OCTOBER 20, 2026
THIRD QUARTER
KATHY WARDEN
Chair, Chief Executive Officer and President
JOHN GREENE
Corporate Vice President and Chief Financial Officer
Photo: Sentinel, vertically assembled
Enterprise SummaryContinued robust demand generated book-to-bill ratio of ~1.5x and record backlog of $110 billion
Outstanding operational performance throughout portfolio drives Q3 segment OM rate1 of 12.1%
Completed first vertical stack of full Sentinel Missile, positioning program for first launch in 2027
Added over one million square feet of manufacturing and engineering space in last three months
Increasing 2026 financial guidance2 for segment operating income1 and MTM-adjusted EPS1
Strategy delivers technology innovation, performance and balanced capital deployment, resulting in durable and profitable growth Third Quarter 2026 Financial HighlightsDisciplined portfolio execution driving strong financial performance and continued momentum
Three Months Ended September 30
($M), except | per share amounts | 2026 | 2025 | ▲% |
Backlog | 109,597 | 91,448 | 20% | |
Sales | 11,122 | 10,423 | 7% | |
Segment | Operating Income1 | 1,345 | 1,277 | 5% |
Segment | Margin Rate1 | 12.1% | 12.3% | (20) bps |
Diluted EPS | $7.89 | $7.67 | 3% | |
Capital Expenditures | (306) | (301) | 2% | |
Adjusted Free Cash Flow1 | 1,810 | 1,256 | 44% | |
14%
and Margin Rate
$3,575
$305
9.7%
$377
10.5%
$3,142
Sales ($M)
Operating Income ($M)
Q3 2025 Q3 2026 Q3 2025 Q3 2026
Sales: higher F-35 volume, B-21 ramp and B-2 sustainment
Margin: disciplined program execution across portfolio
YFQ-48A
Talon Blue
Successful first autonomous flight
Diverse portfolio mix of innovative development, mature production and sustainment Defense SystemsRaid HunterTM
Cost-effective C-UAS and missile defense tech
and Margin Rate
12%
$2,307
$234
11.4%
$250
10.8%
$2,059
Sales ($M) Operating Income ($M)
Q3 2025 Q3 2026 Q3 2025 Q3 2026
Sales: Sentinel ramp, increased munitions and missile volume
Margin: stable program performance, contract mix
Progressing Sentinel, scaling missile capacity and rapidly delivering new solutions Mission SystemsFORTITUDETM
Designing and developing future-ready technology
Sales ($M) Operating Income ($M)
and Margin Rate1
2%
$3,155
$500
15.8%
$515
16.7%
$3,093
Q3 2025 Q3 2026 Q3 2025 Q3 2026
Sales: increased restricted airborne radar and marine systems volume
Margin: consistently strong program performance driving results
Advanced technologies deliver sustained high margin sales growth
1. Prior year operating income includes a $68M favorable EAC adjustment in the restricted advanced microelectronics portfolio.
Space SystemsProliferated Warfighter Space Architecture
First 21 Tranche 1 satellites delivered
Sales ($M) Operating Income ($M)
and Margin Rate
2%
$2,749
$298
11.0%
$312
11.3%
$2,698
Q3 2025 Q3 2026 Q3 2025 Q3 2026
Sales: continued growth on National Security Space programs
Differentiated National Security Space technology delivering durable growth
Margin: solid program execution supports competitive margin rates
+3%
$7.89
$7.67
Q3 2025 $7.67 | |
Segment Performance | 0.43 |
Federal Tax Rate | 0.32 |
Marketable Securities | (0.50) |
Net Pension1 and Other | (0.03) |
Q3 2026 $7.89 | |
Outstanding segment operating performance across portfolio drives EPS growth
Q3 2025 Q3 2026
1. | Net Pension tax effected on a 21% federal statutory tax rate and a 5.25% blended state tax rate. |
Note: Year over year benefit from share reduction embedded in individual items, tax effected at 21%. |
($M), except per share amounts
As of 10/20/2026
Sales $43,750 - $44,250
Segment operating income2 $4,940 - $5,040
Prior: $4,850 - $5,000
MTM-adjusted EPS2 $29.35 - $29.75
Prior: $28.60 - $29.10
Adjusted free cash flow2 $3,100 - $3,500
Building on performance and momentum
1. See the company's third quarter earnings release for a description of the underlying assumptions, judgments and factors that can affect the company's ability to achieve guidance or meet expectations.
2026 Segment Guidance1As of 10/20/2026
Sales ($B) OM Rate %
Aeronautics Systems | ~$14 | High 9% Prior: Mid to High 9% |
Defense Systems | Mid to High $8 | ~10% |
Mission Systems | High $12 | Mid 15% Prior: ~15% |
Space Systems | ~$11 | Low 10% |
Intersegment Eliminations | ~($2.7) | Mid 13% |
Updated segment guidance1 reflects excellent program execution at AS and MS
1. See the company's third quarter earnings release for a description of the underlying assumptions, judgments and factors that can affect the company's ability to achieve guidance or meet expectations.
2027 Outlook as of 10/20/20261Premier portfolio of leading franchise programs
Sales growth of 5% to 7%3 with further acceleration in 2028
Segment operating margin rate2 expansion of 10 to 20 basis points3
Enduring strategy and adaptive approach delivering long-term value
Adjusted free cash flow2 range of $3.3 to $3.7 billion
1. | See the company's third quarter earnings release for a description of the underlying assumptions, judgments and factors that can affect the company's ability to achieve guidance or meet expectations. |
2. | Non-GAAP financial measure. See Appendix. |
3. | 2027 sales growth and segment operating margin rate expansion compared to midpoint of company guidance as of 10/20/2026. |
Historic global demand environment translating to record company backlog
Durable portfolio intentionally and continuously shaped to align with top defense priorities
Leader in advanced technology, developing the world's most important capabilities
Building the capacity to deliver scalable solutions with speed and precision
Consistent, balanced, and disciplined capital deployment priorities
Appendix
2026 Supplemental Guidance1($M) | As of 10/20/2026 |
Total Net FAS/CAS pension adjustment2 | ~$700 |
Unallocated corporate expense: Intangible asset amortization and PP&E step-up depreciation Other items | ~$(65) ~$(300) Prior: ~$(280) |
Operating income | $4,610 - $4,710 Prior: $4,540 - $4,690 |
Interest expense | ~$(640) Prior: ~$(620) |
Effective tax rate % | ~13% Prior: Mid 14% |
Weighted-average diluted shares outstanding, in millions | Mid 142 |
Capital expenditures | ~$1,850 |
See the company's third quarter earnings release for a description of the underlying assumptions, judgments and factors that can affect the company's ability to achieve guidance or meet expectations.
Total Net FAS/CAS pension adjustment is presented as a single amount and includes $245 million of expected CAS pension expense and $210 million of FAS pension service expense, both of which are
2026 Role on % of Total Key Program Area Program Company Sales1,2 | FY27 U.S. Base Budget Request 3 | ||
National Space Security | Mix | >15% | |
B-21 | Prime | ~10% | |
F-35 (Center Fuselage / Sensors / Comms) | Sub | ~10% | |
Weapons Portfolio | Mix | ~8% | |
Sentinel | Prime | ~7% | |
E-2D | Prime | ~4% | |
Autonomous ISR (Triton / Global Hawk) | Prime | ~4% | |
Marine Programs | Sub | ~3% | |
EW Systems (SEWIP / IVEWS / IRCM) | Mix | ~3% | |
TACAMO | Prime | ~2% | |
IBCS | Prime | ~2% | |
Funding Legend
Fully Funded Mostly Funded
Approx. Half Funded Partially Funded
1. | See the company's third quarter earnings release for a description of the underlying assumptions, judgments and factors that can affect the company's ability to achieve guidance or meet expectations. |
2. | Inclusive of international and restricted sales. Remaining sales primarily consist of other restricted programs, international, and commercial. Largest remaining unrestricted prime programs fully funded. |
3. | The graphics shown reflect the U.S. base budget share of total FY27 funding request, excluding classified and international program funding. |
Deliberately built and continuously shaped portfolio aligned with strategic priorities
2027 Net Pension Income Sensitivities ($M)
FAS2,3 | 1.5% | 3.0% | 4.5% | 6.0% | 7.5% |
0 bps | 370 | 400 | 435 | 470 | 500 |
25 bps | 340 | 375 | 410 | 440 | 475 |
50 bps | 315 | 350 | 380 | 415 | 450 |
75 bps | 290 | 320 | 355 | 390 | 420 |
100 bps | 265 | 300 | 330 | 365 | 400 |
Asset Returns
Net pension estimates1 for 2027 have declined compared to initial estimates1 as of 1/27/2026
Current estimates1 as of 9/30/2026 inclusive of updated 2026 projections
Discount Rate Change5
CAS4 | 1.5% | 3.0% | 4.5% | 6.0% | 7.5% |
140 | 110 | 100 | 90 | 85 |
Prior estimates1 as of 1/27/2026 inclusive of demographic update
1. | See the company's third quarter earnings release for a description of the underlying assumptions, judgments and factors that can affect the company's ability to achieve guidance or meet expectations. |
2. | Net FAS pension income includes FAS pension service expense (that is a component of operating earnings) and non-operating FAS pension benefit, assumes holding all other pension assumptions constant. |
3. | FAS Estimates as of 9/30/2026 of $265 million highlighted above include FAS pension service expense of $175 million, and $440 million of non-operating FAS pension benefit. |
4. | CAS costs not directly impacted in the short term by changes in the discount rate, assumes holding all other pension assumptions constant. |
5. | Change in discount rate compared to our original guidance provided on 1/27/2026 of 5.58%. Discount rate and cash balance credit rate assumption movements are assumed to be partially linked. T |
Number of Days in Reporting Period1 | 2026 | 2025 |
First Quarter | 61 | 62 |
Second Quarter | 64 | 64 |
Third Quarter | 63 | 63 |
Fourth Quarter | 63 | 62 |
Full Year | 251 | 251 |
1. Quarterly information is labeled using a calendar convention; that is, first quarter is consistently labeled as ending on March 31, second quarter as ending on June 30 and third quarter as ending on September
30. It is the company's long-standing practice to establish actual interim closing dates using a "fiscal" calendar, in which we close our books on a Friday near these quarter-end dates in order to normalize the potentially disruptive effects of quarterly closings on business processes. This practice is only used at interim periods within a reporting year.
Third Quarter 2026 Conference Call 18
Non-GAAP DefinitionsNon-GAAP Financial Measures Disclosure: This presentation contains non-GAAP (accounting principles generally accepted in the United States of America) financial measures, as defined by SEC Regulation G and indicated by a footnote in this presentation. Definitions for the non-GAAP measures are provided below and reconciliations are provided in this presentation, except that reconciliations of forward-looking non-GAAP measures are not provided because the company is unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of certain items, including, but not limited to, the impact of any mark-to-market pension adjustment. Other companies may define these measures differently or may utilize different non-GAAP measures.
MTM-adjusted EPS: Diluted earnings per share excluding the per share impact of MTM benefit (expense) and related tax impacts. This measure may be useful to investors and other users of our financial statements as a supplemental measure in evaluating the company's underlying financial performance by presenting the company's diluted earnings per share results before the non-operational impact of pension and OPB actuarial gains and losses.
Segment operating income and segment operating margin rate: Segment operating income and segment operating margin rate (segment operating income divided by sales) reflect the combined operating income of our four segments less the operating income associated with intersegment sales. Segment operating income includes pension expense allocated to our sectors under FAR and CAS and excludes FAS pension service expense and unallocated corporate items.
These measures may be useful to investors and other users of our financial statements as supplemental measures in evaluating the financial performance and operational trends of our sectors. These measures should not be considered in isolation or as alternatives to operating results presented in accordance with GAAP.
Organic sales: Total sales excluding sales attributable to the company's former 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.
Adjusted free cash flow: Net cash provided by or used in operating activities, less capital expenditures, plus proceeds from the sale of equipment to a customer (not otherwise included in net cash provided by or used in operating activities) and the after-tax impact of discretionary pension contributions. Adjusted free cash flow includes proceeds from the sale of equipment to a customer, if any, as such proceeds were generated in a customer sales transaction. It also includes the after-tax impact of discretionary pension contributions, if any, for consistency and comparability of financial performance. This measure may not be defined and calculated by other companies in the same manner. We use adjusted free cash flow as a key factor in our planning for, and consideration of, acquisitions, the payment of dividends and stock repurchases. This non-GAAP measure may be useful to investors and other users of our financial statements as a supplemental measure of our cash performance, but should not be considered in isolation, as a measure of residual cash flow available for discretionary purposes, or as an alternative to operating cash flows presented in accordance with GAAP.
Non-GAAP Reconciliations($M) | Three Months Ended September 30 2026 2025 | Nine Months Ended September 30 2026 2025 | ||
Total sales | $11,122 | $10,423 | $31,879 | $30,242 |
Operating income | $1,269 | $1,242 | $3,354 | $3,240 |
Operating margin rate | 11.4% | 11.9% | 10.5% | 10.7% |
Reconciliation to segment operating income: | ||||
FAS/CAS operating adjustment | $(15) | $(67) | $(29) | $(193) |
Unallocated corporate expense: | ||||
Gain on sale of training services business | - | - | - | (231) |
Training services divestiture - unallowable state taxes and transaction costs | - | - | - | 20 |
Intangible asset amortization and PP&E step-up depreciation | 13 | 21 | 51 | 63 |
Other unallocated corporate expense | 78 | 81 | 199 | 165 |
Unallocated corporate expense | $91 | $102 | $250 | $17 |
Segment operating income | $1,345 | $1,277 | $3,575 | $3,064 |
Segment operating margin rate | 12.1% | 12.3% | 11.2% | 10.1% |
($M) | Three Months Ended September 30 2026 2025 | Nine Months Ended September 30 2026 2025 | ||
Net cash provided by operating activities | $1,745 | $1,557 | $1,369 | $860 |
Capital expenditures | (306) | (301) | (775) | (788) |
Proceeds from sale of equipment to a customer | 371 | - | 371 | - |
Adjusted free cash flow | $1,810 | $1,256 | $965 | $72 |
Organic Sales
Total Company($M) | Three Months Ended September 30 2026 2025 | % Change | Nine Months Ended September 30 2026 2025 | % Change | ||
Sales | $11,122 | $10,423 | 7% | $31,879 | $30,242 | 5% |
Less: Training services sales | - | - | - | (112) | ||
Organic Sales | $11,122 | $10,423 | 7% | $31,879 | $30,130 | 6% |
($M) | Three Months Ended September 30 2026 2025 | % Change | Nine Months Ended September 30 2026 2025 | % Change | ||
Sales | $2,307 | $2,059 | 12% | $6,299 | $5,855 | 8% |
Less: Training services sales | - | - | - | (112) | ||
Organic Sales | $2,307 | $2,059 | 12% | $6,299 | $5,743 | 10% |
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