General Dynamics Corporation, a leading defense contractor, published its fiscal 2025 fourth-quarter financial results on Wednesday, revealing a performance that exceeded analyst expectations despite facing adverse tariff costs. The company’s shares declined slightly after the earnings release, reflecting a complex investor response to the latest data.
For the quarter, General Dynamics reported net earnings of $1.143 billion, translating to $4.17 per diluted share. This earnings per share (EPS) figure outperformed the estimated $4.10 consensus. Revenue for the quarter reached $14.379 billion, representing a 7.8% increase from $13.338 billion in the same period a year earlier, and also surpassing the $13.805 billion forecast.
Order intake for the quarter was robust, totaling $22.4 billion, resulting in a consolidated book-to-bill ratio of 1.6 times. This strong demand contributed to a year-end backlog of $118.046 billion, underscoring the company's substantial future revenue pipeline.
Segment Performance
- Aerospace: This segment's revenues increased modestly by 1.2% year over year to $3.788 billion, achieving a solid operating margin of 12.7%. The quarter included the delivery of 45 Gulfstream jets, reflecting continued strength in the business aviation market.
- Marine Systems: Revenues jumped 21.7% to $4.818 billion, supported by a 7.2% operating margin, signaling significant growth and operational efficiency.
- Combat Systems: Sales rose 5.8% to $2.535 billion with a robust operating margin of 15.0%, highlighting the division's steady performance.
- Technologies: This segment's revenues were essentially flat, dipping slightly by 0.1% to $3.238 billion, while delivering a 9.0% operating margin.
Cash Flow and Capital Management
Operating activities generated $1.561 billion in cash during the quarter, representing 137% of net earnings, an indicator of strong cash generation relative to reported profits. Free cash flow was reported at $952 million.
Full-Year Financials
For the entire fiscal year 2025, General Dynamics achieved net earnings of $4.210 billion, marking an 11.3% increase from the previous year. Total revenue advanced 10.1% to $52.550 billion. The diluted EPS rose 13.4% to $15.45 compared to $13.63 in 2024.
The company maintained a solid consolidated book-to-bill ratio of 1.5 times for the year. Estimated total contract value grew 24% year-over-year to reach $178.939 billion, signaling a substantial contract development pipeline.
Commenting on the results, Chairman and CEO Phebe N. Novakovic noted the company's ability to drive growth in both revenue and earnings across all four segments during 2025, coupled with a remarkable 30% increase in company-wide backlog.
Looking ahead, the company invested nearly $1.2 billion in capital expenditures during 2025, reflecting a commitment to position for future growth, with plans for even greater investment in the coming year.
Cumulatively, Operating cash flow for the year totaled $5.120 billion, and free cash flow reached $3.959 billion after adjusting for capital spending of $1.161 billion. Shareholder returns included $1.593 billion paid in dividends and $637 million spent on share repurchases. Additionally, tax payments amounted to $568 million, and the company lowered its total debt by $749 million over the year.
At year-end, General Dynamics held $2.333 billion in cash and equivalents, while total debt stood at $8.013 billion. This enabled the company to reduce its debt-to-equity ratio from 39.7% down to 31.3%. The company posted a return on invested capital of 14.2% and a return on equity of 17.9%, indicative of efficient capital utilization.
2026 Outlook
During the earnings conference call, General Dynamics provided guidance for fiscal 2026, projecting operating earnings near $5.7 billion and EPS in the range of $16.10 to $16.20.
Projected revenues for the upcoming year are estimated between $54.3 billion and $54.8 billion, suggesting operating margins around 10.4%.
Segment revenue forecasts include:
- Aerospace revenue expected to reach approximately $13.6 billion with a 14% operating margin, propelled by anticipated delivery of 160 Gulfstream aircraft.
- Combat Systems projected to generate $9.6 billion to $9.7 billion in revenue with a 14.1% margin.
- Marine Systems revenue forecasted at $17.7 billion.
- Technologies segment predicted to achieve $13.8 billion in revenue.
Management disclosed that tariffs imposed in 2025 negatively impacted the company’s financials by $41 million.
Market Reaction
Following the earnings announcement, General Dynamics’ shares were down 4.31%, trading at $350.81 per share as of Wednesday’s market close, as reported by market data providers.