NORTHROP GRUMMAN CORP /DE/NOC

NORTHROP GRUMMAN CORP /DE/ Segments Disclosure

10-KFiled Jan 27, 20268 min read
15. SEGMENT INFORMATION
The company is aligned in four operating sectors, which also comprise our reportable segments: Aeronautics Systems, Defense Systems, Mission Systems and Space Systems. We generally organize our segments based on the nature of products and services offered.
The company’s chief operating decision maker (“CODM”) is the Chair, Chief Executive Officer and President. The CODM is responsible for allocating resources and assessing performance of the consolidated enterprise and operating sectors. The profitability measure the CODM uses to assess segment performance and allocate resources is segment operating income (and related margin rate, calculated as segment operating income divided by sales) by comparing historical, actual, and forecasted amounts on a regular basis.
The following table presents sales, operating costs and expenses, and operating income by segment:
 Year Ended December 31
$ in millions202520242023
Aeronautics Systems
Sales$12,992 $12,396 $11,164 
Operating costs and expenses:
Product9,340 8,383 9,053 
Service2,687 2,658 2,399 
Intersegment152 119 128 
Aeronautics Systems operating income (loss)813 1,236 (416)
Defense Systems
Sales8,002 7,399 7,185 
Operating costs and expenses:
Product5,682 5,169 4,708 
Service1,263 1,365 1,659 
Intersegment186 149 134 
Defense Systems operating income871 716 684 
Mission Systems
Sales12,506 11,399 10,895 
Operating costs and expenses:
Product7,608 7,000 6,669 
Service1,861 1,805 1,730 
Intersegment1,210 996 887 
Mission Systems operating income1,827 1,598 1,609 
Space Systems
Sales10,771 11,731 11,873 
Operating costs and expenses:
Product7,827 8,711 8,844 
Service1,309 1,398 1,468 
Intersegment452 368 431 
Space Systems operating income1,183 1,254 1,130 
Intersegment profit eliminations
(317)(260)(247)
Total segment operating income4,377 4,544 2,760 
FAS/CAS operating adjustment258 40 (82)
Unallocated corporate expense
(124)(214)(141)
Total operating income$4,511 $4,370 $2,537 
Other (expense) income
Interest expense(665)(621)(545)
Non-operating FAS pension benefit541 656 530 
Mark-to-market pension and OPB benefit (expense)527 443 (422)
Other, net154 168 246 
Earnings before income taxes$5,068 $5,016 $2,346 
FAS/CAS Operating Adjustment
For financial statement purposes, we account for our employee pension plans in accordance with FAS. However, the cost of these plans is charged to our contracts in accordance with applicable FAR and CAS requirements. The FAS/CAS operating adjustment reflects the difference between CAS pension expense included as cost in segment operating income and the service cost component of FAS expense included in total operating income.
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.
Disaggregation of Revenue
Sales by Customer TypeYear Ended December 31
202520242023
$ in millions$
%(3)
$
%(3)
$
%(3)
Aeronautics Systems
U.S. government(1)
$10,469 82 %$10,364 85 %$9,379 85 %
International(2)
2,325 18 %1,878 15 %1,611 15 %
Other customers31 — %22 — %35 — %
Intersegment sales167 132 139 
Aeronautics Systems sales12,992 12,396 11,164 
Defense Systems
U.S. government(1)
6,377 82 %6,056 84 %5,699 81 %
International(2)
1,337 17 %1,101 15 %1,259 18 %
Other customers78 1 %71 1 %76 1 %
Intersegment sales210 171 151 
Defense Systems sales8,002 7,399 7,185 
Mission Systems
U.S. government(1)
8,827 80 %8,322 81 %7,999 81 %
International(2)
2,125 19 %1,809 18 %1,757 18 %
Other customers120 1 %91 1 %85 1 %
Intersegment sales1,434 1,177 1,054 
Mission Systems sales12,506 11,399 10,895 
Space Systems
U.S. government(1)
9,510 93 %10,694 94 %10,805 95 %
International(2)
203 2 %212 2 %278 2 %
Other customers552 5 %413 4 %307 3 %
Intersegment sales506 412 483 
Space Systems sales10,771 11,731 11,873 
Total
U.S. government(1)
35,183 84 %35,436 87 %33,882 86 %
International(2)
5,990 14 %5,000 12 %4,905 13 %
Other customers781 2 %597 1 %503 1 %
Total Sales$41,954 $41,033 $39,290 
(1)Sales to the U.S. government include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is the U.S. government. Each of the company’s segments derives a substantial percentage of its revenue from the U.S. government.
(2) International sales include sales from contracts for which we are the prime contractor, as well as those for which we are a subcontractor and the ultimate customer is an international customer. These sales include foreign military sales contracted through the U.S. government.
(3) Percentages calculated based on external customer sales.
Sales by Contract TypeYear Ended December 31
202520242023
$ in millions$
%(1)
$
%(1)
$
%(1)
Aeronautics Systems      
Cost-type$5,843 46 %$5,500 45 %$5,358 49 %
Fixed-price6,982 54 %6,764 55 %5,667 51 %
Intersegment sales167 132 139 
Aeronautics Systems sales12,992 12,396 11,164 
Defense Systems
Cost-type4,117 53 %3,875 54 %3,868 55 %
Fixed-price3,675 47 %3,353 46 %3,166 45 %
Intersegment sales210 171 151 
Defense Systems sales8,002 7,399 7,185 
Mission Systems
Cost-type5,012 45 %4,589 45 %4,116 42 %
Fixed-price6,060 55 %5,633 55 %5,725 58 %
Intersegment sales1,434 1,177 1,054 
Mission Systems sales12,506 11,399 10,895 
Space Systems
Cost-type5,972 58 %7,000 62 %7,637 67 %
Fixed-price4,293 42 %4,319 38 %3,753 33 %
Intersegment sales506 412 483 
Space Systems sales10,771 11,731 11,873 
Total
Cost-type20,944 50 %20,964 51 %20,979 53 %
Fixed-price21,010 50 %20,069 49 %18,311 47 %
Total Sales$41,954 $41,033 $39,290 
(1)Percentages calculated based on external customer sales.
Sales by Geographic Region(1)
Year Ended December 31
202520242023
$ in millions$
%(3)
$
%(3)
$
%(3)
Aeronautics Systems      
United States$10,500 82 %$10,386 85 %$9,414 85 %
Asia/Pacific920 7 %744 6 %712 7 %
Europe1,320 10 %1,097 9 %863 8 %
Other geographic regions(2)
85 1 %37 — %36 — %
Intersegment sales167 132 139 
Aeronautics Systems sales12,992 12,396 11,164 
Defense Systems
United States6,455 83 %6,127 85 %5,775 82 %
Asia/Pacific374 5 %294 4 %314 4 %
Europe756 10 %616 8 %474 7 %
Other geographic regions(2)
207 2 %191 3 %471 7 %
Intersegment sales210 171 151 
Defense Systems sales8,002 7,399 7,185 
Mission Systems
United States8,947 81 %8,413 82 %8,084 82 %
Asia/Pacific550 5 %472 5 %460 5 %
Europe1,121 10 %990 10 %959 10 %
Other geographic regions(2)
454 4 %347 3 %338 3 %
Intersegment sales1,434 1,177 1,054 
Mission Systems sales12,506 11,399 10,895 
Space Systems
United States10,062 98 %11,107 98 %11,112 98 %
Asia/Pacific75 1 %42 1 %82 1 %
Europe89 1 %134 1 %159 1 %
Other geographic regions(2)
39 — %36 — %37 — %
Intersegment sales506 412 483 
Space Systems sales10,771 11,731 11,873 
Total
United States35,964 86 %36,033 88 %34,385 88 %
Asia/Pacific1,919 4 %1,552 4 %1,568 4 %
Europe3,286 8 %2,837 7 %2,455 6 %
Other geographic regions(2)
785 2 %611 1 %882 2 %
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.
(2)Other geographic regions are principally comprised of the Middle East.
(3)Percentages calculated based on external customer sales.
Segment Sales
The following table presents sales for each of our reportable segments and total intersegment eliminations:
Year Ended December 31
$ in millions202520242023
Sales
Aeronautics Systems$12,992 $12,396 $11,164 
Defense Systems8,002 7,399 7,185 
Mission Systems12,506 11,399 10,895 
Space Systems10,771 11,731 11,873 
Intersegment eliminations(2,317)(1,892)(1,827)
Total sales$41,954 $41,033 $39,290 
Intersegment Sales and Operating Income
Sales between segments are recorded at values that include intercompany operating income for the performing segment based on that segment’s estimated average operating margin rate for external sales. Such intercompany operating income is eliminated in consolidation, so that the company’s total sales and total operating income reflect only those transactions with external customers. See Note 1 for additional information.
The following table presents intersegment sales and operating income:
 Year Ended December 31
$ in millions202520242023
 SalesOperating
Income		SalesOperating
Income		SalesOperating
Income
Intersegment sales and operating income
Aeronautics Systems$167 $15 $132 $13 $139 $11 
Defense Systems210 24 171 22 151 17 
Mission Systems1,434 224 1,177 181 1,054 167 
Space Systems506 54 412 44 483 52 
Total$2,317 $317 $1,892 $260 $1,827 $247 
Capital Expenditures and Depreciation and Amortization
The following table presents capital expenditures and depreciation and amortization for each of our reportable segments and for Corporate:
Year Ended December 31
$ in millions202520242023202520242023
 Capital Expenditures
Depreciation and Amortization
Aeronautics Systems$477 $600 $510 $383 $385 $390 
Defense Systems110 135 158 176 175 178 
Mission Systems312 314 288 278 255 246 
Space Systems403 652 745 367 362 370 
Corporate(1)
148 66 74 268 193 154 
Total$1,450 $1,767 $1,775 $1,472 $1,370 $1,338 
(1)Corporate amounts include the 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 they are not considered part of management’s evaluation of segment operating performance.
Assets
Our CODM does not use assets by segment to evaluate segment performance or allocate resources. Therefore, we do not disclose assets by segment.

Historical Timeline

Fiscal YearFiled
2025Jan 27, 2026Showing above
2024Jan 30, 2025
2023Jan 25, 2024
2022Jan 26, 2023
2021Jan 27, 2022
2020Jan 28, 2021
2019Jan 30, 2020
2018Jan 31, 2019
2017Jan 29, 2018
2016Jan 30, 2017
2015Feb 1, 2016

About Segments Disclosures

Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.

Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.

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