GD
GENERAL DYNAMICS CORP (GD)·Q3 2025 Earnings Summary
Executive Summary
- Q3 2025 was strong: revenue $12.91B (+10.6% YoY), diluted EPS $3.88 (+15.8% YoY), operating margin 10.3% (+20 bps YoY, +30 bps QoQ). Robust cash generation ($2.11B CFO; $1.90B FCF) and record orders/backlog (orders $19.3B; book-to-bill 1.5x; backlog $109.9B; total est. contract value $167.7B) .
- Results beat Wall Street: EPS beat by ~$0.16* and revenue beat by ~$0.37B*; management characterized an ~$0.18 EPS beat on higher revenue and modestly better margins .
- Management raised FY EPS guidance to $15.30–$15.35 (from $15.05–$15.15) and reiterated revenue ~$52B and operating margin ~10.3%, while flagging government shutdown risks to cash flow visibility .
- Aerospace was the standout (revenue +30.3% YoY, margin +100 bps YoY), with 39 Gulfstream deliveries (13 G700; first 3 G800s; no G650ER), and strong North America demand and orders (Aerospace book-to-bill 1.3x) .
What Went Well and What Went Wrong
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What Went Well
- Aerospace strength: “Aerospace performed very well… revenue $3.2B and operating earnings $430M, with a 13.3% operating margin” and 39 aircraft delivered including G700 and G800; order interest accelerated, led by North America .
- Orders/backlog: “Robust order momentum continued… yielding record backlog,” with company book-to-bill 1.5x; defense segments 1.6x; Aerospace 1.3x .
- Cash flow: $2.11B operating cash and $1.90B FCF in Q3; CFO: “Our business units really outperformed our cash flow generation estimates… driven by solid cash collections” .
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What Went Wrong
- Government shutdown uncertainty: CFO warned of unclear timing of cash impacts and re-entered commercial paper for liquidity; tax rate outlook ~17.5% maintained amid uncertainty .
- Marine supply chain fragility still constraining margins; improvements underway but “single largest challenge” remains ramping the industrial base for Columbia-class .
- Technologies segment revenue -1.6% YoY despite strong orders; backlog up but timing of awards/adjudications remains a headwind .
Financial Results
Segment Revenues ($USD Billions):
Segment Operating Margins %:
KPIs and Operating Metrics:
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “In short, we had a superb quarter from my perspective.” – Phebe Novakovic (Chairman & CEO) .
- “Our business units really outperformed our cash flow generation estimates for the quarter, driven by solid cash collections.” – Kimberly Kuryea (CFO) .
- “It is interesting to observe that our slower growing segments in more recent periods have enjoyed very robust book-to-bills this quarter and year to date.” – Phebe Novakovic .
- “The single largest challenge [for Columbia] has been the supply chain… ramping from low-rate production to quintupling that production.” – Phebe Novakovic .
- “On a company-wide basis, we see annual revenue of around $52 billion and margins of around 10.3%. … we are increasing our EPS forecast to between $15.30 to $15.35.” – Phebe Novakovic .
Q&A Highlights
- Aerospace orders and delivery cadence: Orders boosted by improving delivery cadence and new models; G800 led orders; rates will increase as demand/backlog grow; North America strongest region .
- Government shutdown: Not yet impacting cash collection, but contracting personnel furloughs delay awards; management taking prudent liquidity actions; impact grows with duration .
- Marine efficiency: Supply chain stabilization is the biggest driver of margin expansion; significant investments in robotics/automation/training; sequence-critical material up ~40% over two years .
- Combat outlook: International vehicle and munitions demand offset US vehicle headwinds; backlog ~$18.7B; book-to-bill ~2.0x in Q3; growth expected to accelerate .
- Technologies mix and backlog: Strong backlog growth with a 1.8x book-to-bill; shift toward differentiated defense electronics; GDIT investing in AI/cyber/zero trust .
Estimates Context
- Q3 beat: EPS by ~$0.16*, revenue by ~$$0.37B*, EBITDA by ~$$0.05B*. Management cited an EPS beat of ~$$0.18 .
- Revisions: Raised FY EPS guidance and stronger Q3 margin/FCF likely prompt upward tweaks to Q4 EPS/EBITDA; watch shutdown-related cash/timing risks .
Values retrieved from S&P Global.
Key Takeaways for Investors
- High-quality beat with improving margins and record backlog supports near-term estimate momentum; Aerospace strength and defense orders breadth are positive catalysts .
- Guidance raised despite macro uncertainty; monitor shutdown duration as the primary risk to cash timing and contract awards (particularly shorter-cycle businesses) .
- Aerospace mix shift to G700/G800 is progressing; supply chain stabilization and learning-curve benefits should drive margin expansion into 2026+ .
- Marine revenue growth remains robust; margin improvement hinges on supply chain throughput; large contract wins and industrial base funding are supportive .
- Technologies’ strong orders/backlog position portends better revenue trajectory after award cadence normalizes; differentiated electronics and AI/cyber capabilities well-placed .
- Cash generation exceeded expectations in Q3; FY FCF conversion guided to low 90% with higher Q4 CapEx/taxes; liquidity actions taken as precaution .
- Near-term trading: Positive skew from beat/raise and Aerospace momentum; headline risk from shutdown/contracting delays may inject volatility; medium-term thesis anchored by backlog depth and mix-driven margin expansion across segments .