General Dynamics (GD) delivered a solid finish to fiscal 2025, though investors weren't entirely thrilled about it—shares dropped over 4% following Wednesday's earnings release despite the defense giant beating analyst expectations on both the top and bottom lines.
The company posted fourth-quarter earnings of $4.17 per share, topping the $4.10 consensus estimate. Revenue came in at $14.379 billion, well ahead of the $13.805 billion analysts were expecting and up 7.8% from $13.338 billion in the same quarter last year. Net earnings for the quarter reached $1.143 billion.
But here's the really interesting part: orders absolutely crushed sales. General Dynamics booked $22.4 billion in new orders during the quarter, delivering a book-to-bill ratio of 1.6x. That means for every dollar of revenue the company recognized, it signed up $1.60 in new business. The company's backlog—essentially its pipeline of future work—now stands at $118.046 billion.
Segment Performance Shows Uneven Growth
Breaking down the business units, Marine Systems was the star performer with revenue jumping 21.7% to $4.818 billion, though operating margin sat at just 7.2%. Combat Systems revenue increased 5.8% to $2.535 billion with a healthier 15.0% margin. Aerospace revenue edged up 1.2% to $3.788 billion with a 12.7% operating margin, including 45 Gulfstream aircraft deliveries. Technologies was basically flat, dipping 0.1% to $3.238 billion with a 9.0% margin.
On the cash flow front, General Dynamics generated $1.561 billion from operations in the quarter—representing 137% of net earnings—and $952 million in free cash flow.
Full-Year Performance Reflects Steady Growth
For the full year, the company posted net earnings of $4.210 billion, up 11.3% from 2024, on revenue of $52.550 billion, up 10.1%. Diluted earnings per share for the year came to $15.45, a 13.4% increase from $13.63 the previous year.
The annual book-to-bill ratio hit 1.5x, and total estimated contract value reached $178.939 billion—up 24% year over year. Chairman and CEO Phebe N. Novakovic pointed to "an impressive 30% growth in company-wide backlog" as a highlight.
"As we focus on execution of programs for our customers, we are also preparing aggressively for future growth, investing nearly $1.2 billion in capital expenditures in 2025—with even more investments planned in the year ahead," Novakovic said.
For the full year, General Dynamics generated $5.120 billion in operating cash flow and $3.959 billion in free cash flow. The company invested $1.161 billion in capital expenditures while returning capital to shareholders through $1.593 billion in dividends and $637 million in share repurchases. It also paid $568 million in tax payments and reduced total debt by $749 million.
The balance sheet looks solid. General Dynamics ended 2025 with $2.333 billion in cash and equivalents against total debt of $8.013 billion, lowering its debt-to-equity ratio to 31.3% from 39.7% a year earlier. Return on invested capital was 14.2%, and return on equity hit 17.9%.
Looking Ahead to 2026
During the earnings call, management laid out a confident outlook for 2026. The company expects operating earnings of about $5.7 billion and earnings per share between $16.10 and $16.20. Total revenue is forecast at $54.3 billion to $54.8 billion, implying profit margins around 10.4%.
Breaking down the segment projections: Aerospace revenue should hit $13.6 billion with an operating margin around 14%, backed by plans to deliver 160 Gulfstream aircraft. Combat Systems revenue is expected to reach $9.6 billion to $9.7 billion with a 14.1% margin. Marine Systems revenue is forecast at $17.7 billion, and Technologies revenue at $13.8 billion.
One notable detail from the call: management disclosed that tariffs had a $41 million impact on 2025 results—a relatively modest hit given the company's scale, but something worth watching as trade policy continues to evolve.
GD Price Action: General Dynamics shares were down 4.31% at $350.81 at the time of publication on Wednesday.
