prior year period primarily due to cost management, partially offset by lower sales.

See “Segment Operating Results” below for further information by segment. For information regarding product and service operating costs and expenses, see “Product and Service Analysis” below.

Federal and Foreign Income Taxes

Second quarter 2025 income tax expense increased $47 million, or 23 percent, due to higher earnings before income taxes, partially offset by a lower ETR. The second quarter 2025 ETR decreased to 17.7 percent from 18.0 percent in the prior year period primarily due to lower interest expense on unrecognized tax benefits and higher research credits, partially offset by additional income tax expense related to nondeductible goodwill in the divested training services business.

Year to date 2025 income tax expense decreased $43 million, or 11 percent, due to lower earnings before income taxes, partially offset by a higher ETR. The year to date 2025 ETR increased to 17.5 percent from 17.3 percent in the prior year period primarily due to additional income tax expense related to nondeductible goodwill in the divested training services business and lower benefits for FDII and employee share-based compensation. These increases were partially offset by higher research credits and lower interest expense on unrecognized tax benefits.

See Note 4 to the financial statements for additional information.

Net Earnings

Second quarter 2025 net earnings increased $234 million, or 25 percent, primarily due to the $335 million increase in operating income described above, partially offset by a $47 million increase in income tax expense, a $30 million reduction in the non-operating FAS pension benefit and higher interest expense.

Year to date 2025 net earnings decreased $229 million, or 12 percent, primarily due to the $163 million decrease in operating income described above, a $68 million reduction in the non-operating FAS pension benefit and higher interest expense, partially offset by a $43 million decrease in income tax expense.

Diluted Earnings Per Share

Second quarter 2025 diluted earnings per share increased 28 percent, reflecting a 25 percent increase in net earnings and a 3 percent reduction in weighted-average diluted shares outstanding.

Year to date 2025 diluted earnings per share decreased 10 percent, reflecting a 12 percent decrease in net earnings and a 3 percent reduction in weighted-average diluted shares outstanding.

-26-