General Dynamics Corporation
GD · NYSE
Next quarter
Expected to report Oct 23, 2026 — estimated from last year’s reporting date.
Consensus is $4.13 EPS for Sep 2026 across 8 estimates, ranging $4.06 to $4.25.
GD Jun 2026
- 7.34%
- +0.33%
- $3.95
- $4.24
- —
- —
Highlights
- Earnings beat: Diluted EPS was $4.24, $0.29 above the $3.95 consensus, a 7.34% surprise.
- Top-line growth: Revenue rose 8.1% year over year to $14.09 billion, up from $13.04 billion, and increased 4.6% from $13.48 billion in the prior quarter.
- Margin expansion: Operating earnings increased 11.9% year over year to $1.46 billion, while operating margin expanded 40 basis points to 10.4%.
- Aerospace acceleration: Aerospace revenue grew 15.1% to $3.53 billion and operating earnings rose 26.6% to $510 million; margin improved to 14.5% from 13.2%.
- Marine Systems improvement: Revenue increased 10.4% to $4.66 billion and operating earnings rose 17.5% to $342 million, helped by submarine construction and higher shipyard throughput.
- Order momentum: Orders totaled $20.0 billion, producing a 1.4-to-1 company-wide book-to-bill ratio; Aerospace was 1.5-to-1 and the defense segments were 1.4-to-1.
- Backlog growth: Total backlog reached $136.5 billion, up from $130.8 billion in the prior quarter, with total estimated contract value of $186.9 billion including $50.4 billion of potential value.
- Cash generation: Second-quarter operating cash flow was $1.88 billion and free cash flow was $1.65 billion; six-month free cash flow reached $3.60 billion versus $1.11 billion a year earlier.
- Mixed defense performance: Combat Systems revenue was essentially flat at $2.29 billion and operating earnings fell 1.9% to $318 million, while Technologies revenue rose 4.1% to $3.62 billion with operating earnings up 2.1% to $339 million.
Analysis
General Dynamics delivered a broad-based second quarter, with EPS of $4.24 beating the $3.95 consensus by 7.34%. Revenue of $14.09 billion increased 8.1% from $13.04 billion a year earlier and 4.6% from $13.48 billion in the prior quarter. Operating earnings rose 11.9% year over year to $1.46 billion, lifting margin to 10.4% from 10.0%; net earnings increased 14.4% to $1.16 billion, compared with $1.01 billion a year ago and approximately $1.13 billion in the prior quarter.
The defining feature of the print was improved execution in Aerospace and Marine Systems. Aerospace benefited from three additional Gulfstream deliveries, higher aircraft mix and stronger services activity, while Marine Systems gained from Columbia-class submarine construction, oiler throughput and better performance at each shipyard. Demand also remained strong: $20.0 billion of orders generated a 1.4-to-1 book-to-bill ratio and lifted backlog to $136.5 billion. Cash conversion was unusually strong, with $1.88 billion of quarterly operating cash flow and $1.65 billion of free cash flow. Combat Systems remained the principal offset, as lower U.S. military vehicle volume and program mix constrained results despite higher munitions and international vehicle activity.
Quarterly financial performance
- Revenue: Sales were $14.09 billion, up $1.05 billion or 8.1% year over year, with growth across all four operating segments. Revenue was also approximately $0.61 billion above the prior quarter's $13.48 billion.
- Profitability: Operating earnings rose to $1.46 billion from $1.31 billion a year ago and approximately $1.42 billion in the prior quarter. The 10.4% operating margin was 40 basis points above the year-ago level.
- Net income and EPS: Net earnings increased 14.4% to $1.16 billion from $1.01 billion. Diluted EPS rose 13.4% to $4.24 from $3.74 and exceeded the $3.95 consensus by $0.29.
- Contract estimates: Cumulative catch-up adjustments to contract estimates contributed $29 million to operating earnings, or $0.08 per diluted share, versus $31 million and $0.09 in the year-ago quarter.
Aerospace execution
Aerospace was the strongest margin contributor. Revenue increased 15.1% to $3.53 billion, split between $2.47 billion of aircraft manufacturing and $1.06 billion of aircraft services. Gulfstream deliveries rose to 41 aircraft from 38, including 35 large-cabin and six mid-cabin aircraft. Manufacturing revenue and earnings benefited from higher deliveries and mix, while services gained from higher fixed-base operator activity and maintenance demand. Operating earnings rose 26.6% to $510 million, expanding margin 130 basis points to 14.5%. Aerospace orders of $5.28 billion represented a 1.5-to-1 book-to-bill ratio, and management expects full-year revenue of approximately $13.8 billion at a 14.7% margin.
Marine Systems ramp
Marine Systems revenue rose 10.4% to $4.66 billion and operating earnings increased 17.5% to $342 million. U.S. Navy ship construction contributed $281 million of the revenue increase, primarily from higher material and labor volume on Columbia-class submarines and improved throughput on John Lewis-class fleet replenishment oilers. Ship engineering, repair and other services added another $159 million. The segment's margin improved to 7.3% from 6.9%, reflecting better performance at each shipyard. Marine Systems had $65.2 billion of backlog at quarter-end, including $42.4 billion funded and $22.8 billion unfunded, and management expects 2026 revenue of approximately $18 billion at a 7.4% margin.
Orders and backlog
- Order intake: Defense orders were $14.7 billion and Aerospace orders were $5.3 billion, for total orders of $20.0 billion. Six-month defense book-to-bill was 1.8-to-1, while Aerospace was 1.3-to-1.
- Backlog: Total backlog increased to $136.5 billion from $130.8 billion in the prior quarter and $103.7 billion a year earlier. It comprised $104.1 billion of funded backlog and $32.4 billion of unfunded backlog.
- Contract potential: Estimated potential contract value was $50.4 billion, taking total estimated contract value to $186.9 billion. Technologies accounted for $30.9 billion of that potential value, Marine Systems $7.4 billion, Combat Systems $10.8 billion and Aerospace $1.2 billion.
- Revenue visibility: The filing indicates that approximately 50% of the $136.5 billion backlog is expected to convert to revenue by year-end 2027, another 30% by year-end 2029 and the remainder thereafter.
Other defense segments
- Combat Systems: Revenue was $2.29 billion, up just 0.3%, while operating earnings fell 1.9% to $318 million and margin declined to 13.9%. Higher artillery production and international vehicle volume were offset by lower U.S. military vehicle revenue, including the termination of the M10 Booker program, and unfavorable program mix.
- Technologies: Revenue increased 4.1% to $3.62 billion, led by $112 million of additional C5ISR solutions revenue and $31 million of additional IT services revenue. Operating earnings rose 2.1% to $339 million, but margin narrowed 20 basis points to 9.4% because of program mix.
- Demand environment: Management cited elevated demand for munitions, submarines and international military vehicles, while noting continued pressure on skilled labor and supply chains as capacity expands.
Cash and capital deployment
- Cash conversion: Operating cash flow was $1.88 billion in the quarter, equal to 162% of net earnings. Free cash flow was $1.65 billion after $234 million of capital expenditures.
- Year-to-date cash flow: Six-month operating cash flow was $4.04 billion versus $1.45 billion a year earlier, while free cash flow was $3.60 billion versus $1.11 billion. Working-capital benefits included a $1.17 billion increase in customer advances and deposits.
- Balance sheet: Cash ended at $4.33 billion, up from $2.33 billion at year-end 2025. Total debt declined to $7.52 billion from $8.01 billion, leaving net debt of $3.18 billion.
- Deployment: The company paid $429 million of dividends, invested $234 million in capital expenditures and reduced debt by $498 million during the quarter. It expects to repay $500 million of notes maturing in August using cash on hand.
