Aerospace and defense company General Dynamics (NYSE: GD) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.8% year on year to $14.38 billion. Its non-GAAP profit of $4.17 per share was 1.3% above analysts’ consensus estimates.
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General Dynamics (GD) Q4 CY2025 Highlights:
- Revenue: $14.38 billion vs analyst estimates of $13.82 billion (7.8% year-on-year growth, 4.1% beat)
- Adjusted EPS: $4.17 vs analyst estimates of $4.12 (1.3% beat)
- Adjusted EBITDA: $1.70 billion vs analyst estimates of $1.68 billion (11.9% margin, 1.5% beat)
- Operating Margin: 10.1%, in line with the same quarter last year
- Backlog: $118 billion at quarter end, up 30.3% year on year
- Market Capitalization: $96.44 billion
StockStory’s Take
General Dynamics' fourth quarter results saw sales and profit exceed Wall Street expectations, yet the market responded negatively, reflecting concern over several operational headwinds. Management cited robust demand across its portfolio, particularly in Aerospace and Combat Systems, but also acknowledged margin pressures from tariffs, supply chain bottlenecks, and product mix. CEO Phebe Novakovic specifically pointed to the “imposition of tariffs” and “higher overhead” in Aerospace as key factors impacting profit performance despite strong order activity and delivery increases.
Looking forward, General Dynamics’ guidance is shaped by expectations for continued revenue growth, especially in Marine Systems and European defense programs, but offset by ongoing cost inflation and investment requirements. Management highlighted plans to accelerate shipyard production, expand capacity for munitions, and invest in next-generation defense technologies. Novakovic emphasized, “We believe this is a prudent plan focused on meeting our obligations to our customers and expanding our productivity,” while also cautioning that supply chain constraints and elevated capital expenditures will persist through the coming year.
Key Insights from Management’s Remarks
Management attributed the quarter’s performance to strong order intake in defense segments, steady demand for Gulfstream jets, and productivity gains in shipbuilding, while noting that margin improvement was tempered by tariffs and cost pressures.
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Aerospace demand robust: Gulfstream experienced strong order momentum, with the G700 and G800 models driving increased customer interest across all regions. Management highlighted a 1.3 book-to-bill ratio in Aerospace, indicating more orders than deliveries, and noted that new product introductions are supporting sustained demand.
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Margin headwinds in Aerospace: The Aerospace segment saw margin compression largely due to tariffs, higher overhead, and product mix. President Danny Deep explained, “the impact of tariffs in 2025 was $41 million,” with expectations for a higher impact in 2026, and noted that supply chain cost increases are not always immediately offset by higher pricing.
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Combat Systems backlog surge: Combat Systems received significant international orders, particularly from European Land Systems, with a book-to-bill of over four to one in Q4. CEO Novakovic described the “explosive order activity” as positioning the segment for future growth, though she noted that much of the revenue impact will materialize beyond the next year as new contracts move into production.
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Marine Systems productivity gains: Shipbuilding throughput improved, with Electric Boat’s submarine production tonnage up 13%. Management credited ongoing investments in facilities and workforce, with particular progress in submarine programs and a focus on overcoming remaining supply chain bottlenecks.
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Technologies steady amid contracting delays: The Technologies segment delivered stable performance despite slow contracting activity caused by U.S. government budget uncertainties. Management highlighted a solid order pipeline and noted that a transition from legacy programs is enabling the group to align more closely with customer priorities in defense IT and cybersecurity.
Drivers of Future Performance
General Dynamics expects future growth to be led by increased defense production, strong international demand, and operational investments, but sees ongoing risks from tariffs, supply chain constraints, and margin pressures.
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Defense backlog conversion: Management anticipates that the record backlog in Combat Systems and Marine will drive revenue growth in coming years, with European programs expected to shift from planning to production phases by 2027. CFO Kim Kuryea noted, “European Land Systems will be the fastest grower by far,” but cautioned that ramping production for new programs will require significant capital and operational discipline.
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Margin improvement focus: Improving margins, especially in Aerospace, remains a strategic priority. Deep stated that progress will depend on better pricing, supply chain normalization, and efficiency gains, while warning that “headwinds around tariffs” and delayed cost recovery could limit near-term improvement.
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Capital expenditure and supply chain risks: The company plans to increase capital spending, especially in shipyards and munitions capacity, to support future demand. However, Novakovic cautioned that supply chain bottlenecks, particularly among sole-source suppliers, could constrain throughput and delay benefits from these investments.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will monitor (1) the pace at which General Dynamics converts its record defense backlog into revenue, (2) progress on margin expansion in Aerospace as supply chain and tariff headwinds are addressed, and (3) the impact of elevated capital expenditures, particularly in Marine Systems, on both productivity and free cash flow. Additional scrutiny will be given to international contract execution and the timing of major U.S. Navy shipbuilding awards.
General Dynamics currently trades at $358.12, down from $366.53 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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