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GD

GENERAL DYNAMICS CORP (GD)·Q2 2025 Earnings Summary

Executive Summary

  • GD delivered a clean beat: Q2 revenue $13.041B (+8.9% y/y) and diluted EPS $3.74 (+14.7% y/y), exceeding S&P Global consensus on both EPS and revenue; operating margin expanded 30 bps to 10.0% .
  • Orders surged to $28.3B with companywide book-to-bill of 2.2x; backlog climbed to $103.7B (+14% y/y), led by Marine Systems awards; Aerospace posted a 1.3x book-to-bill .
  • Guidance raised: company revenue to ~$51.2B (from $50.3B), EPS to $15.05–$15.15 (from $14.75–$14.85); Aerospace revenue up, margin slightly lower; Marine revenue and margin raised; Combat margin maintained; Technologies unchanged .
  • Cash generation strong: $1.598B cash from operations and $1.400B free cash flow in Q2; net debt trimmed to $7.189B; debt-to-equity improved to 36.9% .

What Went Well and What Went Wrong

What Went Well

  • Robust demand and awards: “We had a huge quarter with over $28 billion of orders…book-to-bill ratio of 2.2 to 1,” with Marine and Aerospace as drivers .
  • Aerospace execution and deliveries: 38 Gulfstream deliveries (15 G700s) with improving cadence; G800 initial deliveries to commence in Q3; services portfolio remains a key margin lever despite variability .
  • Backlog strength: Backlog reached $103.7B and total estimated contract value hit $161.2B, “an all-time high” .

What Went Wrong

  • NASCO EAC adjustment: Marine margin declined sequentially due to “an unfavorable EAC adjustment at NASCO” following flood and subsequent rework; expected resolution by year-end .
  • Technologies award cadence: GDIT highlighted slower-than-normal adjudications and protests, constraining near-term revenue ramp despite healthy backlog and pipeline .
  • Services softness: Aerospace services saw pressure in Q2; management noted mix and volume variability without a clear algorithmic margin predictor .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$11.976 $12.223 $13.041
Diluted EPS ($)$3.26 $3.66 $3.74
Operating Earnings ($USD Billions)$1.156 $1.268 $1.305
Operating Margin (%)9.7% 10.4% 10.0%
Net Earnings ($USD Billions)$0.905 $0.994 $1.014

Actual vs S&P Global Consensus (Q2 2025)

MetricActualConsensusSurprise
Revenue ($USD Billions)$13.041 $12.378*+$0.663B; +5.4% (bold beat)
Diluted EPS ($)$3.74 $3.552*+$0.19 (bold beat)
EBITDA ($USD Billions)$1.548 exhibits; press-release exhibits show operating earnings and related, EBITDA referenced via estimates]$1.462*+$0.086B; +5.9% (bold beat)
  • Values retrieved from S&P Global.*

Segment Performance

SegmentRevenue ($USD Billions)Revenue ($USD Billions)Revenue ($USD Billions)Operating Margin (%)Operating Margin (%)Operating Margin (%)
Q2 2024Q1 2025Q2 2025Q2 2024Q1 2025Q2 2025
Aerospace$2.940 $3.026 $3.062 10.9% 14.3% 13.2%
Marine Systems$3.453 $3.589 $4.220 7.1% 7.0% 6.9%
Combat Systems$2.288 $2.176 $2.283 13.7% 13.4% 14.2%
Technologies$3.295 $3.432 $3.476 9.7% 9.6% 9.6%

KPIs and Balance/Cash Metrics

KPIQ2 2024Q1 2025Q2 2025
Company Book-to-Bill (x)0.9x Q4 ref; Q2 segment BB varies 0.8x Aerospace; Technologies 1.1x 2.2x company; 1.3x Aerospace
Gulfstream Deliveries (units)37 36 38 (incl. 15 G700)
Backlog ($USD Billions)$91.3 $88.7 $103.7
Cash from Operations ($USD Billions)$0.814 (Q2 2024 table) ($0.148) (use Q1 table) $1.598
Free Cash Flow ($USD Billions)$0.613 ($0.290) $1.400
Net Debt ($USD Billions)$7.348 (FY’23) $8.367 $7.189
Debt-to-Equity (%)43.5% (FY’23) 43.2% 36.9%

Guidance Changes

MetricPeriodPrevious Guidance (Jan 29)Current Guidance (Jul 23)Change
Company RevenueFY 2025~$50.3B ~$51.2B Raised
Company Operating MarginFY 202510.3% 10.3% Maintained
Company EPSFY 2025$14.75–$14.85 $15.05–$15.15 Raised
Aerospace RevenueFY 2025~$12.650B; deliveries 150 ~$12.9B; deliveries 150–155 Revenue/Deliveries raised
Aerospace Operating MarginFY 202513.7% 13.5% Lowered (mix)
Marine RevenueFY 2025~$15.0B ~$15.6B Raised
Marine Operating MarginFY 20256.8% 7.0% Raised
Combat RevenueFY 2025~$9.1B ~$9.2B Slightly raised
Combat Operating MarginFY 202514.5% 14.5% Maintained
Technologies Revenue/MarginFY 2025$13.5B; margin ~9.2% Unchanged Maintained
Tax Rate (Effective)FY 2025~17.5% ~17.5% (Q2: 17.7%) Maintained
Interest ExpenseFY 2025~$330M implied by Q4 call context~$330M Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Baseline)Q1 2025 (Update)Q2 2025 (Current)Trend
Aerospace deliveries and mixG700 deliveries below plan; causes identified; margin compression; planning conservative for 2025 36 deliveries; G800 certified; confidence in delivery plan; 0.8x book-to-bill 38 deliveries (15 G700); G800 initial deliveries in Q3; services down; margins stable sequentially in Q3, stronger in Q4 Improving cadence; near-term mix pressure
Marine supply chain/productivityInflation and quality escapes; funding via CR and industrial base; margin 6.5% FY 2024 Growth +7.7% y/y; continued supply issues; strike authorization among draftsmen; working with Navy/admin 22.2% y/y revenue growth; NASCO EAC hit; backlog +38% to ~$53B; continuing workarounds and throughput initiatives Backlog robust; productivity gradually improving
Technologies award cadenceRecord awards; 1.1x book-to-bill in 2024; strong pipeline Solid orders; but sluggish adjudications; active dialogue with government on savings/outcomes Unchanged FY guidance due to market fluidity; protests impacting wins; backlog up y/y Growth path intact; cadence uneven
Tariffs/macroPlanning to manage impacts; manufacturing footprint flexibility; exports supported Cautious customer tone; pipeline strong; defense impact minimal Aerospace demand resilient; bonus depreciation helps; no single macro driver cited Monitoring; limited impact to defense
Backlog/ordersBacklog $90.6B; 1.0x FY book-to-bill Backlog $88.7B; orders >$10B Backlog $103.7B; orders $28.3B; total est. contract value $161.2B Strong acceleration

Management Commentary

  • CEO assessment: “In my view, this was a wonderful quarter that exceeded our expectations and led to a very good first half of the year.”
  • Aerospace cadence and margin trajectory: “G800 deliveries are about to commence… G700 delivery cadence and operating margin are both improving.”
  • Orders/backlog and cash: “We had a huge quarter with over $28 billion of orders… free cash flow was $1.4 billion for the quarter” .
  • Marine outlook: “Backlog increased… largely the result of a contract for two Block 5 Virginia-class ships… funds to support shipyard productivity, wage increases, and additional training programs.”

Q&A Highlights

  • Aerospace margin path: High-teens margins require both mix and volume; G800 margins expected to ramp with lots; services margin variability acknowledged .
  • NASCO EAC: Flood-related disruption from two prime lines to one; rework drove EAC; expected resolution by year-end, restoring lines .
  • Technologies cadence: GDIT navigating slower adjudications and protests; holding FY guidance due to uncertainty in transactional encryption demand timing .
  • Marine industrial base: Navy/Congress funding to stabilize suppliers; Electric Boat throughput improving, with continued workarounds for late/quality-challenged parts .

Estimates Context

  • EPS and revenue beats: EPS $3.74 vs $3.552* (+$0.19), revenue $13.041B vs $12.378B* (+$0.663B; +5.4%); EBITDA above consensus by ~$0.086B* .
  • Estimate breadth: EPS estimates (n=18*), revenue estimates (n=19*) indicate broad coverage; upside likely drives near-term upward revisions.
  • Values retrieved from S&P Global.*

Actual vs Consensus Detail

MetricActual Q2 2025Consensus Q2 2025Surprise
Revenue ($USD Billions)$13.041 $12.378*+$0.663B; +5.4%
Diluted EPS ($)$3.74 $3.552*+$0.19
EBITDA ($USD Billions)$1.548 $1.462*+$0.086B; +5.9%
EPS - # Estimates—18*—
Revenue - # Estimates—19*—
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • The quarter’s broad-based beat and raised EPS guidance ($15.05–$15.15) provide positive estimate momentum; orders/backlog at record levels are a multi-year visibility catalyst .
  • Marine Systems growth and backlog expansion underpin medium-term revenue, while productivity and supply chain stabilization are key to margin lift (watch NASCO EAC normalization) .
  • Aerospace: delivery cadence improving; G800 entry supports demand; mix-driven margin pressure near-term, but medium-term trajectory intact with services and lot progression (monitor services recovery) .
  • Technologies: guidance held amid adjudication volatility; backlog and pipeline support steady execution; watch government outcomes-based contract mix shifts .
  • Cash generation re-accelerated (Q2 FCF $1.4B), net leverage improving; dividend maintained at $1.50 per share with payment schedule announced (Nov 14, 2025) .
  • Near-term trading: stock likely sensitive to Marine productivity updates, Gulfstream delivery cadence/mix, and government award cadence; medium-term thesis anchored in backlog conversion, margin normalization, and improved operating leverage .

Additional Context and Catalysts

  • Electric Boat $1.85B long-lead and preliminary construction materials award supports submarine production ramp and supplier capacity investment .
  • Bath Iron Works additional DDG-51 option exercised, reinforcing surface combatant throughput pipeline .
  • Dividend declared: $1.50 per share payable Nov 14, 2025 (record Oct 10, 2025) .

Cross-References and Notes

  • Q1 2025: Revenue $12.223B; EPS $3.66; company backlog $88.7B; Aerospace 36 deliveries; 0.8x Aerospace book-to-bill .
  • Q4 2024: Revenue $13.338B; EPS $4.15; FY 2024 revenue $47.716B; FY backlog $90.6B .
  • Q2 2025 exhibits provide detailed segment splits, backlog by segment, balance sheet, cash flow, and non-GAAP reconciliations .