Northrop Grumman Corp.

Market and investment · Asset valuation and impairment

Business investments and/or recorded goodwill and other long-lived assets may become impaired, which could have a material adverse effect on our financial condition and/or results of operations. Goodwill is an intangible asset that we recognize in connection with acquisitions of third-party businesses. Goodwill accounts for approximately 35 percent of our total assets as of December 31, 2024.

Market and investment · Investment portfolio performance

Pension and other postretirement benefit (OPB) obligations and related expenses and funding requirements may fluctuate significantly depending upon investment performance of plan assets, changes in actuarial assumptions, and legislative or other regulatory actions. The company's pension and OPB obligations and related expenses are dependent upon the investment performance of plan assets and various assumptions, including discount and interest rates, mortality and the estimated long-term rates of return on plan assets.

Market and investment · Investment portfolio performance

Pension and other postretirement benefit (OPB) obligations and related expenses and funding requirements may fluctuate significantly depending upon investment performance of plan assets, changes in actuarial assumptions, and legislative or other regulatory actions.

Tax and financial reporting · Tax compliance and changes in tax law

Unanticipated changes in our tax provisions or an increase in our tax liabilities, whether due to changes in applicable laws and regulations, the interpretation or application thereof, or a final determination of tax audits or litigation or agreements, could have a material adverse effect on our financial position, results of operations and/or cash flows.

Legal and litigation · Litigation and legal proceedings

We are subject to various investigations, claims, disputes, enforcement actions, litigation, and other legal proceedings that could ultimately be resolved against us and could have a material adverse effect on our financial position, results of operations and/or cash flows. The size, nature and complexity of our business make us particularly susceptible to investigations, claims, disputes, enforcement actions, prosecutions, litigation and other legal proceedings.

Tax and financial reporting · Tax compliance and changes in tax law

Unanticipated changes in our tax provisions or exposure to additional tax liabilities could affect our profitability and cash flow. Changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, have affected and could affect our tax expense.

Cybersecurity and data protection · Data breaches and cyber attacks

Cyber and other security threats or disruptions could have a material adverse effect on our reputation and our financial position, results of operations and/or cash flows. As a defense contractor, we face significant cyber and other security threats. They include, among other things, attempts to gain unauthorized access to sensitive information or otherwise compromise the integrity, confidentiality and/or availability of our systems, hardware and networks, and the information on them; insider threats; ransomware; threats to the safety of our directors, officers and employees.

Digital transformation and innovation · Technology obsolescence and evolution

Our future success depends, in part, on our ability to innovate, develop new products and technologies, progress and benefit from digital transformation and maintain technologies, facilities and equipment to win new competitions and meet the needs of our customers. Failure to do so or meet our contractual obligations that require innovative design could adversely affect our profitability, reputation and future prospects and have a material adverse effect on our financial condition, results of operations and/or cash flows.

Cybersecurity and data protection · Data breaches and cyber attacks

As a defense contractor, we face significant cyber and other security threats. They include, among other things, attempts to gain unauthorized access to sensitive information or otherwise compromise the integrity, confidentiality and/or availability of our systems, hardware and networks. We have experienced cyber attacks and expect we will continue to experience additional attacks in the future.

Economic and market conditions · Economic recession and downturns

The global macroeconomic environment has negatively impacted and could in the future negatively impact our business, and if we are unable to mitigate such challenges, it could have a material adverse effect on our financial position, results of operations and/or cash flows. Our business, financial position, results of operations and/or cash flows have been and may in the future be adversely impacted by the global macroeconomic environment, which impacts have included and may in the future include high rates of inflation; increased interest rates; tight credit in financial markets; widespread disruptions in supply chains; workforce challenges, including labor shortages; and market volatility, including exchange rate volatility.

Geopolitical and trade · Political instability and government changes

Changes in laws, political leadership and environment, and/or security risks may dramatically affect our ability to conduct or continue to conduct business in international markets. Our international business is impacted by changes in U.S. and non-U.S. national policies and priorities, and geopolitical relationships, any of which may be influenced by changes in the global threat environment, political leadership, geopolitical and economic uncertainties, world events, government budgets, inflationary pressures, sanctions imposed in countries where we do business or seek to do business.

Geopolitical and trade · Government funding and budget changes

We depend heavily on a single customer, the U.S. government, for a substantial portion of our business. Changes in this customer's strategies, priorities and spending could have a material adverse effect on our financial position, results of operations and/or cash flows. Our primary customer is the U.S. government, from which we derived 87 percent of our sales in 2024.

Economic and market conditions · Economic recession and downturns

Our business, financial position, results of operations and/or cash flows have been and may continue to be adversely impacted by the global macroeconomic environment. The global macroeconomic environment has experienced, and continues to experience, extraordinary challenges, including high rates of inflation; widespread disruptions in supply chains; workforce challenges, including labor shortages.

Geopolitical and trade · Government funding and budget changes

We depend heavily on a single customer, the U.S. government, for a substantial portion of our business. Changes in this customer's priorities and spending could have a material adverse effect on our financial position, results of operations and/or cash flows. Our primary customer is the U.S. government, from which we derived 86 percent of our sales in 2022.

Market position and competition · Competitive pressure and market share loss

Competition within our markets and bid protests, or other attempts to interfere with our ability to obtain and retain awards, may affect our ability to win new contracts and result in reduced revenues, which could have a material adverse effect on our financial position, results of operations and/or cash flows. We operate in highly competitive markets and our competitors may have more financial capacity or more extensive or specialized engineering, technical, manufacturing, marketing or servicing capabilities.

Project and contract management · Government contract dependency

As a U.S. government contractor, we and our partners are subject to various procurement and other laws, regulations and contract terms applicable to our industry, as well as those more broadly applicable to industry, and changes in such laws, regulations or terms, any negative findings by the U.S. government as to our or our partners' compliance with them, and changes in our customers' business practices globally could affect our ability to compete and have a material adverse effect on our financial position, results of operations and/or cash flows.

Core operations · Operational disruption and business continuity

Our business is subject to significant disruptions caused by natural disasters or other events outside of our control, which could have a material adverse effect on our financial position, results of operations and/or cash flows. We have significant operations, including centers of excellence, located in regions that have been, and may in the future be, exposed to hurricanes, earthquakes, water levels, wildfires, windstorms, heat waves, other extreme weather conditions, acts of terrorism, power shortages and blackouts, telecommunications failures and other significant disruptions.

Supply chain and procurement · Supplier financial distress and capability

Our earnings and profitability depend, in part, on subcontractor and supplier performance, financial viability, and compliance with regulatory requirements globally, as well as highly skilled labor, raw materials, chemicals, parts, and component availability and pricing, and one or more of these factors could have a material adverse effect on our financial position, results of operations and/or cash flows.

Human capital and workforce · Talent acquisition and retention

If we are unable to attract and retain a qualified workforce necessary for our business, we may be unable to maintain our competitive position, meet the needs of our customers or achieve our results, which could have a material adverse effect on our financial position, results of operations and/or cash flows. Our operating results and growth opportunities are heavily dependent upon our ability to attract and retain sufficient qualified personnel who are or can reasonably be cleared (and obtain program access), who have the requisite skills in multiple areas, including science, technology, engineering and math.

Human capital and workforce · Skills shortage and training requirements

Our ability to win new competitions and meet the needs of our customers depends, in part, on our ability to maintain a qualified workforce. We continue to face increased competition for talent, both with traditional defense companies and commercial companies, globally, and with increasing wage rates.