General Dynamics Q3 2025 slides: Revenue up 10.6%, record $109.9B backlog

Introduction & Market Context

General Dynamics Corporation (NYSE:GD) presented its third-quarter 2025 results on October 24, 2025, revealing robust performance across all business segments. The defense and aerospace giant reported significant year-over-year growth in revenue, earnings, and backlog, exceeding analyst expectations and driving the stock price higher.

Following the earnings announcement, General Dynamics' stock surged 3.95% in pre-market trading to $355, approaching its 52-week high of $360.22. The company's market capitalization stands at approximately $94.54 billion, reflecting investor confidence in its growth trajectory and operational execution.

Quarterly Performance Highlights

General Dynamics reported impressive financial results for the third quarter of 2025, with substantial growth across all key metrics compared to the same period in 2024.

As shown in the following financial highlights:

Revenue reached $12.91 billion, representing a 10.6% increase from the prior year. Operating earnings grew at an even faster pace, rising 12.7% to $1.33 billion, with operating margins expanding by 20 basis points to 10.3%. This performance translated to diluted earnings per share of $3.88, up 15.8% year-over-year, exceeding the analyst forecast of $3.69.

Particularly noteworthy is the company's free cash flow generation, which reached $1.9 billion in the quarter, representing 179% of net earnings. This strong cash conversion demonstrates operational efficiency and provides the company with financial flexibility for investments, debt reduction, and shareholder returns.

The year-to-date performance through the first nine months of 2025 shows similar strength:

Revenue for the first nine months of 2025 totaled $38.17 billion, up 11.0% compared to the same period in 2024. Operating earnings increased by 15.7% to $3.9 billion, with operating margins expanding by 40 basis points to 10.2%. Diluted EPS reached $11.29, a 19.0% improvement year-over-year.

Segment Performance Analysis

General Dynamics' Aerospace segment delivered exceptional performance in the third quarter, as illustrated in the following chart:

Aerospace revenue surged 30% to $3.23 billion, while operating earnings jumped 41% to $430 million. Operating margin improved by 100 basis points to 13.3%. The segment achieved a book-to-bill ratio of 1.3x, indicating strong future demand. Key milestones included the delivery of the first G800 aircraft in August and the announcement of the all-new G300 model in September, positioning the company for continued growth in the business jet market.

The Combat Systems segment showed steady performance with modest growth:

Revenue increased slightly to $2.25 billion, while operating earnings rose to $335 million with a margin of 14.9%. The segment secured significant new orders, achieving a book-to-bill ratio of 2.0x. Notable contract awards included $1.7 billion for various munitions, ordnance, and propellant; $595 million for engineering services related to the next-generation Abrams tank; and $365 million from Latvia for ASCOD combat vehicles and training.

The Marine Systems segment demonstrated strong growth and secured substantial new contracts:

Revenue grew by double digits to $4.1 billion, while operating earnings increased to $291 million. The segment achieved record backlog of $53.6 billion with a book-to-bill ratio of 1.2x. Key contract awards included an additional Arleigh Burke-class DDG-51 guided-missile destroyer and $640 million for lead-yard services, development, and design for Virginia-class submarines.

The Technologies segment maintained steady performance with improved margins:

While revenue was relatively flat at $3.33 billion, operating earnings increased slightly to $327 million, with operating margin improving to 9.8%. The segment achieved a book-to-bill ratio of 1.8x, resulting in record backlog and sequential total estimated contract value growth of 7%.

Financial Outlook & Guidance

General Dynamics' total backlog reached a record $109.86 billion at the end of the third quarter, representing an 18.6% increase from the prior year. The total estimated contract value, which includes options and indefinite delivery, indefinite quantity (IDIQ) contracts, grew by 21.9% to $167.74 billion. This robust order book provides strong visibility into future revenue streams and supports the company's growth outlook.

Based on the strong year-to-date performance, General Dynamics has raised its full-year EPS guidance to a range of $15.30 to $15.35, with projected annual revenue of approximately $52 billion and expected operating margins of around 10.3%. This revised guidance reflects management's confidence in the company's ability to maintain its growth momentum through the remainder of 2025.

Market Reaction & Conclusion

The market responded positively to General Dynamics' third-quarter results, with the stock price increasing by 3.3% to close at $352.77 on October 24, 2025, after reaching as high as $355 in pre-market trading. The stock is now trading near its 52-week high of $360.22, reflecting investor confidence in the company's performance and outlook.

CEO Phebe Novakovic described the quarter as "superb" during the earnings call, highlighting the strong demand across all sectors, particularly in aerospace and defense. The company's record backlog, expanding margins, and robust cash flow generation position General Dynamics for continued success in the coming quarters.

While the company faces potential challenges, including government shutdown risks and ongoing supply chain disruptions, its diversified business portfolio, strong order book, and operational execution provide a solid foundation for sustained growth. The combination of strong performance in commercial aerospace and increasing defense spending, particularly in Europe, creates favorable conditions for General Dynamics to maintain its positive trajectory through 2025 and beyond.

Full presentation:

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