GENERAL DYNAMICS (GD)·Q4 2025 Earnings Summary
General Dynamics Beats, Stock Falls 4% as Guidance Disappoints Despite Record $118B Backlog
January 28, 2026 · by Fintool AI Agent
General Dynamics delivered a double beat in Q4 2025 but shares fell 4% as 2026 guidance underwhelmed investors. The defense giant reported revenue of $14.38B (+7.8% YoY) and EPS of $4.17, beating consensus on both metrics. Total backlog surged 30% to a record $118 billion, driven by Combat Systems' exceptional 4.3x book-to-bill in Q4.
"We beat analyst consensus for both the year and the quarter... Full year numbers are absolutely terrific. Revenue is up 10.1%, operating earnings are up 11.7%, net earnings are up 11.3%, and fully diluted EPS is up 13.4%." — Phebe N. Novakovic, Chairman and CEO
Despite the strong results, shares dropped from $366.62 to $352 (-4%) as investors focused on 2026 EPS guidance of $16.10-$16.20 and a 79% increase in CapEx to support shipyard capacity expansion.*
Did General Dynamics Beat Earnings?
Yes—GD beat on both revenue and EPS, extending its beat streak to 5 consecutive quarters.
Full-year 2025 delivered across the board:
Marine Systems and Aerospace led growth with revenue increases of 16.6% and 16.5% respectively, while operating earnings grew 25.9% at Marine and 19.3% at Aerospace.
Ask Fintool AI AgentWhat Did Management Guide for 2026?
Management provided detailed 2026 guidance that fell slightly below buy-side expectations:
Company-Wide 2026 Outlook:
Segment-Level Guidance:
Key guidance callouts from management:
- CapEx increasing to $2.1B+ (up 79% from 2025), primarily for Electric Boat shipyard investments
- Combat Systems revenue acceleration expected to ramp in 2027 as international programs move from engineering to production
- Aerospace margins expected to reach "mid to high teens" by 2027 as supply chain improves
- Interest expense rising to ~$340M due to refinancing $1B of maturing notes
- Tax rate expected to remain ~17.5%
What Drove the Record $118B Backlog?
Total backlog reached $118 billion, up 30% YoY. Total estimated contract value hit $179 billion, up 24%.
The surge was led by Combat Systems, which posted an extraordinary 4.3x book-to-bill in Q4 alone, and 2.1x for the full year.
Major Combat Systems awards in Q4:
- Germany: $4B+ for Eagle tactical vehicles
- Norway & UK: $600M for bridges
- Canada: $640M for light armored vehicles and logistics vehicles
- U.S.: Continued progress on M1E3 main battle tank acceleration
European Land Systems achieved over 4x book-to-bill in Q4 with more than $10 billion in new awards for the full year.
How Did Each Segment Perform?
Aerospace: Strong Demand, G800 Entering Service
Aerospace had a standout quarter for orders, with book-to-bill of 1.3x for the segment and 1.4x for Gulfstream aircraft alone—even as deliveries increased significantly. It was Gulfstream's second-best orders quarter since Q2 2008.
- Q4 Revenue: $3.79B (+1.2% YoY, +17.1% sequentially)
- Q4 Operating Earnings: $481M (down $104M YoY due to prior-year one-time items)
- FY Deliveries: 158 aircraft (22 more than 2024)
- FY Revenue: $13.1B (+16.5% YoY, after +30.5% in 2024)
Q4 margin analysis: The $104M YoY decline in operating earnings was driven by G600 ($75M less due to 3 fewer deliveries, tariffs, and prior-year settlements) and modest declines in G500 and services. However, G800 earnings "more than replaced" G650 earnings, and G700 margins improved despite 2 fewer deliveries.
"Our new airplanes are driving demand. We continue to come down our learning curve. The supply chain is improving, has a ways to go, but it's definitely better than it was." — Phebe Novakovic
Tariff impact: $41M in 2025, expected to be higher in 2026 but contemplated in margin guidance.
Combat Systems: International Explosion
Combat Systems delivered solid operating performance with the real story in order momentum:
- Q4 Revenue: $2.5B (+0.8% YoY, +12.6% sequentially)
- Q4 Operating Margin: 15.0% (up 10 bps YoY)
- Q4 Book-to-Bill: 4.3x
- FY Backlog: $27.2B (+60%), TEC of ~$42B
European Land Systems was the fastest grower, driven by tactical vehicle awards in Germany and armored vehicle orders across NATO allies. Revenue acceleration expected to ramp in 2027 as programs move from engineering/R&D into production.
Marine Systems: Submarine Productivity Accelerating
Marine Systems delivered exceptional revenue growth with margin expansion:
- Q4 Revenue: $4.8B (+21.7% YoY, +17.6% sequentially)
- Q4 Operating Margin: 7.2% (up 210 bps YoY)
- Q4 Operating Earnings: $345M (+72.5% YoY)
- FY Revenue: $16.7B (+16.6% YoY)
Electric Boat productivity up 13%: Management highlighted that submarine tonnage produced increased 13% year-over-year at Electric Boat, demonstrating the payoff from multi-year facility investments.
"The supply chain remains the gating item, and we have seen significant improvement in some areas, but we still have some suppliers and parts of the supply chain that are at risk." — Phebe Novakovic
Technologies: Steady Despite Difficult Market
Technologies delivered solid results despite headwinds from the long continuing resolution and DOGE contract reviews:
- Q4 Revenue: $3.24B (flat YoY)
- Q4 Operating Margin: 8.9% (down 80 bps YoY)
- FY Revenue: $13.5B (+2.6% YoY)
- Pipeline: ~$120B of qualified opportunities
Mission Systems completed its legacy program transition and is now focused on encryption, subsea warfare, and strategic deterrence—areas aligned with customer priorities.
Ask Fintool AI AgentHow Strong Is Cash Generation?
Free cash flow reached $3.96 billion in 2025, representing 94% of net income—up from 85% in 2024:
Management highlighted stronger-than-expected collections and inventory reductions at Gulfstream, with Combat Systems and Aerospace generating particularly strong Q4 cash.
2026 cash outlook: Targeting 100% FCF conversion despite CapEx increasing 79% to 3.5-4% of sales. The elevated investment is primarily for shipyard capacity expansion at Electric Boat.
How Did the Stock React?
GD shares fell 4.0% to $352 following the earnings release, despite the revenue and EPS beat.*
The negative reaction appears driven by:
- 2026 EPS guidance underwhelmed at $16.10-$16.20 vs. expectations closer to $16.50
- Elevated CapEx of 3.5-4% of sales (79% increase) signals near-term margin pressure
- Supply chain still a constraint despite productivity improvements
- Technologies margin decline of 30 bps in 2026 guidance
The stock has gained ~47% over the past 12 months, outperforming the S&P 500 Aerospace & Defense index, leaving valuations elevated heading into the print.*
Q&A Highlights
On Aerospace margin trajectory: Management confirmed mid-to-high-teens margins are "still reasonable for 2027" as the company executes backlog and continues down the learning curve on G700/G800.
On tariff mitigation: 2025 tariff impact was $41M. Pricing increases are possible but often lag cost increases. Tariffs are contemplated in 2026 margin guidance.
On capital deployment: Management emphasized continued investment in the business over buybacks: "Our strategy remains heavily invested in the business because it's justified, given the demand and the backlog." No comment on share repurchase plans.
On submarine contracts: Timing of new Columbia and Virginia-class contracts is "simply up to the government" and management doesn't have visibility on timing.
On munitions demand: The business runs 14-15% margins with operating leverage potential. Stores and inventories are low globally, supporting continued demand.
On AI/tech bubble impact on Gulfstream: No notable impact seen. "The demand is across the portfolio, very heavy in the Fortune 500, high net worth individuals, but there's no one particular segment that jumps out."
On battleship program: Bath Iron Works is participating in the design phase with other industry partners. "It's just recently announced, so I think it'll be quite some time in playing out... really at its beginning design phases."
On unmanned ground vehicles (UGVs): Management noted the U.S. Army is in a "period of transition" toward the most advanced systems including unmanned vehicles, Mobile Protected Firepower, and communications in GPS-denied environments. GD has made investments to support this growth.
Ask Fintool AI AgentKey Takeaways
- Double beat but stock down 4%: Revenue +4.5% and EPS +1.2% vs consensus, but guidance disappointed
- Record backlog: $118B (+30% YoY), driven by Combat Systems 4.3x Q4 book-to-bill
- International momentum: $4B+ Germany, $600M Norway/UK, $640M Canada awards in Q4
- Marine productivity improving: Electric Boat tonnage +13%, margins +210 bps in Q4
- 2026 guidance conservative: EPS $16.10-$16.20, CapEx rising 79% to support growth
- Supply chain still gating: Shipyard capacity improving but supplier constraints remain
*Values retrieved from S&P Global
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