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GENERAL DYNAMICS CORP (GD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered revenue of $12.23B (+13.9% y/y) and diluted EPS of $3.66 (+27.1% y/y); operating margin expanded 70 bps to 10.4% and Aerospace was the standout with +45.2% revenue and +210 bps margin expansion to 14.3% .
  • Results beat Wall Street consensus: EPS beat by ~$0.19 and revenue beat by ~$0.28B; management noted a ~$0.16 EPS beat versus consensus on the call* .
  • Backlog ended at $88.66B (down from $90.60B in Q4); free cash flow was -$290M on working capital build, with management guiding for cash to improve through the year .
  • Catalysts: G800 earned FAA/EASA certifications with better-than-projected performance (range and speed), supporting Gulfstream demand; defense award flow remains healthy (e.g., Virginia-class long-lead funding and additional awards shortly after quarter-end) .

What Went Well and What Went Wrong

What Went Well

  • Aerospace profitability inflected: operating margin rose to 14.3% (+210 bps y/y) on 36 deliveries (including 13 G700) and stronger services; management: “Aerospace did particularly well… and we are improving our G700 delivery cadence and operating margin” .
  • Technologies orders and backlog momentum: book-to-bill of 1.1x in Q1 and strong pipeline/win rates; focus areas include AI, cloud, cyber and quantum solutions driving demand .
  • Defense outlook firm: Combat Systems demand robust in Europe; accelerating Abrams modernization and munitions capacity ramp (new projectile facility in TX and L&A&P in AR) .

What Went Wrong

  • Marine Systems still hampered by supply chain delays/quality issues; operating margin flat at 7.0% in Q1; management flagged continued out-of-sequence work and quality escapes impacting cost and schedule .
  • Company-wide book-to-bill <1x in Q1 due to strong revenue growth and timing; backlog dipped sequentially to $88.66B .
  • Cash usage: free cash flow -$290M on working capital build across Aerospace (inventory ahead of G800 entry) and defense units; net debt rose to $8.37B .

Financial Results

Headline versus Prior Periods and Consensus

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$11.67 $13.34 $12.22
Diluted EPS ($)$3.35 $4.15 $3.66
Operating Margin (%)10.1% 10.7% 10.4%
Revenue Consensus Mean ($USD Billions)$11.76*$12.82*$11.94*
EPS Consensus Mean ($)$3.51*$4.03*$3.48*

Values marked with * retrieved from S&P Global.

Segment Performance

SegmentRevenue ($USD Billions)Q3 2024Q4 2024Q1 2025
Aerospace$2.48 $3.74 $3.03
Marine Systems$3.60 $3.96 $3.59
Combat Systems$2.21 $2.40 $2.18
Technologies$3.38 $3.24 $3.43
SegmentOperating Margin (%)Q3 2024Q4 2024Q1 2025
Aerospace12.3% 15.6% 14.3%
Marine Systems7.2% 5.1% 7.0%
Combat Systems14.7% 14.9% 13.4%
Technologies9.7% 9.8% 9.6%

KPIs

KPIQ3 2024Q4 2024Q1 2025
Backlog ($USD Billions)$92.63 $90.60 $88.66
Free Cash Flow ($USD Millions)$1,215 $1,805 -$290
Net Debt ($USD Billions)$7.17 $7.07 $8.37
Gulfstream Deliveries (Units)28 total; 24 LC; 4 MC 47 total; 42 LC; 5 MC 36 total; 30 LC; 6 MC
Aerospace Book-to-Bill (x)1.0x 1.0x 0.8x

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4 2024 call)Current (Q1 2025)Change
Company RevenueFY 2025~$50.3B “We never update guidance at this time” (no change signaled) Maintained
Company Operating MarginFY 2025~10.3% (+20 bps y/y) No update Maintained
Company EPSFY 2025~$14.75–$14.85 No update Maintained
Aerospace RevenueFY 2025~$12.65B; deliveries ~150; margin ~13.7% (strong Q1, weaker Q2/Q3, strong Q4) No update; Q1 remarks reiterated cadence/mix Maintained
Combat SystemsFY 2025Rev ~$9.1B; margin ~14.5% No update Maintained
Marine SystemsFY 2025Rev ~$15B; margin ~6.8% No update; supply chain still a watch item Maintained
TechnologiesFY 2025Rev ~$13.5B; margin ~9.2% No update; mix shift and customer dialogues Maintained
Effective Tax RateFY 2025~17.5% Q1 effective tax rate 17.2% (consistent with full-year guidance) Maintained
CapExFY 2025~2% of revenue Q1: $142M; expect increase through the year Maintained
FCF ConversionFY 2025~80–85% of net income Q1: -$290M FCF; trajectory improving through year Maintained
DividendCurrent$1.50 per share declared (28th consecutive annual increase) Paid $383M in Q1 dividends Maintained

Earnings Call Themes & Trends

TopicQ3 2024 MentionsQ4 2024 MentionsQ1 2025 Current PeriodTrend
Aerospace supply chain and G700 rampDeliveries increased; margin 12.3% Detailed causes of G700 delivery shortfall and corrective actions G700 margins improving; G700 cadence/quality better; G800 certified; cautious on tariffs Improving execution; new product strength
Marine Systems supply chain/industrial baseStrong revenue; backlog high Supply chain delays/quality escapes impacting margins; CR funds to support Continued delays/quality issues; government engagement stepped up Gradual stabilization; needs continued support
Technologies bookings and customer cost initiativesSolid orders Record awards; digital acceleration success 1.1x book-to-bill; active dialogue on savings and contract structures (fixed-price/outcome-based) Healthy demand; evolving contract mix
Tariffs/macroLimitedNoted as risk across segmentsManagement declines specifics; pipeline remains strong; U.S. and Middle East demand solid Watch item; caution but no material impact yet
Government procurement/Shipbuilding office——Positive engagement; potential to improve throughput/productivity; acquisition reform supportive Constructive policy backdrop
R&D/product performance—Gulfstream product ramp; margin path discussed G800 certified with better-than-expected performance characteristics (range/speed) Product cycle tailwind

Management Commentary

  • “We have obviously opened the year with a very strong quarter… we also [indiscernible] consensus by $0.16 in the quarter” .
  • “Aerospace did particularly well… 36 deliveries… improved margins on our G700 deliveries… increasingly confident that we can meet this year’s delivery plan” .
  • “We continue to be impacted by delays and quality problems in the supply chain… we have more work to do, but we have made progress” (Marine Systems) .
  • “We are in a good, healthy active discussion [with customers]… shifting to fixed price outcome-based contracts we very much welcome” (Technologies) .
  • “We do not know the scope and breadth of the tariff issue… anything I might say… will be sheer speculation” .

Q&A Highlights

  • Technologies: Active engagement to deliver savings for government customers; potential longer-term margin opportunity in fixed-price outcome-based contracts; caution about mission risk if government workforce reductions accompany insourcing .
  • Marine funding: Efforts to get supplemental CR funds under contract; industrial base funding flows to suppliers; supply chain stabilization remains key .
  • Aerospace demand/tariffs: Pipeline remains strong; U.S. and Middle East robust; no evidence of accelerated deliveries to avoid tariffs; margins expected to fluctuate with mix .
  • Capital deployment: ~$600M Q1 repurchases at ~$252/share; watch rates for refinancing; slightly higher interest expense expected .
  • Combat: European demand strong; accelerating Abrams modernization; Stryker funding under CR was reduced vs prior plans .

Estimates Context

  • Q1 2025 vs consensus: EPS $3.66 vs $3.48*; Revenue $12.23B vs $11.94B*; ~+$0.19 EPS and +$0.28B revenue beats. Management referenced a ~$0.16 EPS beat on the call* .
  • Trailing context: Q4 2024 EPS $4.15 vs $4.03* and revenue $13.34B vs $12.82B* (beats); Q3 2024 EPS $3.35 vs $3.51* and revenue $11.67B vs $11.76B* (miss). Values marked with * retrieved from S&P Global.
MetricQ3 2024Q4 2024Q1 2025
Primary EPS Consensus Mean ($)3.506*4.030*3.475*
Revenue Consensus Mean ($USD Billions)11.761*12.817*11.944*
# of EPS Estimates20*19*20*
# of Revenue Estimates20*20*20*

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Strong start to 2025 with broad-based y/y growth and margin expansion; Aerospace led with 14.3% margin and G700/G800 momentum, while defense segments posted improving earnings .
  • Beat vs consensus on both EPS and revenue; the pattern since Q3 shows improving execution into Q4/Q1—supports modest upward estimate revisions if cadence holds* .
  • Working capital build weighed on Q1 cash; management expects cash to turn modestly positive in Q2 and improve in 2H—watch quarterly FCF trajectory against the 80–85% full-year conversion target .
  • Marine Systems remains a margin recovery story; supply chain fixes and industrial base funding are catalysts for gradual improvement—contracting of CR funds and Block VI progression are milestones to monitor .
  • Technologies shows durable demand with 1.1x book-to-bill and strong pipeline; evolving contract mix (fixed-price, outcome-based) can sustain growth with manageable margin pressure .
  • G800 certification (with enhanced performance) and steady Gulfstream demand in U.S./Middle East are supports for Aerospace revenue/booking cadence; monitor tariff developments but management sees limited defense impact so far .
  • Capital deployment remains shareholder-friendly (dividend increase and buybacks), balanced with near-term debt refinancing—slightly higher interest expense expected; buyback opportunism continues .

Notes: Values marked with * retrieved from S&P Global.