Financial Analysis

Merger Agreement On July 28, 2025, we entered into an Agreement and Plan of Merger (the Merger Agreement) with Union Pacific Corporation, a Utah corporation (Union Pacific), pursuant to which Union Pacific will acquire the Company in a stock-and-cash transaction more fully described therein. The consummation of this transaction is subject to certain conditions, including approval by the U.S. Surface Transportation Board (STB). Additionally, if the Merger Agreement is terminated under specific circumstances, either we or Union Pacific are required to pay a termination fee of $2.5 billion. The full text of the Merger Agreement can be found as Exhibit 2.1 in our Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (SEC) on July 29, 2025. We incurred $51 million and $103 million in expenses during the second quarter and first six months of 2026, respectively, related to or resulting from the proposed transaction. These costs, which include costs associated with employee retention agreements, fees to third-party advisors, and expenses for legal services, are recorded in Merger-related expenses on the Consolidated Statements of Income. …

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Commitments and Contingencies We and/or certain subsidiaries are subject to numerous lawsuits, inquiries, investigations and other claims and proceedings relating principally to railroad operations. In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 450, Contingencies , when we conclude that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, it is accrued through a charge to earnings and, if material, disclosed. While the ultimate amount of liability incurred in any of these matters is dependent on future developments, in our opinion, the recorded liability is adequate to cover the future payment of such liabilities and claims. However, the final outcome of any of these matters cannot be predicted with certainty, and developments related to the progress of such matters or other unfavorable or unexpected developments or outcomes could result in additional costs or new or additionally accrued amounts that could be significant to our financial position, results of operations, or liquidity in a particular year or quarter. Any adjustments to the recorded liability will be reflected in earnings in the periods in which such adjustments become known. If it is reasonably possible that we will incur losses in excess of the amounts currently recorded as a loss contingency, we disclose the potential range of loss, if reasonably estimable, or we disclose that we cannot reasonabl …

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Debt Under the terms of the Merger Agreement, we are subject to certain restrictions on incurring additional indebtedness. In April 2026, we entered into a non-cancellable finance lease of an office building in replacement of a previous operating lease. The lease term is for five years and includes options to renew, purchase, or sell the building at the end of the lease. We recorded a right-of-use asset of $117 million and a finance lease liability of $115 million, based on the initial five -year term. The lease contains a residual value guarantee of approximately $499 million for the total construction cost of the building. We determined no amounts are probable of being owed under the guarantee and, as such, were not included in the measurement of the finance lease liability. Right-of-use assets related to finance leases are included in Properties less accumulated depreciation, and finance lease liabilities are included in Current maturities of long-term debt and Long-term debt in the Consolidated Balance Sheet. In connection with the transaction, a third-party bank paid $272 million directly to other bank counterparties related to the restructuring of our prior operating lease. In May 2026, we renewed our accounts receivable securitization program with a maximum borrowing capacity of $400 million. Amounts under our accounts receivable securitization program are borrowed and repaid from time to time in the ordinary course for general corporate and cash management purposes. T …

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The following table disaggregates our revenues by major commodity group: Second Quarter First Six Months 2026 2025 2026 2025 ($ in millions) Merchandise: Agriculture, forest and consumer products $ 673 $ 645 $ 1,298 $ 1,281 Chemicals 646 546 1,213 1,081 Metals and construction 480 458 893 872 Automotive 334 323 614 601 Merchandise 2,133 1,972 4,018 3,835 Intermodal 908 743 1,657 1,503 Coal 424 395 788 765 Total $ 3,465 $ 3,110 $ 6,463 $ 6,103

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Stock-Based Compensation Second Quarter First Six Months 2026 2025 2026 2025 ($ in millions) Stock-based compensation expense $ 24 $ 17 $ 49 $ 35 Total tax benefit 3 3 10 8 During the second quarter and first six months of 2026, no stock options were granted. We granted restricted stock units (RSUs) and performance share units (PSUs) pursuant to the Long-Term Incentive Plan (LTIP), as follows: Second Quarter First Six Months Granted Weighted-Average Grant-Date Fair Value Granted Weighted-Average Grant-Date Fair Value RSUs 1,132 $ 315.93 198,891 $ 288.07 PSUs 78,986 273.82 Stock Options Second Quarter First Six Months 2026 2025 2026 2025 ($ in millions) Options exercised 8,109 26,352 47,802 68,904 Cash received upon exercise $ 1 $ 2 $ 5 $ 6 Related tax benefits realized 1 1 2 2 Restricted Stock Units RSUs granted primarily have three - and four-year ratable restriction periods and will be settled through the issuance of shares of Norfolk Southern common stock (Common Stock). Certain RSU grants include cash dividend equivalent payments during the restriction period in an amount equal to the regular quarterly dividends paid on Common Stock. Second Quarter First Six Months 2026 2025 2026 2025 ($ in millions) RSUs vested 9,970 10,454 188,553 163,218 Common Stock issued net of tax withholding 6,263 6,225 131,463 113,482 Related tax benefits realized $ $ $ 2 $ 1 Performance Share Units PSUs provide for awards based on the achievement of certain predetermined corporate performance go …

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Pensions and Other Postretirement Benefits We have both funded and unfunded defined benefit pension plans covering eligible employees. We also provide specified health care benefits to eligible retired employees; these plans can be amended or terminated at our option. Under our self-insured retiree health care plan, for those participants who are not Medicare-eligible, certain health care expenses are covered for retired employees and their dependents, reduced by any deductibles, coinsurance, and, in some cases, coverage provided under other group insurance policies. Eligible retired participants and their spouses who are Medicare-eligible are not covered under the self-insured retiree health care plan, but instead are provided with an employer-funded health reimbursement account which can be used for reimbursement of health insurance premiums or eligible out-of-pocket medical expenses. Pension and postretirement benefit cost components were as follows: Pension Benefits Other Postretirement Benefits Second Quarter 2026 2025 2026 2025 ($ in millions) Service cost $ 6 $ 6 $ $ Interest cost 25 27 3 4 Expected return on plan assets (52) (49) (3) (3) Amortization of net losses 5 5 Amortization of prior service benefit (5) (5) Net benefit $ (16) $ (11) $ (5) $ (4) Pension Benefits Other Postretirement Benefits First Six Months 2026 2025 2026 2025 ($ in millions) Service cost $ 13 $ 12 $ 1 $ 1 Interest cost 50 53 6 7 Expected return on plan assets (104) (98) (5) (5) Amortization of …

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Restructuring and Other Charges During the second quarter of 2026, we recorded $6 million in expenses related to severance costs associated with organizational changes. During the second quarter of 2025, we recorded $10 million in expenses primarily related to the restructuring of certain technology functions, which includes severance costs for impacted employees.

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Railway Operating Revenues The following table disaggregates our revenues by major commodity group: Second Quarter First Six Months 2026 2025 2026 2025 ($ in millions) Merchandise: Agriculture, forest and consumer products $ 673 $ 645 $ 1,298 $ 1,281 Chemicals 646 546 1,213 1,081 Metals and construction 480 458 893 872 Automotive 334 323 614 601 Merchandise 2,133 1,972 4,018 3,835 Intermodal 908 743 1,657 1,503 Coal 424 395 788 765 Total $ 3,465 $ 3,110 $ 6,463 $ 6,103 We recognize the amount of revenues to which we expect to be entitled for the transfer of promised goods or services to customers. A performance obligation is created when a customer under a transportation contract or public tariff submits a bill of lading to us for the transport of goods. These performance obligations are satisfied as the shipments move from origin to destination. As such, transportation revenues are recognized proportionally as a shipment moves, and related expenses are recognized as incurred. These performance obligations are generally short-term in nature with transit days averaging approximately one week or less for each commodity group. The customer has an unconditional obligation to pay for the service once the service has been completed. Estimated revenues associated with in-process shipments at period-end are recorded based on the estimated percentage of service completed. We had no material remaining performance obligations at June 30, 2026 and December 31, 2025. We may provide custom …

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Segment Reporting We manage our company as one reportable operating segment, railway operations, providing rail transportation to customers. Although we provide and analyze revenues by commodity group, the overall financial and operational performance of the railroad is analyzed as one operating segment due to the nature of our integrated rail network. The chief operating decision maker assesses the performance of the railway operations segment and decides how to allocate resources based on Net income that is reported on the Consolidated Statements of Income. The measure of segment assets is reported on the Consolidated Balance Sheets as Total assets. Total expenditures for long-lived assets are disclosed as Property additions on the Consolidated Statements of Cash Flows. Railway operations segment revenues, expenses, and profit are disclosed below as reviewed and used by the chief operating decision maker. There are no other significant segment items or reconciling items to segment profit. Second Quarter First Six Months 2026 2025 2026 2025 ($ in millions) Railway operating revenues (Note 3) $ 3,465 $ 3,110 $ 6,463 $ 6,103 Railway operating expenses Compensation and benefits 744 692 1,484 1,431 Purchased services 435 409 853 810 Equipment rents 115 111 219 208 Fuel 405 219 661 463 Depreciation 358 346 710 692 Materials 113 98 207 198 Claims 69 59 122 125 Other 30 38 72 77 Merger-related expenses 51 103 Restructuring and other charges 6 10 6 10 Eastern Ohio incident 15 (47) 2 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing