諾斯洛普格魯曼 (NOC) 2026年第三季法說會：在手訂單創新高與上調財測指引

重點摘要

• 諾斯洛普格魯曼 (Northrop Grumman) 公布 2026 年第三季銷售額為 111 億美元，年增 7%，四大業務部門均實現成長。
• 新接訂單突破 160 億美元，單季接單出貨比 (book-to-bill ratio) 達 1.5，推升在手訂單年增 20%，創下 1,100 億美元的新高。
• 部門營業利潤成長 5%，部門營業利潤率達 12.1%。稀釋後每股盈餘 (EPS) 上升 3% 至 7.89 美元。
• 受惠於營運資金改善以及出售 B-21 測試資產獲得的 3.71 億美元，調整後自由現金流成長超過 40%，達到 18 億美元。
• 管理層維持 2026 年銷售額指引於 437.5 億至 442.5 億美元，將部門營業利潤指引中位數調升 6,500 萬美元，並將每股盈餘指引調升 0.70 美元。
• 展望 2027 年，管理層預期銷售額成長率為 5% 至 7%，利潤率擴張 10 至 20 個基點，調整後自由現金流將達 33 億至 37 億美元。

核心財務數據

業務與營運表現

航空系統部門 (Aeronautics Systems) 銷售額成長 14%，主要受惠於 F-35 量產與維修後勤量提升、B-21 持續產能爬升，以及 B-2 後勤維護銷售增加。受惠於產品組合與專案執行力，營業利潤率提升至 10.5%。

防衛系統部門 (Defense Systems) 銷售額成長 12% 至 23 億美元。成長動能來自哨兵 (Sentinel) 洲際彈道飛彈專案與戰術固體火箭發動機出貨量增加。營業利潤達 2.5 億美元，營業利潤率為 10.8%。

任務系統部門 (Mission Systems) 銷售額成長 2%，主要歸因於受限機載雷達專案以及海軍系統 (Marine Systems) 出貨量增加。在優良的產品組合執行力支持下，營業利潤率為 15.8%。

太空系統部門 (Space Systems) 銷售額成長 2%，主要由國家安全專案、受限業務及滑翔階段攔截器 (GPI) 帶動，但部分被商業補給服務合約的營收認列時點所抵銷。利潤率提升至 11.3%，公司並恢復了 GEM 63 XL 火箭發動機的交付。

本季重大得標項目包括：46 億美元的受限專案合約、哨兵專案額外獲頒 20 億美元，以及 3 架額外 E-2D 生產型預警機的 10 億美元合約。此外，維吉尼亞級 V 型 (Block V) 潛艦合約為在手訂單增加了 14 億美元，涵蓋截至 2032 年的 12 套額外艦載設備。

在哨兵專案方面，諾斯洛普格魯曼完成了惰性飛彈的首次完整垂直組裝，並獲得美國空軍批准其設計成熟度，得以朝 2027 年的首次試飛邁進。管理層預計，飛彈、發射基礎設施及指揮控制系統的研發工作將持續數年，隨後於 2030 年代接近尾聲時開始擴大生產。

在太空系統方面，該公司為美國太空發展局 (SDA) 的「第一批次傳輸層」(Tranche 1 Transport Layer) 發射並部署了首批 21 顆衛星。管理層預計，在其計畫的 150 顆衛星中，有近 50 顆將在未來 6 個月內完成部署。

諾斯洛普格魯曼亦在擴建 B-21 生產、固體火箭發動機、極音速推進器及先進太空系統的產能。在猶他州、馬里蘭州、亞利桑那州和佛羅里達州新設或擴建的設施，新增了超過 100 萬平方英呎的面積以及 2,000 多個工作機會。

公司強調了 Talon Blue 的首次全自主飛行，並推出了名為 Fortitude 的微電子晶片，管理層表示該晶片能提供最高達同類產品 3 倍的功率和 20 倍的訊號品質。諾斯洛普格魯曼正在評估其更廣泛的微電子與量子能力之戰略替代方案，包括持續內部投資、引進外部投資或進行分拆。

管理層財務指引

管理層預計 2027 年四大業務部門皆將成長。在哨兵專案和 B-21 的支持下，防衛系統和航空系統預計仍將是主要成長貢獻者。太空系統的成長預計將較 2026 年水準加速，而管理層正在評估任務系統是否能超越歷史上 3% 至 5% 的成長區間。

公司預期 2027 年部門營業利潤成長率將快於銷售額。然而，來自 B-21 和哨兵專案的銷售占比增加可能會給部門利潤率帶來壓力，且任務系統 2026 年的高獲利能力可能難以複製。

展望 2027 年以後，隨著核心專案增加產量、國際銷售拓展以及研發專案轉向量產，管理層預計成長將進一步加速。公司亦重申了到 2031 年將國際銷售額翻倍的目標。

風險與值得關注的領域

• 在政府依據持續續期決議案（臨時撥款法案）營運之際，美國聯邦預算撥款的時間與金額仍具不確定性。管理層表示，若臨時撥款法案時間延長，可能會影響 2027 年的成長節奏。
• B-21 在測試以及剩餘的固定價格初期低速率生產 (LRIP) 單位方面仍面臨執行風險，不過管理層表示，關鍵里程碑的成功實現正在逐步降低該風險。
• B-21 產能擴建需要較高額的投資。2026 年第四季的資本支出預計將接近 10 億美元，2027 年則約為 21 億美元。
• B-21 的虧損消化 (loss burn-down) 預計平均每季約 1 億美元；2026 年第三季金額為 7,000 萬美元。
• 國際合約簽訂時點以及新獲頒合約進入生產的速度，將決定 2027 年銷售額成長率是接近 5% 至 7% 區間的下限還是上限。
• 研發專案仍面臨技術突破變數與完工估算 (EAC) 調整的影響。管理層預期隨著產品組合轉向生產階段，此類波動將會下降。
• 微電子與量子計畫的投資需求及最終架構尚未確定。

分析師問答集錦

管理層表示，2027 年銷售額成長區間反映了對在手訂單、專案執行力以及國家安全預算優先順序的信心，但由於內部規劃與政府預算週期仍在發展中，該區間仍相對寬泛。公司預計將在公佈第四季財報時精確調整該區間。

在在手訂單能見度方面，管理層預計目前在手訂單約有 35% 將在未來 12 個月內轉化為營收，另有 55% 將在接下來的 24 個月內轉化，剩餘部分則延展至 36 個月以上。這支持了管理層關於 2028 年成長率將高於 2027 年的預期，不過並未提供 2028 年的具體成長數據。

關於 B-21，管理層表示產能投資將在未來幾年持續進行，隨著主要設施建設工作進行至 2028 年後，預計在本十年後期會有更高的產量。維護後勤與現代化升級預計也將對該專案的長期營收表現有所貢獻。

在固體火箭發動機及相關零件方面，管理層說明目前業務規模約為 10 億美元。預計成長動能來自既有合約數量的增加，以及涵蓋固體火箭發動機、引信和彈頭的新組件合約，2027 年將是產能爬升之年。

在自主系統方面，諾斯洛普格魯曼表示，Talon IQ 已展示出與第三方自主軟體的互操作性，並支持了與大約 6 家公司的合作整合專案。管理層將具負擔能力、可擴展的製造能力以及開放式整合，視為其協同作戰飛機策略的核心。

電話會議完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good day, ladies and gentlemen, and welcome to Northrop Grumman's Third Quarter 2026 Conference Call. Today's call is being recorded. My name is Josh, and I will be your operator today. [Operator Instructions].

I would now like to turn the call over to your host, Mr. Randy Sinclair, Vice President of Investor Relations. Mr. Sinclair, please proceed.

Unknown Executive

Good morning, and welcome to Northrop Brummin's Third Quarter 2026 Conference Call. Before we begin, please note that matters discussed on today's call, including guidance and outlooks for 2026 and beyond, reflect the company's judgment based on information available at the time of this call. They constitute forward-looking statements under the safe harbor provisions of federal securities laws. Forward-looking statements involve risks and uncertainties, including those noted in today's press release and our SEC filings, which may cause actual company results to differ materially.

Today's call will also include non-GAAP financial measures, which are reconciled to our GAAP results in the earnings release. Additionally, we will reference a presentation that has been posted on our Investor Relations website. Joining us on the call today are Kathy Warden, our Chair, CEO and President; and John Greene, our CFO.

With that, I'll now turn the call over to Kathy.

Kathy Warden

Thanks, Randy, and good morning, everyone. Northrop Grumman's third quarter results reflect strong and disciplined execution across the company. We're delivering on our commitments, and we're doing it with innovation and urgency. Our execution is based on an enduring strategy and adaptive approach, meeting our customers' needs through technology innovation, a laser focus on performance and value-driven capital deployment. Guided by that strategy, we've deliberately and continuously shaped our portfolio to align with our customers' top priorities, and I'm confident our investments and industry-leading performance will enable durable sales and earnings growth for the foreseeable future.

As the threat environment evolves, maintaining America's advantage requires significant and balanced investments in both the attributable mass that supports resilience and the exquisite capabilities that remain the backbone of deterrence and power projection. In a complex world with growing needs for solutions that scale and perform in contested environments, our customers continue to turn to Northrop Grumman.

We have leading roles in the strategic triad, space superiority, microelectronics and homeland defense. We also offer innovative and cost-effective solutions in emerging market segments, including counter UAS and autonomous systems. And we are investing to rapidly expand our munitions and missile capacity to meet operational needs and increased demand.

Our company's portfolio breadth matched with our execution, turn strategic alignment into delivered capability and value creation, as demonstrated in our third quarter results. In the quarter, our book-to-bill was 1.5x, which drove a new record backlog of $110 billion, reflecting robust demand and years of durable sales. Performance across the portfolio was exceptional, with a segment operating margin rate over 12%. These outcomes are built on disciplined program execution, and our team continues to deliver many significant accomplishments.

On Sentinel, all aspects of the program are progressing as planned as we complete multiple tests and achieve our milestones on this complex development effort. In the quarter, we completed the first full vertical assembly of an inert missile at Vandenberg Space for Space and gained approval from the U.S. Air Force on Sentinel Design Maturity for first flight to proceed in 2027. We -- this program is a key growth driver this year and throughout the 2030s as we complete the development and transition into production. In Space Systems, we provide space vehicles and ground systems for the Space Development Agency's proliferated war fighter space architecture.

We recently launched and deployed our first 21 satellites for the tranche 1 transport layer, a critical step in the execution of unparalleled space-based communication for the U.S. base force. In the next 6 months, we expect a sustained cadence of launches with nearly 50 of our 150 satellites planned for deployment to support transport and tracking missions. Across our company, we see a sustainable and profitable growth trajectory.

As John will share in more detail, we are exceeding our own expectations and increasing our 2026 guidance for segment operating income, margin rate and earnings per share. We expect to drive that momentum into 2027 as we ramp B-21 testing and production Advanced Sentinel, continue our leadership in national security space and meet increased demand for missile and munition production.

Our confidence in program execution is reflected in our 2027 outlook where we expect to accelerate growth and expand margins and cash to offset increased capital investments for the B-21 acceleration, maintaining our previously communicated cash flow range.

Beyond 2027, we expect growth to again accelerate and margins to further expand as we ramp on franchise programs, increased production volumes and grow international sales. Our outlook reflects both the depth and promise of our premier portfolio with new sources of growth already taking shape. One example of our response to growing market demand is Rate Hunter our latest addition to our counter UAS portfolio.

Rate Hunter is a cost-effective product line that's designed to close a critical short-range defense gap as drone swarms and cruise missiles become more common. This gut-based air defense system combines our proven Bushmaster Changan technology and new precision-guided 50-millimeter ammunition to deliver powerful protection against high volume rates. We're receiving clear demand signals for Rate Hunter from key allies and expected to drive incremental growth for an already rapidly growing defense systems portfolio. We also definitize the Virginia Class Block V submarine procurement for an additional 12 ship sets of main propulsion units and ship service turbine generators.

The award value adds $1.4 billion to backlog, supporting our partnership with the Navy through 2032. Additionally, we had multiple competitive strategic award wins in our restricted space portfolio associated with our leadership role in space sensing and superiority. Each advancement adds to breadth and future growth sectors and we are investing in delivering products to capture it. We deploy capital with discipline, investing first to profitably grow and meet our customers' needs.

In the last 3 months, we've opened or expanded facilities in Utah, Maryland, Arizona and Florida, adding over 1 million square feet of manufacturing and engineering space and creating more than 2,000 new jobs at these sites. These investments support key customer priorities, including the accelerated production of the B-21 Raider, increased capacity for solid rocket motors and hypersonic propulsion systems, advanced space systems, design and manufacturing and aircraft design and manufacturing. Each is a continuation of our strategy to invest and perform.

Today, our investments have provided the capacity necessary to deliver durable growth as we expand our product offerings and capacity. Staying ahead of tomorrow's threats takes leadership in technology. And this quarter, we extended that leadership in several areas. In Aeronautics, Talon Blue completed its first fully autonomous light with the aircraft handily taxi, take-off, flight maneuvers and landing on its own. -- designed and built in 24 months, Talon Blue demonstrates how we're accelerating modular design with manufacturing innovations to deliver real results with speed.

After the successful test flight, we used Talon Blue to rapidly test and mature new autonomous capabilities, moving them into the field faster and at lower cost. Building on 7 decades of autonomous leadership, we expect this product line to be a competitive entry in a market with clear growing demand signals, both in the U.S. and internationally.

We also introduced Fortitude, a significant advancement in microelectronics technology. This single chip, the size of a grain of rice, uses patented technology to deliver up to 3x the power and 20x the signal quality of comparable solutions in the market today. It can replace dozens of individual components while reducing the weight and power demands of the system it serves. It's a capability with broad application from RADAR to GPS, electronic warfare and future 6G networks, and we're building it for both defense and commercial applications.

Fortitude is just one example of our unmatched microelectronics capability. For more than a decade, we've leveraged our expertise in cutting-edge semiconductors and our secure U.S. foundries to pioneer leading quantum computing technologies. Today, we see a significant opportunity to scale this transformative technology for commercial and government customers.

To fully realize its potential, we are actively evaluating strategic alternatives and believe we are uniquely positioned to lead in this field. We'll share more details on our approach to scale this capability in the coming months.

Turning to the budget and starting with the U.S. We remain optimistic about the strong bipartisan support in Congress for national security. We are operating under a continuing resolution, and we're hopeful that an agreement for appropriations will be reached in the coming months. We understand how to navigate this environment, and we've done so effectively in the past.

Importantly, our portfolio includes a set of prioritized growth drivers firmly anchored in the U.S. base budget request, including full coverage of our prime program and solid support across the rest of our business. As a result, we believe we're relatively insulated from incremental funding uncertainty, leaving us well positioned and confident in our outlook. Globally, we continue to witness unprecedented levels of demand for defense capabilities.

Allied Defense budgets are in the midst of a multiyear secular upswing and we are responding by providing a range of ready-now capabilities, including munitions, missile defense, sensors as well as crude and uncrewed aircraft. These demand signals give us confidence in our goal to double international sales by 2031.

In closing, I'm proud of our team and our ability to execute and innovate with speed. This quarter extended our reputation for driving performance through a strategy fundamentally aligned to our customers' highest priorities. For decades, Northrop Grumman has been solving the world's most difficult challenges including those that require staying ahead of advanced and evolving adversaries.

While we continue to adapt and innovate, the core of our advantage is in the technology leadership and our portfolio that underpins deterrence and power projection. We will continue to deliver unmatched capabilities that serve to protect the United States and our allies around the world. That is why I'm excited about our future and confident in our performance trajectory in the years ahead.

Now I'll turn it over to John for a review of our quarterly results and updated guidance. John?

John Greene

Thank you, Kathy, and good morning, everyone. I'll start with our third quarter financial results, as shown on Slide 4. Momentum continues to build throughout our portfolio. As Kathy shared, backlog increased 20% to $110 billion compared to the third quarter of last year, driven by bookings of over $16 billion. This performance reflects a book-to-bill ratio of 1.5 for the quarter and 1.45 on a year-to-date basis.

Key awards in the quarter include $4.6 billion on restricted programs and additional $2 billion on Sentinel and 3 additional E-2D production aircraft for $1 billion. Third quarter sales were $11.1 billion, up 7% year-over-year, driven by higher sales at all 4 segments. Operating performance was outstanding. Segment operating income grew 5% with a margin rate of 12.1%. From a year-over-year comparison standpoint, the prior year benefited from a favorable $68 million EAC adjustment at MS.

Earnings per share increased to $7.89 and up 3%, driven by higher top line segment operating income expansion and additional tax benefits. Capital expenditures were $306 million, reflecting continued investment in our business to enable long-term profitable growth. And adjusted free cash flow was $1.8 billion in the period, up over 40% compared to the prior year, driven by improvements in working capital and $371 million of proceeds from the sale of a test asset on the B-21 program.

Overall, it was an outstanding quarter of disciplined program execution that demonstrated the strength of our portfolio. Moving to segment performance, starting with Aeronautics on Slide 5. AS continues to fire on all cylinders with backlog, sales and operating income all up meaningfully from the prior year. sales increased by 14%, driven by higher production volumes and sustainment volumes on the F-35 program. We're also seeing higher volumes in our strike portfolio, driven by the continued ramp on B-21 and higher sustainment sales on the B2 program.

Operating margins improved to 10.5%, enabled by product mix and disciplined program execution throughout the portfolio. Defense Systems third quarter sales accelerated to $2.3 billion, up 12% compared to the prior year. Higher sales were driven by continued ramp on Sentinel as well as higher volumes on tactical solid rocket motor programs. Operating income increased to $250 million with third quarter segment operating margin rate of 10.8% supported by good execution on tactical missile programs.

Mission Systems delivered another quarter of exceptional bottom line performance. Sales increased 2%, primarily due to the ramp up on restricted airborne radar programs and higher volumes on Marine Systems. Segment operating income was outstanding at 15.8%, driven by continued excellent portfolio execution. And at space, sales increased by 2%, driven by strength on national security programs, including restricted efforts and GPI, partially offset by timing of revenue on the commercial resupply service contract. Margins improved to 11.3%, including stable performance on GEM 63 XL. We resumed delivery of rocket motors in the third quarter.

Turning to earnings per share on Slide 9. Third quarter diluted EPS was $7.89, up 3% compared to the prior year. Strong segment operating performance and tax benefits were partially offset by lower returns on marketable securities. The improvement in the third quarter effective tax rate was driven by the recognition of higher research credits. These past 2 quarters have reflected ongoing efforts to optimize our tax positions, both federally and at the state level.

We'll continue to assess our positions in future periods and expect the cash benefits associated with these efforts to land over the next several years.

Moving to company level guidance on Slide 10. We continue to expect full year sales of $43.75 billion to $44.25 billion. Similar to last year, we expect higher fourth quarter sales throughout the portfolio driven by production throughput, material volumes and normal seasonality. We expect continued strong awards in the fourth quarter and a full year book-to-bill ratio of at least 1.3 on due to continued strong operating performance throughout the portfolio and our confidence in the fourth quarter, we are increasing the midpoint of our segment operating income by $65 million.

The updated guidance range of $4.94 billion to $5.04 billion, reflect a full year segment operating margin rate of approximately 11.3% at the midpoint. We are increasing EPS guidance by $0.70 driven by higher segment performance and a lower tax rate, partially offset by higher corporate unallocated costs and interest expense. And we are maintaining our adjusted free cash flow guidance at $3.1 billion to $3.5 billion for the year.

Turning to segment level guidance on Slide 11. We are reaffirming our sales guidance at all segments. For operating income, we are increasing our guidance at AES to high 9% and at MS to mid-15% due to their excellent program execution. Collectively, this implies a fourth quarter segment operating margin rate of mid- to high 11%, driven by production mix and continued strong operating performance.

Before concluding my prepared remarks, I'll take a few moments to build on Kathy's comments regarding our 2027 outlook. Given the strong support for our key programs and the enduring global demand for our capabilities, we continue to expect robust sales growth next year and well into the next decade. For 2027, we project sales growth between 5% and 7%, representing further acceleration from the growth expected this year with higher sales in all 4 segments.

Beyond 2027, we are confident that sales growth will continue to accelerate. We expect segment operating income will grow faster than sales with 10 to 20 basis points of margin expansion beyond the current 2026 guidance midpoint. Capital expenditures continue to be projected at 4.5% of sales as we build out the capacity to support a higher B-21 production rate.

In total, we expect approximately $2.1 billion in 2027 CapEx. We also expect a 2027 adjusted free cash flow in the range of $3.3 billion to $3.7 billion. Relative to the previous outlook, higher capital intensity for B-21 acceleration is being offset with stronger operating performance, disciplined working capital management and cash tax optimization.

In closing, the results and the outlook we've discussed today are not the product of a single quarter, but the output of the strategy that Kathy described at the onset of the call. That strategy is translating directly into our financial results and it provides a visible runway for durable long-term growth.

We expect that growth to come with expanding margins driven by strong program execution, cost efficiency growing international sales and a mix shift towards more production as our development programs mature. Our pairing of intentional strategy and the combination of accelerating growth, expanding margins and capital discipline underpins our confidence in the years ahead.

Lastly, we'll continue to be guided by our consistent balanced and disciplined capital allocation priorities, which drive value to our shareholders through strategic investments in our business and shareholder distributions.

With that, let's open the call for Q&A.

Operator

[Operator Instructions]. Our first question comes from Kristine Liwag with Morgan Stanley.

分析師問答

Kristine Liwag

I guess Kathy and John, you've previously talked about acceleration in growth in 2028. But I think when we think about the potential range of outcomes in 2 -- can you just give us an understanding of what drives the low end versus the high end of your outlook? And also with this meaningful step-up in 2028 of acceleration, what are the key operating milestones or potential enablers that could potentially bring forward some of this 2020 growth into 2027? Is that a possibility?

John Greene

Okay. Kristine, it's good to hear your voice. So let me phrase '27 this way and I'm going to move it back to '26 and talk about our execution here this year. We talked about in the last quarter that we're building momentum. And what you saw in this quarter building momentum, and that momentum continues into 2027. So as we pulled the guide together for 2027, we considered a number of factors.

Certainly, the strong backlog that we have, the great execution, the the placement of our programs in the national defense priorities all giving us confidence that we're going to be able to execute strongly into '27 and out beyond into 2028. So the low end reflects frankly, where we are in the budgeting cycle for ourselves.

So we've got some more work to do internally to get a greater level of confidence. The high end reflects our belief that we're going to continue to execute very, very strongly and be able to deliver great outcomes for our customers. So it's probably a little bit wider than you would like. And I hear the read in terms of '28, what can we pull in.

Certainly, we've got some marquee programs, B-21, Sentinel and the multiyear programs that we're all working on. So 5% to 7% is where we are today. And in our fourth quarter call, we'll tighten that range. And if there's some more upside on it, we'll certainly share.

Kristine Liwag

Great. And as a follow-up, Kathy, on Fortitude, you called out your microelectronics, the size of a grain of rice, delivering 3x the power and 20x the signal quality of comparable solutions. It's also particularly interesting that you called out the commercial opportunity for this product. So first, can you give us more context on how differentiated the technology is and how we should think about the growth opportunity for Northrop Grumman for this kind of a defense and commercial TAM?

Kathy Warden

Yes. Thanks, Kristine. So as we have for decades been at the forefront of microelectronics technology, we've largely focused that technology development on miniaturized processing power. I've talked before about having the most powerful chip in terms of processing speed. And that geared toward military applications has meant that in very small form factors that are power efficient, we are able to deliver extreme processing capability.

We recognize that there's commercial applications for those underlying technologies as well. And with Fortitude, and I also mentioned Quantum Technology, we are sitting on patent that have relevance outside of the defense space. So we have been doing a strategic review of our microelectronics capability and looking at how do we bring some of these out to a more both defense.

We're not strained from our defense core, but also commercial applications for this underlying technology in our business. So we are optimistic about what that could look like. We are doing some strategic reviews. Fortitude clearly is mature technology. Quantum is progressing towards some very important technical milestones in the next couple of years, but we see both of them as addressing very large both defense and commercial markets.

Operator

Our next question comes from John Godyn with Citi.

John Godyn

I also wanted to just ask for a little bit more color on the 2027 comments. This quarter, we saw relative strength in Aeronautics and Defense Systems, while Mission Systems and Space lagged. I know you're going to give sort of segment detail later on. But just in terms of the shape when we're thinking about the drivers of '27, are the leading segments accelerating further? Are the laggards sort of snapping back a bit? Any color you can give us just to give us a little bit of a better sense would be helpful.

John Greene

Sure, John. So all 4 segments, we will see positive year-over-year growth. So we expect that growth to come from both new programs as well as backlog. And certainly, our 2 leading franchise in terms of growth will be DS. It approaching 10% this year. We expect AES continued growth on the back of B-21. And then Mission Systems, certainly, that business has generated year-over-year growth on average somewhere between 3 and 5, we're going to continue to take a look at that and see if that can be accelerated.

And in Space, this year, it's been -- we're looking at relatively muted growth. We expect next year to that to accelerate a bit from where we are this year. So hopefully, that's helpful color.

John Godyn

Yes. That's great. And just sort of a similar question on the margins improving comment. Any puts and takes or leaders and laggers that you'd call out just as we're trying to visualize the upcoming year?

John Greene

Yes. So AS had a really, really strong margins this year. So as B-21 becomes a larger percent of sales, we're going to certainly expect that program to deliver continued profitability. But certainly, as that becomes a larger percent of sales, that will put some level of basis points pressure on on the AES margin. DS, we expect strong execution, but we have a similar situation with Sentinel, but also growing international sales and program execution that will be helpful. space, relatively consistent margins.

And then MS, it's been a banner year in terms of execution there. So we're looking to see if we can repeat that, but where we are today, is likely on the upper end, and I would expect that to fall in a bit. And just one other point on overall margins. We're still early in the planning process here. So the takeaway should be that we're early. We've got strong program performance. We're going to have a slight contract mix shift

And then relative to Kathy's comments on Quantum, we haven't included any specific investment dollars for Quantum yet. What we're trying to do is work out the strategic alternatives and make sure we can maximize shareholder value in whatever way we take that initiative.

Operator

Our next question comes from Ronald Epstein with Bank of America.

Ronald Epstein

Kathy, can you speak a little bit to the ramp of B-21, you're ramping up production by, what, 25%, how that's going?

Kathy Warden

Sure, Ron. Thanks for the question. As you know, it is a ramp that will happen over time. We will be investing in that acceleration capacity over the next couple of years and then expect to see the translation into higher volumes later in the decade. We, of course, are ramping beyond production as well. We have sustainment starting to come into the program.

We also have modernization that is ongoing in the program. As we've talked about top line drivers for the B-21 is beyond that production acceleration to other elements of the full program life cycle support. But as you pointed to the capacity expansion, that really starts to take effect once we get through the large part of the facilitization, which is through 2028.

Ronald Epstein

And then maybe as a follow-on to B-21, a question we frequently get from investors, how should they think about potential risk of another charge the future around the fixed price low rate initial production months.

Kathy Warden

The program is performing very well. We are continuing to progress through test and as we are testing the aircraft, it is performing against our key performance parameters. That's the largest risk in any development program, which is that you would find discoveries late and particularly the later you get in test, we are knocking down that risk with each program day and test milestone that is successful.

We also are working our way through the production learning curve. And so again, there each and every day that we perform, we are improving our performance cadence and retiring risk. It is not without risk because we still have a ways to go clearly in production of our remaining LRIP units, but our confidence continues to grow in the team's ability to execute on that program.

Operator

Our next question comes from Scott Deuschle with Deutsche Bank.

Scott Deuschle

Kathy, just to be more explicit, when you talk about the strategic review for the foundry business, are you suggesting you might sell it or spin it? Or is there a broader landscape of strategic alternatives than just those 2 outcomes?

Kathy Warden

It's a broader landscape clearly to the degree that we and others see value in that business. We could continue to solely invest in it ourselves with the support of our current shareholders. We could think about broadening that base of investment or we could think as you noted, about separating the business, all of those options are on the table and certainly the degree to which we do that and the timing are all the things that we would be taking under advisement here in the coming months.

Scott Deuschle

Can you quantify at all what the size of the investment might be required if you were to go it alone?

Kathy Warden

It would be premature to do that because it depends on how quickly we want to scale to particular technical milestones and our appetite for that. So we really shared this with you today to just give you the broader purview of what is happening in our microelectronics business with several technologies, like the RQL, which is our unique advantage in quantum. It stands for reciprocal quantum logic and it's an ultra-efficient superconducting chip technology.

And as we said, we believe it has applicability not only for us scale a quantum computer, but that others might also be able to leverage this technology. So that's what we are exploring.

Scott Deuschle

Okay. And then, John, when the B-21 charges were first books, I believe the expectation on cash timing was that 60% of the cash impact would hit buyer before 2026. I think the remaining 40% was 2027 or later. Is that still the kind of rough cadence and timing expectation for those cash losses? Or has that actually moved at all?

John Greene

Yes. So the way to think about that is on the loss burn down. And what we've said is about $100 million a quarter is what we'll typically burn down. This quarter, the number happened to be $70 million. So -- you can just do the math on that to have a better estimate of the cash impact.

Operator

Our next question comes from Sheila Kahyaoglu with Jefferies.

Sheila Kahyaoglu

I thought the slide was super helpful in terms of the program funding that highlights the base request pending for almost 70% of the portfolio. and the 5% to 7% growth for 2027. How do you think about the major drivers of that 5% to 7%? And I guess, where are areas of potential acceleration that might move the needle as you suggested potentially for 2028 growth.

Kathy Warden

Sheila, certainly, the programs that we outlined on that chart are key drivers of growth, areas like B-21, Sentinel, our support to shipbuilding and in addition, things that are not fully represented on the chart like our weapons portfolio scaling into new munitions acceleration counsel weapons where we have not been a key provider, but we now are entering into contracts become a key provider. Those would scale over the course of 2027.

International is obviously not represented on this chart. It's meant to be a U.S. base budget analysis, but international is also a key driver of acceleration of our growth in 2027 and beyond. And international, as always is more difficult to pin down in time in terms of exact timing for getting under contract. So it becomes a driver of question as to how much of that falls into '27 and how much falls more into 2028.

And then the other area that isn't significantly called out on this chart, but we expect to be a key growth driver is our restricted base portfolio. About 2/3 of our space portfolio falls into the category of national security space and both the base budget and the reconciliation package has pretty significant increases that could drive further growth.

So when you think about what will drive us towards the bottom end versus the top end of our growth range for 2027, it's the rate at which we get these areas on contract and can scale our production rate at which international contracts are awarded and begin to have a meaningful impact in 2027.

And probably most importantly, is the level of appropriation and the timing of appropriations, the amount of time we stay in a continuing resolution, certainly, could impact 2027. But the point being, we expect acceleration throughout the year with further acceleration into 2028.

Sheila Kahyaoglu

That's super helpful. And maybe, Kathy, if I could follow up to that. What this portfolio solid market motors is about 8% of the mix, 75% funded. How do we think about that solid bucket motor opportunity second sourcing? Like what's what's the potential size of that business?

Kathy Warden

Yes. So we've talked before about having approximately $1 billion of work in that area today. And we are looking at not only scaling off of that $1 billion because we are seeing growth in quantities for the contracts where we already are performing, but we are entering into agreements to become a component provider most notably solid rocket motors, but I should mention fuses, warheads, notes are also part of our component offering mix.

And as we enter into those new agreements that will become the primary growth driver for us in '27 and beyond. But '27 will be a ramping year on all of those contracts as they start out small and then we progress towards the minimum guaranteed quantities and work to secure even more of that work going forward.

Operator

Our next question comes from Maggie Schooley with Rothschild & Co Redburn.

Margaret Schooley

I wanted to ask about Talon Blue. You mentioned it recently had its first tili autonomous slate. And I was wondering if you could provide any more details on how Prism the Mission software system is performing and particularly how the interoperability with other third-party autonomy systems is working. So any color on that would be very helpful.

Kathy Warden

Absolutely. So Talon is an investment that we've made both in the platform, which is Talon Blue and in the systems that control the CCAs and associated platforms, and that's what we call Talent IQ. And Maggie, your question goes largely to Telenet, which has demonstrated through test the ability to interoperate with other companies autonomous software. And to integrate that software, we're working with about half a dozen companies who have come into our test bed and done cooperative integration projects with us.

We also, through that test bed, have demonstrated the ability to control other platforms. So those milestones have been proven and demonstrated. And it's the combination of a platform that allows us to do this testing and the test that itself that allows us to derisk integration and work with partners that really is creating the optionality for us to work with multiple U.S. customers on defining their requirements for the next generation of collaborative aircraft and with international partners as well.

Operator

Our next question comes from Seth Seifman with JPMorgan.

Seth Seifman

I wanted to ask, John, maybe just starting off on the cash flow. If you could help us a little bit and thinking about the drivers there moving from '26 to '27, the growth of a couple of hundred million, but there's the headwind from the payment for the test article this year and then the broader increase in CapEx. So we can see the growth and the drop in that growth and that provides a portion of it. But if you could quantify the other pieces perhaps.

John Greene

Sure. Sure. So cash flow is actually quite a good story this year. So in the third quarter, we're up about $550 million. Year-to-date, we're up $900 million, so good performance year-to-date. In the fourth quarter, we expect a meaningful step-up in the level of CapEx to support some of the some of the key initiatives, including B21. So you can think about the fourth quarter CapEx to be approaching $1 billion. And then as we look at 2027 and beyond, really what's driving it is program execution.

So sales growth, margin -- consistent margin with some level of margin expansion, tax optimization, working capital optimization. And then we're going to continue to be disciplined on the allocation of our CapEx dollars. So I mentioned in the prepared remarks, we do expect another step-up of CapEx to about $2.1 billion, and that's be able to invest in the infrastructure to deliver key programs for our customers. So overall, building cash momentum on the back of strong sales and execution from a margin perspective and disciplined capital allocation and working capital management.

Seth Seifman

Okay. Great. And then maybe just a follow-up. If you can help out a little bit in terms of where we are in the Sentinel program, it looks like you've achieved a lot of the development of the missile. And I've kind of thought about the missile as ramping in production more in the next decade.

And so in terms of the activity, at the company between now and kind of late in the 2020s. Is that primarily related to sort of infrastructure and C2 in terms of incremental growth and how to think about the magnitude of that incremental growth, that percentage of sales that you guys hopefully put on the slide, does that increase in the coming years?

Kathy Warden

So Seth, over the next several years, we will continue to execute the development program, and there will be aspects of all 3 lines of effort, which includes the missile itself, we'll be continuing the integration as we demonstrated that first vertical stack and taking that through a rigorous test campaign.

We will also be continuing design work on the launch facilities. Think of that as infrastructure part of the program, the building out of the missile silos and the command centers. And then the third component of the program is command and control, and that's all the system has been in a great and allow the government to operate the system. So all 3 of those work streams have continued development work over the next several years leading into an integrated test campaign.

At the same time, towards the end of the decade, we'll begin looking at ramping production on all aspects of the program. So the missile itself as well as the infrastructure will begin to deploy those capabilities and scale them. And that is something that we're really excited about. And yet our focus in these next several years will be on completing the development program.

Seth Seifman

Okay. Great. And so does that -- is that kind of a 7%-ish think of that sales percentage through the development portion kind of remaining fairly consistent? Or is that growing above the company pace?

Kathy Warden

It's been growing above the company pace modestly, and we expect that it will be in the same range around the company growth rate or a little above.

Operator

Our next question comes from Anthony Valentini with Barclays.

Unknown Analyst

Kathy, I'm curious what you're most excited about in the portfolio that's outside of B-21 and Sentinel. And then obviously, like the classified stuff that you can't talk about.

Kathy Warden

Yes. You're asking me to pick amongst a lot of favorite children today, really, what we wanted to highlight is some of the microelectronic to that we are bringing out of what we would call deeper research and development work into ready for commercialization. And so we talked about Fortitude as a new product line. We've talked about quantum.

And I think many people don't recognize that our company has that strong pedigree of microelectronics expertise because we have largely directed it towards government application. Our government customers are very open now to us taking that technology working it into a commercial ecosystem and then in commercial terms, selling it back to the government.

I can't underemphasize how important that is, and it's an opportunity that as a company, we are going to take advantage of in complete partnership with the government, but do it in a way that also opens up access to commercial markets before, we did not have as strong as an opportunity to because of the restricted nature of the work we were doing. So to me, that's the biggest change that we are sharing with you today and something that I'm quite excited about.

Operator

Our next question comes from Noah Poponak with Goldman Sachs.

Noah Poponak

Apologies if this is some combination of splitting hairs or obvious, but I just want to make sure I'm using the right definitions and understanding the outlook correctly. So with the outlook for 2027 organic revenue growth, 5% to 7% and then further acceleration in 2028.

Just want to make sure that the literal interpretation of that is 8% or more growth in 2028 as opposed to just meaning that it's up again.

And then, John, you didn't specify -- you're not guiding '29 or '30, but you made comments along the lines of sustainability of acceleration into the next decade. Should we be thinking about 8% or more 2029, 2030? Or is that reading what you're saying too much?

Kathy Warden

Noah, this is Kathy. I'll start, and then John can add in. We are suggesting that a 5% to 7% growth rate next year would accelerate, meaning be higher in '28 than we experienced in '27. I'm not sure I would jump all the way to 8%. We're not going to guide a specific number for 2028. But to answer your question directly, we are saying that we expect the growth rate in '28 to be higher than it is in '27.

There is potential for further acceleration beyond that. But of course, the further out you go, the more dependent that is on factors that today we didn't cover, we see strong visibility through contracts we have for backlog we have today through that '28 period.

Just to give you a little bit of insight there. As we have done in the past, we shared that our backlog burn down tends to be weighted towards the later part of our planning horizon. So for 2027, we expect about 35% of our backlog to burn down over the next 12 months, another 55 over the following 24 months. leaving the remainder past 36 months.

And when you think of it in that way, our backlog today is more robust and durable than what we would typically experience, which is why it gives us that strong visibility to talk multiple years out. So hopefully, that gives you some good insight.

Noah Poponak

That's super helpful. I appreciate it. And then, Kathy, I guess, the margins in the quarter are strong and the margin outlook you're providing is discussed with confidence. But the margins have been a little bit choppy over the last few years.

I guess, maybe a level setting on what's been behind that? How should we be thinking about the extent to which the items that have driven margin headwind in recent periods are behind you versus still have some risk?

Kathy Warden

I really look at it with the mix of our portfolio in mind whenever we have a high concentration of development work, that carries a higher risk profile, and it's why margins tend to be lower on development programs. And we can't always predict that. So you see a little bit of choppiness, right, taking earnings adjustments as a result of discovery in development as our portfolio has progressed and will continue to progress very notably over the remainder of this decade towards more production, we tend to see less variation and fewer EAC adjustments and, therefore, higher margin performance.

So it's that dimension of our portfolio that is really worth thinking through. We've talked and given numbers about how we expect that cost plus, which is, in some ways, synonymous with development contracts shifting to fixed price over the next several years, but it's a pretty material shift that we are expecting that derisks the portfolio.

Unknown Executive

Josh, I think we have time for one more question.

Operator

And our last question comes from Michael Ciarmoli with Guggenheim Securities.

Unknown Analyst

Maybe, Kathy, you talked earlier about Talon Blue that's been in the news. But talk more broadly maybe about your kind of overall CCA strategy. It seems like we've got Increment 1. It's moving a bit slower. You've got Talon Blue, but then you've also got the the MoCA Air program.

So what are the overall expectations? I mean do you kind of envision being a significant player in that market? Do we have to wait more for Increment 2 and some of the follow-on directives and orders from the Air Force? Or maybe just some color there.

Kathy Warden

Yes. We are waiting for direction, but we are engaging with all of our customers to utilize the expertise we have. As I've talked about before, we put over 500,000 flight outwards of experience with unmanned systems, more than anyone that I'm aware of in the world.

And so as a result, we're bringing that skill set to bear in 2 ways. One is in how an architecture of PCAs can work and integrate. And I talked earlier in response to Maggie's question about how Talon IQ is doing that, not just for us but for other companies who are developing autonomy software and command and control. And then for the platform itself, we are working to drive towards affordability, and scaled manufacturing because we know that's going to be important to deliver affordable maps.

We think that is going to be true across all customers, the services domestically and our international customers. So those are our goals for our product line. And we are demonstrating capability so that customers can see the art of the possible.

Unknown Analyst

Got it. That's helpful. And then just a quick follow-up on microelectronics. Would a potential direct investment from office with strategic capital or department award beyond the table there? Or is truly everything, any and all options on the table?

Kathy Warden

Everything is on the table. We believe there is such a strong commercial application for this that we are not wanting to be overly dependent on any government, particularly the U.S. government in this case, but all options are on the table.

Unknown Executive

Thanks, Josh. I'd like to turn the call back to Kathy to close, please.

Kathy Warden

Right. Thanks, Randy, and thanks to all of you for joining us. I just want to end by saying it's a really exciting time at Northrop Grumman. We are seeing a sustained and robust global demand cycle, and our team up and responding to that. We also see applications for leading technologies that we have for broader application to support shareholder value and to deliver new innovations to our customers.

And so you heard us talk about several examples of that today. I look forward to following up with all of you following the so we can share some more insights. Thanks for joining us.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.