General Dynamics NYSE: GD reported higher second-quarter revenue, earnings and cash flow, led by growth in its Aerospace and Marine Systems businesses, and raised its full-year earnings outlook.
The company reported second-quarter diluted earnings per share of $4.24 on revenue of $14.1 billion. Revenue increased 8.1% from the prior-year quarter, while operating earnings rose nearly 12% to $1.46 billion and net earnings climbed 14.4% to $1.16 billion. Companywide operating margin expanded 40 basis points to 10.4%.
Chairman and CEO Phebe Novakovic said the company exceeded consensus expectations by $0.28 per share, citing higher revenue, operating earnings and operating margins than expected by the sell side. For the first half, General Dynamics generated $27.6 billion in revenue, up 9.1% year over year, while operating earnings rose 11.9% to nearly $2.9 billion.
Record Backlog and Cash Generation
Chief Financial Officer Kim Kuryea said General Dynamics generated $1.9 billion in operating cash flow during the quarter and more than $4 billion in the first half. Free cash flow totaled $1.6 billion in the second quarter and $3.6 billion through six months, producing a first-half cash conversion rate above 150%.
The company now expects full-year free-cash-flow conversion of approximately 105% of net income. Kuryea said the second half will be lighter than the first because of higher capital expenditures, a planned approximately $500 million pension contribution, more than $500 million of expected cash-tax payments, and the working down of advance payments on new European Land Systems programs.
Capital expenditures were $234 million in the quarter and $437 million in the first half. General Dynamics continues to expect capital expenditures to amount to 3.5% to 4% of annual sales, with spending set to rise meaningfully in the second half as it invests in shipyard capacity and production.
Orders came in at just under $20 billion, producing a companywide book-to-bill ratio of 1.4-to-1. Backlog reached a record $136.5 billion, up 32% from a year earlier, with record backlog reported in each operating segment. Total estimated contract value, including options and indefinite-delivery, indefinite-quantity contracts, was $186.9 billion.
- Aerospace book-to-bill was 1.5-to-1.
- Combat Systems book-to-bill was 2.1-to-1.
- Technologies book-to-bill was 1.1-to-1.
- All four operating segments recorded book-to-bill above 1-to-1.
General Dynamics ended the quarter with approximately $4.3 billion in cash and net debt of $3.2 billion, down $1.2 billion from the prior quarter. During the period, it paid about $430 million in dividends, repurchased approximately $100 million in stock to offset dilution, and repaid $500 million of notes that matured in June. The company expects to repay another $500 million of notes due in August with cash on hand.
Aerospace and Marine Drive Growth
Aerospace revenue rose 15.1% to $3.5 billion, supported by three additional aircraft deliveries and higher service revenue at Gulfstream and Jet Aviation. The segment delivered 41 aircraft during the quarter and reported operating earnings of $510 million, up $107 million from a year earlier. Its operating margin increased 130 basis points to 14.5%.
President Danny Deep said Gulfstream and Jet Aviation improved operating earnings across service categories. He said productivity has improved on new aircraft types, though second-quarter segment margins were lower sequentially because of a less favorable business mix and modest increases in general and administrative expense and research and development.
Novakovic said Aerospace saw active interest across all models in the U.S. and Asia, while customers in the Middle East showed some caution but remained active in the sales pipeline. The company said it expects to deliver approximately 160 Gulfstream aircraft in 2026.
Marine Systems revenue increased 10.4%, driven primarily by the Columbia-class and Virginia-class submarine programs, with contributions from NASSCO and Bath Iron Works. Segment operating earnings increased 17.5%, while operating margin improved 40 basis points.
Deep said Bath Iron Works accelerated delivery of its most recent DDG 51 destroyer by almost three months compared with plan. At Electric Boat, first-half hours earned on the Columbia program increased 37% from a year earlier, while sequence-critical material deliveries increased 65% in the second quarter.
The company said it is making progress in accelerating shipbuilding production and has seen broad supply-chain improvement, although single-source suppliers of large, complex components remain potential pacing constraints. Deep added that workforce recruitment and retention at the shipyards has met the company’s needs, with help from the Navy.
Combat and Technologies Outlook
Combat Systems reported revenue of $2.3 billion, up marginally from a year earlier, while operating earnings fell $6 million to $318 million. Operating margin declined 30 basis points to 13.9%, largely due to business mix. Revenue gains at Ordnance and Tactical Systems and European Land Systems were partly offset by lower Land Systems revenue.
Management pointed to strong demand from U.S. allies, particularly for international vehicles, combat support vehicles and munitions. Novakovic said European Land Systems is expected to continue delivering double-digit growth, while Ordnance and Tactical Systems is benefiting from artillery, missile-component and 155mm ammunition demand.
Technologies revenue rose 4.1% to $3.6 billion, with Mission Systems leading growth. Operating earnings increased 2.1% to $339 million, though margin declined 20 basis points to 9.4%. Deep said Mission Systems’ international portfolio has increased more than 35% since 2024. At GDIT, the company cited prolonged procurement cycles but said it submitted and won more contracts under Other Transaction Authorities during the first half than in all of 2025.
2026 Guidance Raised
General Dynamics raised its 2026 diluted EPS outlook to a range of $16.80 to $16.90, from its prior range of $16.45 to $16.55. The company forecast annual revenue of about $55.7 billion and an operating margin of 10.5%.
- Aerospace revenue is expected to be about $13.8 billion, with a 14.7% operating margin.
- Combat Systems revenue is expected to be about $9.8 billion, with a 13.8% operating margin.
- Marine Systems revenue is expected to be about $18 billion, with a 7.4% operating margin.
- Technologies revenue is expected to be about $14.1 billion, with a 9.4% operating margin.
Novakovic said the company entered the second half with confidence following what she characterized as a strong first half, supported by its expanding backlog, improving productivity and continued demand across its portfolio.
About General Dynamics (NYSE:GD)
General Dynamics is a major American aerospace and defense contractor that designs, manufactures and supports a broad range of products and services for government and commercial customers worldwide. Headquartered in the United States (Reston, Virginia), the company supplies platforms and systems used by armed forces, civil authorities and private operators across multiple domains including air, land, sea and cyber.
Its principal activities span several operating businesses: a business aviation unit that develops and supports Gulfstream business jets; land systems that produce armored combat vehicles and related logistics and sustainment services; marine systems that design and construct submarines and surface ships for navies; and mission systems and information technology operations that provide command-and-control, communications, cybersecurity and systems-integration services.
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