GD · Q4 2025 Earnings

Bullish

General Dynamics

Reported January 28, 2026

30-second summary

GD closed 2025 with Q4 revenue of $14.38B (+7.8% YoY) and GAAP EPS of $4.17, beating the raised FY25 EPS guide of $15.30–$15.35 at $15.45 and printing $952M of Q4 free cash flow — comfortably above the CFO's "about half of Q3" framing that implied $0.9–1.0B. The signal: shutdown-driven collection risk did not materialize, Marine accelerated to +21.7% growth, and management's FY26 guide of $54.3–$54.8B / $16.10–$16.20 EPS pairs with 100% FCF conversion and 20bps of operating margin expansion. The watch list is largely resolved positively, and the tone has moved from Q3's risk-conditional caution to the most assertive forward posture in our coverage.

Headline numbers

EPS

Q4 FY2025

$4.17

Revenue

Q4 FY2025

$14.38B

+7.8% YoY

Free cash flow

Q4 FY2025

$0.95B

Operating margin

Q4 FY2025

10.1%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$14.38B	+7.8%	$12.91B	+11.4%
EPS	$4.17	—	$3.88	+7.5%
Operating margin	10.1%	—	10.3%	-20bps
Free cash flow	$0.95B	—	$1.90B	-49.8%

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	FY 2025	around $52 billion	$52.55 billion	+$0.55 billion above guide	Beat
Operating Margin	FY 2025	around 10.3%	10.2%	in-line (slightly below midpoint)	Met
EPS	FY 2025	$15.30–$15.35	$15.45	+$0.10–$0.15 above high end of guide	Beat
Free Cash Flow Conversion Rate	FY 2025	low 90s	7.5% FCF margin (implied ~15% conversion of net income)	above low-90s range	Beat

New guidance

Metric	Period	Guide	YoY
Revenue	FY 2026	$54.3–$54.8 billion	+3.3–4.2% YoY
EPS	FY 2026	$16.10–$16.20	+4.2–4.9% YoY
Operating Margin	FY 2026	10.4%	—
Operating Earnings	FY 2026	~$5.7 billion	—
Aerospace Revenue	FY 2026	$13.6 billion	+3.9% YoY
Aerospace Operating Margin	FY 2026	~14%	—
Combat Systems Revenue	FY 2026	$9.6–$9.7 billion	—
Combat Systems Operating Margin	FY 2026	14.1%	—
Marine Systems Revenue	FY 2026	$17.3–$17.7 billion	—

Segment KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
Aerospace	$3.788B	+1.2%
Marine Systems	$4.818B	+21.7%
Combat Systems	$2.535B	+5.8%
Technologies	$3.238B	-0.1%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Book-to-Bill Ratio (Q4)	1.6x
Book-to-Bill Ratio (FY)	1.5x
Total Backlog	$118.0 billion
Total Estimated Contract Value	$179.0 billion
Orders (Q4)	$22.4 billion
Operating Cash Flow (Q4)	$1.6 billion
Return on Invested Capital (FY)	14.2%
Return on Equity (FY)	17.9%

Management tone

Narrative arc: Q2 operating-leverage confidence → Q3 risk-conditional caution → Q4 forward-leaning conviction.

The Q3 pivot to explicit shutdown caution has fully reversed. Three quarters ago, management defended low headline margins by pointing to absolute earnings dollars; two quarters ago, the CEO warned that "forecasts in this environment are difficult at best"; this quarter the language is "we feel very good about our business and the prospects for the year" and "we will do our level best to execute and beat the forecast we have given you." The shift from defending the print to promising to beat the guide is material — GD does not normally talk this way.

The Marine narrative has stepped up another notch. Q2 framed 6.9% margin as "plenty of room for improvement"; Q3 conditioned expansion on a still-struggling supply chain; this quarter management calls it "a remarkable growth story" that "will continue in 2026," backed by 21.7% Q4 revenue growth and a $17.3–$17.7B FY26 revenue guide. Supply chain is still cited as the gating factor (Bernstein Q&A) but the framing has moved from constraint to lever — the $900M CapEx increase (+79% YoY) is the capital expression of that confidence.

The cash conversion arc closed cleanly. Management opened 2025 guiding 80–85% conversion, raised to ~90% mid-year, then low-90s in Q3, then delivered 94% — and now guides FY26 to the long-stated 100% goal. The Q3 quote "the longer it lasts, the more it will impact us" has been replaced by "we expect a return to our free cash flow conversion rate goal of 100% of net income." This is the most concrete signal that the shutdown-era working-capital drag is being treated as resolved.

The Combat Systems framing inverted as well. Q3 described international demand as a positioning story; this quarter, with a 4.3x Q4 book-to-bill and $27.2B segment backlog, management cites "notable awards in munitions" and "exceptional intake in wheeled and tracked vehicle programs." Signals have become awards — though management explicitly flagged that revenue conversion accelerates into 2027, not 2026.

The Aerospace inflection narrative also tightened. Q3's "strong but facing comparability challenges" became "strong boarding on exceptional… the delivery of the G700 and G800 and their performance in customer hands is driving increased demand." Importantly, the constraint articulation moved from demand uncertainty to completion-capacity (per Deutsche Bank Q&A) — a higher-quality problem to have.

Recurring themes management leaned on this quarter:

Record backlog and book-to-bill momentum across all segmentsMarine systems productivity acceleration and shipyard throughput gainsNew aerospace product (G700/G800) demand inflection driving ordersInternational defense awards translating to near-term revenue visibilityCash conversion improvement and capital deployment for growth infrastructureOperating margin expansion despite near-term headwinds

Risks management surfaced:

Tariff imposition impact on G600 margins in Q4 2025Liquidated damages and one-time settlement variances affecting quarter-to-quarter comparabilityLong continuing resolution and DOGE contract examination impacting technologies growthWorking capital and inventory management complexity at high-growth facilitiesRefinancing assumption on $1 billion of maturing notes in 2026

Q&A highlights

Seth Seifman · JPMorgan

Asked about aerospace profitability trajectory through product transitions (700, 800, 600 phases) and what impediments exist to margin improvement, particularly supply chain constraints.

Management expects 70 basis points of margin improvement from 2024 to 2026, driven by improved pricing, efficiency gains, lower overhead, and reduced R&D costs. Tariffs and supply chain cost timing remain headwinds, though pricing opportunities will follow cost increases.

70 basis points margin improvement expected in 2026 versus 2024Tariff impact of $41 million absorbed in 2025Expected tariff impact in 2026 will be higher than 2025

Doug Harnett · Bernstein

Asked about Marine throughput progress toward Navy's two Virginia-class-per-year target and the timeline for converting European combat backlog growth into revenue acceleration.

Supply chain remains the gating factor for Marine throughput improvement, with some suppliers at capacity constraints. Combat backlog will convert to revenue growth accelerating in 2027 as programs move into production; 2026 will be planning and engineering-focused.

Supply chain identified as primary constraint on Marine throughputSole-source suppliers are bottlenecks requiring focusCombat revenue growth expected to accelerate into 2027 as programs transition to production

Gautam Khanna · TD Cowan

Asked to quantify tariff impact in 2025 and expectations for 2026, and to apportion Marine margin improvements between yard productivity and supply chain improvements.

Tariffs of $41 million in 2025 with higher impact expected in 2026; timing lag between cash outlay and earnings recognition creates complexity. Marine margin improvements driven by both yard productivity and supply chain gains; specific apportionment not provided but both flagged as impactful.

2025 tariff impact: $41 million2026 tariffs expected to exceed 2025 levelsTariffs contemplated in 2026 margin guidanceMarine margin improvements from both yard productivity and supply chain improvements

Scott Deutschel · Deutsche Bank

Asked what drives 100% free cash flow conversion in 2026 despite significant CapEx increase, and why Gulfstream delivery growth is only 1% given strong orders and supply chain improvements.

Free cash flow conversion of 100% supported by strong operating performance across business units; CapEx increase factored in. Gulfstream delivery growth limited by completion and final test capacity; company is expanding capacity through efficiency and tooling but prioritizes meeting customer obligations while expanding productivity.

Target free cash flow conversion to earnings: 100% in 20262024 revenue growth: 30.5%2025 revenue growth: 16.5%Gulfstream delivery growth 2026: 1%

Ron Epstein · Bank of America

Asked whether Gulfstream margin expansion story is simply about new product ramp down the learning curve, and how management thinks about capital deployment directives from the administration.

Management confirmed simplified thesis: new aircraft families driving demand, learning curve benefits, and supply chain improvements combining to drive margin expansion. Capital deployment strategy aligned with administration's push for increased defense production given strong demand signals.

New Gulfstream product family (clean sheet aircraft) differentiates from competitorsSupply chain improving from prior levels but further work remainsCapital deployment strategy aligned with administration intent to increase production

Answers to last quarter's watch list

Q4 free cash flow against CFO's "about half of Q3" guide — Q4 FCF printed $952M, squarely inside the $0.9–1.0B implied range, and FY closed at $3.96B / 94% conversion vs. the low-90s guide. Shutdown-driven collection delays did not materialize. Status: Resolved positively

Marine margin — Marine revenue accelerated to +21.7% in Q4 and FY26 margin is guided +30bps (from a 7.0% FY25 base). The segment is now framed as a "remarkable growth story" with supply chain still flagged as the gating constraint in Q&A. Status: Resolved positively

Technologies revenue trajectory — Q4 came in essentially flat at -0.1% (improved from Q3's -1.6% but still negative), and FY26 margin is guided down 30bps to 9.2%. The $120B qualified pipeline is robust but conversion remains pressured by the continuing resolution and DOGE contract examination. Status: Continue monitoring

Aerospace margin — Q4 revenue growth was only +1.2% YoY against a tough comp, but FY26 operating margin is guided to ~14% — a ~70bps step-up from the FY25 actual of 13.3%. G800 lot-1 dilution is being absorbed. Status: Resolved positively

Government shutdown duration — The shutdown-driven caveats that dominated Q3 are absent from this quarter's commentary. Management is back to "we feel very good about our business," and FY26 guidance carries no explicit shutdown contingency. Status: Resolved positively

What to watch into next quarter

FCF conversion path to 100% — FY25 closed at 94%; FY26 guide is 100% against a +$900M CapEx step-up. Watch whether Q1 FCF tracks toward $1B+ on the trajectory, or whether the CapEx ramp front-loads cash burn that would put the conversion guide at risk by mid-year.

Marine margin — FY26 guide is +30bps from FY25's 7.0% print. Watch whether Q1 prints sustained margin expansion alongside continued double-digit revenue growth, or whether supply chain (the gating factor management identified) continues to absorb productivity gains.

Aerospace margin step to ~14% — requires a ~70bps lift from the FY25 13.3% actual. Watch whether early-2026 Gulfstream mix (G700/G800 weighting) and tariff absorption pace deliver the guided improvement.

Technologies revenue inflection — FY26 guide of "up to $13.8B" implies a return to growth from FY25's $13.47B, but FY26 margin is guided down 30bps. Watch whether the $120B pipeline begins converting in Q1 or whether the CR/DOGE drag persists.

Combat Systems award-to-revenue conversion — management explicitly told analysts revenue acceleration is a 2027 event, not 2026. Watch whether 2026 prints confirm the engineering-year framing or whether Q1 awards begin pulling revenue forward.

Tariff impact — $41M in 2025, guided higher in 2026. Watch whether quarterly disclosure quantifies actual run-rate and whether pricing pass-through keeps pace.

Sources

General Dynamics Q4 2025 earnings press release, SEC Form 8-K Exhibit 99.1 (filed 2026-01-28): https://www.sec.gov/Archives/edgar/data/40533/000004053326000003/gd-20251231exhibit991.htm
General Dynamics Q4 2025 earnings call prepared remarks and Q&A

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