What Northrop Grumman Corporation told the SEC could break it.

Northrop's business is exposed to the extent/duration of tariffs (and target-country responses / resulting inflation), and to commodity-price and inflationary pressure on fixed-price programs; it mitigates via FX/interest/commodity hedging, economic-price-adjustment clauses, REAs/ECPs and not-to-exceed pricing (e.g., on additional B-21 lots), but mitigation may not succeed.

“We work proactively to mitigate the challenges caused by the macroeconomic environment, including, in some cases, hedging foreign exchange, interest rate and commodity price risk, and seeking the inclusion of economic price adjustment clauses or seeking to recover on REAs, ECPs or other claims, but the impacts of these challenges are uncertain”

The U.S. government can terminate contracts for convenience or default and issue stop-work orders (recovering only costs incurred plus reasonable fee, not anticipated profit; stoppages introduce inefficiencies/damages); alternative contracting models including non-FAR-based OTA awards can place greater development-cost and limited-reimbursement risk on Northrop and offer more limited protest rights.

“The U.S. government has the ability to terminate contracts, in whole or in part, for its convenience or for default of contract terms. In the event of termination for convenience, contractors are generally protected by provisions covering reimbursement for costs incurred and profit on those costs up to the amount authorized under the contract, but not the anticipated profit that would have been earned.”

Sales to the U.S. government (prime and subcontractor where the ultimate customer is the U.S. government, including FMS) were ~84% of Northrop Grumman's 2025 sales ($35.2B of $42.0B total), and each segment derives a substantial percentage of revenue from the U.S. government — concentrating results in U.S. defense budgets and appropriations.

“Total U.S. government (1) 35,183 84 % 35,436 87 % 33,882 86 %”

Northrop's production could be significantly impacted if the microelectronics manufacturing supply chain is cut off, limited or delayed — heightened for single/sole-source products (sometimes only one, or one domestic, supplier); for U.S. government contracts it must procure certain raw materials/chemicals/components/parts from customer-approved sources and is restricted from others, and qualifying new suppliers is slow.

“Our ability to produce and/or deliver products will be significantly impacted if the microelectronics manufacturing supply chain is cut off or significantly limited or delayed. This risk is increased for products and services that are single or sole source. For example, for some components, we may have had, or have, only one supplier, or one domestic supplier, that meets our needs.”