General Dynamics (NYSE:GD) Reports Upbeat Q2

Aerospace and defense company General Dynamics (NYSE:GD) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 8.9% year on year to $13.04 billion. Its GAAP profit of $3.74 per share was 5.9% above analysts’ consensus estimates.

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"During the first half of the year, each of our four segments achieved growth in revenue and earnings, with margins on a companywide basis expanding 50 basis points over the same period last year," said Phebe Novakovic, chairman and chief executive officer.

Company Overview

Creator of the famous M1 Abrahms tank, General Dynamics (NYSE:GD) develops aerospace, marine systems, combat systems, and information technology products.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, General Dynamics’s 5.5% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. General Dynamics’s annualized revenue growth of 10.9% over the last two years is above its five-year trend, suggesting its demand recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its backlog, or the value of its outstanding orders that have not yet been executed or delivered. General Dynamics’s backlog reached $103.7 billion in the latest quarter and averaged 2.1% year-on-year growth over the last two years. Because this number is lower than its revenue growth, we can see the company fulfilled orders at a faster rate than it added new orders to the backlog. This implies General Dynamics was operating efficiently but raises questions about the health of its sales pipeline.

This quarter, General Dynamics reported year-on-year revenue growth of 8.9%, and its $13.04 billion of revenue exceeded Wall Street’s estimates by 5.7%.

Looking ahead, sell-side analysts expect revenue to grow 1.8% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

General Dynamics’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 10.5% over the last five years. This profitability was solid for an industrials business and shows it’s an efficient company that manages its expenses well.

Analyzing the trend in its profitability, General Dynamics’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q2, General Dynamics generated an operating margin profit margin of 10%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

General Dynamics’s unimpressive 5.8% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For General Dynamics, its two-year annual EPS growth of 10.5% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q2, General Dynamics reported EPS at $3.74, up from $3.26 in the same quarter last year. This print beat analysts’ estimates by 5.9%. Over the next 12 months, Wall Street expects General Dynamics’s full-year EPS of $14.89 to grow 3.1%.

Key Takeaways from General Dynamics’s Q2 Results

We were impressed by how significantly General Dynamics blew past analysts’ backlog expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 1.6% to $302.06 immediately after reporting.

General Dynamics may have had a good quarter, but does that mean you should invest right now? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.