Aerospace and defense company General Dynamics (NYSE: GD) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 8.9% year on year to $13.04 billion. Its non-GAAP profit of $3.74 per share was 5.6% above analysts’ consensus estimates.

Is now the time to buy GD? Find out in our full research report (it’s free).

StockStory’s Take

General Dynamics delivered a second quarter that exceeded Wall Street’s expectations, prompting a positive market response. Management attributed the company’s performance to robust order activity, especially in the Marine Systems segment, and continued operational improvements within Aerospace. CEO Phebe Novakovic highlighted strong operating leverage, noting that all four business segments contributed to the company’s year-over-year growth in revenue, earnings, and cash generation. Management credited record backlog levels and improved supply chain performance, particularly for Gulfstream jets, as key drivers behind the quarter’s results.

Looking ahead, General Dynamics’ forward outlook revolves around sustained defense demand, new platform deliveries in Aerospace, and productivity enhancements across its businesses. Management pointed to the ramp-up of G800 jet deliveries, ongoing investments in submarine production, and improved throughput at shipyards as factors expected to shape the second half of the year. CEO Phebe Novakovic stated, “We feel very good about the potential for the year,” while also noting that Aerospace operating margin will face some pressure from product mix, but is expected to recover as higher-margin models gain traction.

Key Insights from Management’s Remarks

Management identified record defense backlog, strong Aerospace demand, and improvements in operational execution as the major themes shaping Q2 performance and near-term outlook.

• Marine Systems contract wins: The Marine segment secured major submarine construction contracts, boosting order backlog by 38%. Management emphasized that increased funding will support shipyard productivity, wage increases, and workforce training, helping to stabilize the submarine supply chain and improve delivery cadence.

• Aerospace delivery progress: Gulfstream delivered 38 aircraft, including more G700s as supply chain reliability improved. CEO Novakovic said all G700 retrofit aircraft are now delivered, with initial G800 deliveries set for Q3, highlighting customer interest from Fortune 500 companies. Aerospace saw a 1.3x book-to-bill ratio, reflecting continued demand across model lines and regions.

• Operational leverage and cost control: The company achieved double-digit growth in operating earnings and cash flow, supported by ongoing efforts to optimize manufacturing and working capital. Newly appointed EVP of Global Operations Danny Deep outlined a renewed focus on continuous improvement across the value chain to drive value creation.

• Technologies segment momentum: GDIT and Mission Systems both reported solid quarters, with GDIT navigating contract scope changes and slower-than-usual adjudications. Mission Systems is transitioning to higher-margin programs and investing in areas such as unmanned platforms and high-speed encryption, supporting future backlog growth.

• Combat Systems resilience: Despite flat revenue, Combat Systems achieved higher margins and noted growth in its European operations, benefiting from increased defense spending in the region. Management cited the cancellation of the Booker program as a U.S. headwind, but remains optimistic about new opportunities tied to next-generation platforms and munitions expansion.

Drivers of Future Performance

General Dynamics expects continued growth to be driven by defense demand, execution on new aerospace deliveries, and ongoing productivity initiatives, while acknowledging risks from supply chain variability and contract timing.

• Defense backlog and contract execution: Management highlighted the company’s record defense backlog and contract value, noting that execution on major submarine and combat vehicle contracts will be a primary driver of revenue and operating margin. Progress in stabilizing the submarine supply chain is expected to gradually improve Marine segment profitability, though some near-term variability may persist.

• Aerospace product mix and ramp-up: The cadence of new jet deliveries, particularly the G800, will influence Aerospace segment margins. Management expects initial G800 deliveries to carry lower margins, with improvement as production matures and higher-margin models increase in mix. Any supply chain setbacks or delays could impact the segment’s path to margin recovery.

• Adjudication pace and margin pressures: The Technologies segment’s outlook depends on the pace of government contract adjudications and demand for high-speed encryption and digital modernization services. Management cautioned that contract delays or changes in federal spending priorities may introduce short-term revenue and margin fluctuations.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will be monitoring (1) progress on ramping up G800 and G700 jet deliveries and their impact on Aerospace margins, (2) throughput and productivity improvements in the Marine segment as new funding and workforce initiatives take hold, and (3) the pace of contract adjudications and backlog conversion in the Technologies and Combat Systems segments. The ability to maintain operating leverage while navigating supply chain and government spending uncertainties will be central to results.

General Dynamics currently trades at $316.88, up from $297.34 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Donald Trump’s April 2024 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.