If the Pentagon decides to increase production of the U.S. Air Force’s new B-21 stealth bomber it will require further investment by Northrop Grumman, which expects higher returns for early production aircraft, CEO Kathy Warden said Tuesday.
Those investments would be on top of a $226 million pre-tax charge Northrop Grumman incurred in the first quarter of 2025 stemming in part from a manufacturing process change to set the foundation to increase production of the B-21. That charge covered the first two low-rate initial production (LRIP) lots, but the process change would benefit all five LRIP lots.
The B-21 is designed to have the dual capability of carrying both conventional and nuclear weapons, which the National Nuclear Security Administration is responsible for producing and maintaining. As of October, the 2025 Stockpile Stewardship Management Plan said that the B61-12 life extension program, which completed its last production unit in December, is continuing to certify the B-21 to carry the gravity bomb.
Warden said during the company’s second quarter earnings call that any investments the company makes to speed the production ramp would come “with the opportunity to earn improved returns [on] LRIP and NTE [not-to-exceed] production lots.” The five LRIP lots cover the first 21 B-21s, and the next 19 bombers will be contracted under NTE terms already set at a higher price than the LRIP work.
Current Air Force plans call for buying 100 B-21s although the service is interested in increasing that number. The recently approved reconciliation bill includes $4.5 billion to increase B-21 production capacity.
“We are in discussions with the Air Force regarding the potential for an accelerated production ramp on the program,” Warden said, adding that the “ultimate outcome of these discussions remain uncertain.” Later on the call, she said those discussions are about “how those funds will be used,” to include incentivizing the company to “invest in that production capacity.” Warden expects “more clarity in the coming months.”
Depending on an agreed increase in the production rate ramp for B-21, the program would exceed 10% of the company’s overall sales in the future, she said.
During the earnings call, Warden also highlighted continued progress on maturing design of the Sentinel intercontinental ballistic missile (ICBM) and achieving test milestones on the program. The company touted a positive $76 million adjustment to its earnings expectations on the engineering and manufacturing development phase of Sentinel based on getting contract incentives.
While work had been stopped on the command and launch segment during discussions on a program restructuring and a re-look at how Sentinel is being acquired, that pause has been lifted as the program continues to go through a re-baselining, Warden said. The company is working on “nailing down” the design of the silos with the Air Force to accelerate and “potentially” lower program costs, she said.
“Good progress” is being made on “all other aspects of the program,” which has been demonstrated through the first half of 2025, Warden said.
Two programs in the company’s existing portfolio that Warden is most excited about are B-21 and Sentinel—which in fiscal 2026 has the opportunity to be accelerated and improve costs through risk reduction efforts.
Warden also noted that the company is conducting ground-based testing of space-based interceptors in a competitive effort that she said “can be accelerated” to meet the Donald Trump administration’s timeline for the Golden Dome homeland missile defense shield.
Net earnings in the quarter increased 25% to $1.2 billion, $8.15 earnings per share (EPS), from $940 million ($6.36 EPS) a year ago. The results handily beat analysts’ estimates of $6.84 EPS.
Improved operating performance added 80 cents of EPS to the bottom line, driven by the Sentinel program, higher sales, and production and performance efficiencies.
Sales increased 1% to $10.4 billion from $10.2 billion a year ago, led by the Mission Systems, Defense Systems, and Aeronautics Systems segments. Space Systems was the only segment to post lower sales and operating income.
The sales outlook for 2025 was increased slightly on the low end of the range by $50 million to $42.1 billion, and lowered by $250 million at the high end of the range to $42.25 billion. Adjusted earnings are forecast to be five cents higher than prior projections, the new range being $25 to $25.40 EPS. Free cash flow is expected to be between $3.1 billion and $3.4 billion, up from the prior outlook of $2.9 to $3.3 billion.
Free cash flow in the second quarter was $637 million and through the first half of the year is negative $1.2 billion.
Northrop Grumman tallied $7.4 billion in orders in the quarter and backlog stood at $89.7 billion, down 2% from $91.5 billion at the end of 2024.
Exchange Monitor affiliate Defense Daily first published this article.
