General Dynamics (NYSE:GD) executives said the company closed 2025 with strong full-year growth, record backlog, and an outlook for higher revenue and earnings in 2026, while highlighting improved shipyard productivity, robust international demand in Combat Systems, and continued momentum at Gulfstream despite tariff and supply-chain headwinds.
Fourth-quarter results and full-year performance
Chairman and CEO Phebe Novakovic said the company reported fourth-quarter earnings of $4.17 per diluted share on $14.379 billion of revenue. Operating earnings were $1.452 billion and net earnings were $1.143 billion. Novakovic noted revenue was up 7.8% year over year and operating earnings rose 2%, while net income and EPS were “relatively flat” versus a particularly strong prior-year quarter that benefited from “significant one-time items” and unusually high margins.
For the full year 2025, management described results as “absolutely terrific,” with revenue up 10.1%, operating earnings up 11.7%, net earnings up 11.3%, and diluted EPS up 13.4%. Marine Systems and Aerospace led growth, with revenue increases of 16.6% and 16.5%, respectively, and operating earnings up 25.9% in Marine and 19.3% in Aerospace.
Aerospace: strong demand and product transition dynamics
In Aerospace, General Dynamics reported fourth-quarter revenue of $3.788 billion and operating earnings of $481 million. Revenue rose 1.2% year over year, but operating earnings declined by $104 million compared with the prior-year quarter, which management said had benefited from discrete positive items. Sequentially, Aerospace revenue rose 17.1% and operating earnings increased 11.9%.
For the year, Aerospace revenue reached $13.1 billion, up 16.5% from 2024, driven in large part by deliveries of 158 new aircraft (22 more than the prior year). Segment earnings were $1.75 billion, up 19.3%.
Novakovic characterized demand in the quarter as “strong…bordering on exceptional,” citing an Aerospace book-to-bill of 1.3x and Gulfstream aircraft book-to-bill of 1.4x, even as deliveries increased. She said the introduction and performance of the G700 and G800 in customer hands helped drive demand, and that interest was improving across models and geographies.
President Danny Deep attributed much of the year-over-year Aerospace earnings decline in the quarter to the G600 line, which was $75 million lower, due to three fewer deliveries, differences in liquidated damages and prior-year settlements, higher overhead, and tariffs that were not present in the fourth quarter of 2024. Deep said that adjusting for those items, G600 earnings and margin rates were similar between the periods. He also said the G800 more than replaced G650 earnings and that G700 margins are improving.
On the Q&A, management said Aerospace margin improvement is expected to continue, supported by pricing, efficiency, and lower overhead and R&D costs, while noting headwinds from tariffs and timing mismatches between supply-chain cost increases and pricing actions. Deep said tariff impacts at Gulfstream were $41 million in 2025 and are expected to be higher in 2026, but are contemplated in 2026 margin guidance. Management also indicated delivery capacity is constrained primarily by completion, final test, and delivery processes, and said its plan reflects what it is “quite comfortable” executing while absorbing recent growth and lifting margins.
Defense: order strength, shipyard productivity, and a challenged contracting environment
Combat Systems posted fourth-quarter revenue of $2.5 billion, up 0.8% year over year, and operating earnings of $381 million, up 7%, with a 15% operating margin. Sequentially, revenue and earnings grew 12.6% and 13.7%, respectively, with Novakovic calling out strength at OTS. For the year, revenue was $9.2 billion (up 2.8%) and earnings were $1.33 billion (up 4.3%).
The segment’s “real story,” Novakovic said, was orders. Combat Systems recorded a fourth-quarter book-to-bill of 4.3x and a full-year book-to-bill of 2.1x, lifting backlog to $27.2 billion and total estimated contract value to nearly $42 billion. Deep detailed several international awards, including:
- Germany: two awards totaling more than $4 billion for Eagle tactical vehicles
- Norway and the U.K.: $600 million for bridges
- Canada: $640 million for Light Armored Vehicles and additional logistics vehicles
Deep said the company expects some revenue growth in 2026 with acceleration into 2027 as European programs move from planning and engineering into production. Addressing munitions, Novakovic said inventories are low and need replenishment; she described munitions as a business that tends to run in the 14%–15% margin range, with variability tied to operating leverage and cost control. She also cited capacity steps, including sustained production of 36 rounds a month over the past year in Northeast Pennsylvania, the establishment of load pack and assembly capacity of 50,000 rounds a month, and increased propellant capacity.
Marine Systems delivered another quarter of outsized growth, with revenue of $4.8 billion, up 21.7% year over year, driven by submarine programs at Electric Boat. Operating earnings rose to $345 million, up 72.5%, with operating margin improving 210 basis points to 7.2%. Novakovic noted the prior-year quarter was Marine’s poorest operating earnings quarter in 2024, but said the latest result represented meaningful progress in submarine construction. For the year, Marine revenue was $16.7 billion (up 16.6%) and earnings were $1.18 billion (up 25.9%).
Deep said investments at Electric Boat have helped increase output, citing submarine tonnage produced up 13% year over year. He also pointed to ship-over-ship learning at Bath Iron Works and improving schedule variance trends at NASSCO. In response to analyst questions, management said supply chain constraints remain the primary gating item for submarine throughput, particularly among bottleneck sole-source suppliers, though it has seen improvement as the government invests in supply chain capacity. On future Columbia and Virginia submarine contracts, Novakovic said the company does not know timing and will update investors when it learns more.
Technologies posted fourth-quarter revenue of $3.24 billion, roughly flat year over year, and operating earnings of $290 million, down $29 million on an 80 basis point margin decline. For the year, revenue was $13.5 billion (up 2.6%) and earnings were $1.28 billion (up 1.3%). Novakovic said the businesses performed well in a “difficult market,” citing impacts from a long continuing resolution and contract scrutiny by the Department of Government Efficiency that slowed contracting earlier in the year. Still, Technologies posted total orders of $15.9 billion, with book-to-bill of 0.9x in the quarter and 1.2x for the year, ending with backlog of $16.7 billion and total estimated contract value of $49.9 billion. Deep said a qualified opportunity pipeline near $120 billion supports the forward outlook, and that Mission Systems has completed its transition away from legacy programs.
Backlog, cash flow, and 2026 guidance
CFO Kim Kuryea said overall order activity was a highlight in 2025, with a company-wide book-to-bill of 1.5x for the year even as revenue grew 10%. She said the company ended 2025 with a record total backlog of $118 billion, up 30% year over year, and record total estimated contract value of $179 billion, up 24%. Kuryea added that each defense segment ended the year at record levels for both metrics, and Aerospace ended at levels “not seen since the announcement of the G650 in 2008.”
On cash, Kuryea reported fourth-quarter operating cash flow of $1.6 billion, bringing 2025 operating cash flow to $5.1 billion, about $1 billion higher than 2024. Free cash flow was “just shy of” $4 billion for 2025, producing a 94% cash conversion rate. Capital expenditures totaled $609 million in the fourth quarter and $1.2 billion for the year, up nearly 30% from 2024. The company also paid $490 million in the quarter to purchase assets that had been under lease. Kuryea said year-end cash was $2.3 billion, and net debt was $5.7 billion, down $1.4 billion from 2024.
Looking to 2026, management guided to free cash flow conversion returning to its goal of 100% of net income, supported by operating cash flow while investment levels rise. Kuryea said 2026 capital expenditures are expected to increase by more than $900 million, or 79%, to 3.5%–4% of sales, with a significant portion tied to shipyard investment. She also noted $1 billion of notes due in 2026, with the plan assuming refinancing, and forecast interest expense rising to approximately $340 million under that assumption. The company’s 2025 effective tax rate was 17.5%, and Kuryea said 2026 is expected to be similar.
For 2026 operations, Novakovic provided segment outlooks that roll up to company guidance of $54.3 billion to $54.8 billion in revenue, operating margin of 10.4% (up 20 basis points from 2025), operating earnings around $5.7 billion at the midpoint, and EPS of $16.10 to $16.20. She emphasized that the EPS forecast does not include any capital deployment and said the company remains focused on execution across the 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.
