GD Q3 Deep Dive: Aerospace Growth and Record Backlog Drive Positive Momentum

Aerospace and defense company General Dynamics (NYSE:GD) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 10.6% year on year to $12.91 billion. Its GAAP profit of $3.88 per share was 4.7% above analysts’ consensus estimates.

Is now the time to buy GD? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

General Dynamics delivered a third quarter that exceeded Wall Street’s expectations, driven by strong order momentum and substantial revenue growth in its Aerospace and Marine Systems segments. Management attributed the quarter’s outperformance to higher aircraft deliveries and resilient demand for new business jets, particularly the G700 and G800 models. CEO Phebe Novakovic emphasized that the company’s ability to improve operating margins and cash flow sequentially demonstrated progress in operational execution and supply chain recovery. The robust backlog, especially in defense and aerospace, reflected broad-based customer demand and supported a positive market response.

Looking forward, management’s guidance is anchored in continued strength in Aerospace and Marine Systems, though they noted the potential impact of a prolonged government shutdown on cash flow and contract timing. Novakovic cautioned, "forecasts in this environment are difficult at best and less reliable than one would hope," highlighting ongoing uncertainty. The company expects ongoing investments in manufacturing capacity and supply chain improvements to support future margin gains. Management also pointed to a healthy pipeline of defense contracts and new aircraft certifications as key contributors to revenue visibility and growth potential.

Key Insights from Management’s Remarks

Management highlighted that third quarter performance was powered by new aircraft deliveries, improved manufacturing productivity, and strong defense order activity, while noting operational improvements in both supply chain and backlog management.

• Aerospace order surge: Orders for business jets, particularly the G700 and G800, accelerated, with unit orders up 56% year to date. Management credited improved delivery cadence and positive customer response to new models for this momentum, with North America leading demand.
• Manufacturing productivity gains: The company reported notable reductions in manufacturing hours for its flagship aircraft and improved on-time supply chain performance, returning to pre-pandemic reliability. This enabled an increase in aircraft deliveries and operational efficiency.
• Marine Systems throughput improvement: Investments in tooling, automation, and workforce training at shipyards supported steady progress in ship production. Management cited stabilizing supply chain metrics and increased ship-over-ship learning as drivers of gradual margin improvement in this segment.
• Defense backlog expansion: The defense portfolio benefited from robust international demand for combat vehicles and munitions, particularly in Europe. The book-to-bill ratio exceeded 2:1 in Combat Systems, with indigenous production in Europe providing a competitive advantage.
• Technology segment order pipeline: The Technology group saw a strong book-to-bill ratio and record backlog, supported by demand for advanced defense electronics and cybersecurity solutions. Management expects ongoing program transitions to support future growth and margin resilience.

Drivers of Future Performance

General Dynamics’ outlook is shaped by sustained demand in defense and aerospace, ongoing operational investments, and the potential impact of government funding uncertainty on short-cycle businesses.

• Sustained aerospace demand: Management expects continued strength in business jet orders and deliveries, with new aircraft models driving growth. Supply chain stabilization and a shift toward higher-margin models are anticipated to improve profitability, though learning curves will affect margins in the near term.
• Defense contract execution: Robust backlog and pipeline in Marine Systems and Combat will support revenue visibility. The company is preparing for large, complex contract awards, particularly in submarines and combat vehicles, but acknowledges that government shutdowns could delay funding and contract timing.
• Operational investment risks: Ongoing capital expenditures in manufacturing, automation, and supply chain are expected to yield future margin gains. However, management highlighted that a prolonged government shutdown could disrupt cash flow and contract execution, particularly in shorter-cycle defense businesses.

Catalysts in Upcoming Quarters

Our analyst team will closely watch (1) the pace of business jet deliveries and margin improvement in Aerospace, (2) progress on large defense contract awards and execution in Marine Systems and Combat, and (3) the company’s ability to navigate potential disruptions from government funding uncertainty. Progress on supply chain reliability and the impact of operational investments will also be signposts of execution.

General Dynamics currently trades at $350.95, up from $341.46 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

Stocks That Trumped Tariffs

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.