General Dynamics (GD) reported a strong second quarter of 2025, with robust growth in revenue, earnings, and cash flow, alongside a record-high backlog and solid execution across all four of its business segments. Total revenue rose 8.9% year-over-year to $13.04 billion, while operating earnings increased 12.9% to $1.31 billion, pushing the operating margin up 30 basis points to 10.0%. Net earnings climbed 12.0% to $1.01 billion, translating into diluted EPS of $3.74, a 14.7% increase from Q2 2024. Year-to-date, the company has delivered $25.26 billion in revenue (up 11.3%), $2.57 billion in operating earnings (up 17.4%), and $2.01 billion in net income (up 17.8%), supported by a 20.5% jump in EPS to $7.40.

All four segments posted YoY earnings growth, with companywide margins expanding 50 basis points through the first half. Aerospace saw a 26.3% increase in operating earnings on 4.1% revenue growth, driven by higher deliveries of the G700 and improved productivity. Marine Systems led revenue growth at +22.2%, supported by submarine and destroyer programs, despite ongoing supply chain challenges and a one-time disruption at NASSCO. Combat Systems remained flat on revenue but still delivered 3.5% earnings growth and a 14.2% margin, buoyed by strong European demand. Technologies grew 5.5% in revenue, with both GDIT and Mission Systems contributing, although the segment faces a more tempered outlook in the second half due to the timing of contract awards.

The company’s backlog surged to $103.7 billion, up from $88.7 billion in Q1, boosted by key wins in Marine Systems and ongoing demand across defense and aerospace. Notably, General Dynamics secured contracts for two Block V Virginia-class submarines, contributing to a Marine backlog nearing $53 billion. Companywide book-to-bill was 2.2x, highlighting robust order activity, especially in defense (2.4x) and aerospace (1.3x). The estimated total contract value reached $161.2 billion, marking an all-time high.

Cash generation was another standout: operating cash flow reached $1.6 billion, or 158% of net income, and free cash flow hit $1.4 billion, more than double the prior year. For the first half, free cash flow totaled $1.11 billion, well ahead of expectations. Capital expenditures were modest at $198 million (1.5% of sales), though management expects full-year capex to exceed 2% of sales. The company returned capital through $402 million in Q2 dividends and $785 million in H1, with $600 million in share repurchases during H1, though none occurred in Q2. Net debt declined by $1.2 billion to $7.19 billion, with a debt-to-equity ratio of 36.9% and $1.52 billion in cash on hand.

Looking ahead, General Dynamics raised its full-year 2025 guidance, now projecting revenue of approximately $51.2 billion, operating margin of 10.3%, and EPS in the range of $15.05–$15.15, all up from prior forecasts. Segment-level guidance includes $12.9 billion in Aerospace revenue, with 13.5% margin and 150–155 aircraft deliveries; $15.6 billion for Marine Systems with 7% margin; $9.2 billion for Combat Systems at 14.5% margin; and a flat H2 for Technologies, consistent with earlier projections.

Despite macro uncertainties—such as policy shifts from a new administration, government efficiency mandates, new U.S. tariffs, and lingering supply chain issues—management expressed confidence in navigating these challenges. Risks remain, particularly in IT services and Marine supply chains, but have so far proven manageable.

In sum, General Dynamics delivered a resilient and well-balanced Q2, combining strong top-line growth, expanding margins, and disciplined capital deployment. With record backlog, upwardly revised guidance, and improving operational execution, the company is well-positioned for continued strength in the second half of 2025.