General Dynamics Beats Estimates as Record Backlog Hits $131B and Guidance Is Raised

Transcript intelligence

What changed

Revenue growth accelerated to 10.3% YoY from 7.8% in Q4 FY2025. Backlog surged from $118B to a record $131B, with total contract value reaching $188B. Free cash flow conversion jumped from the 100% full-year target to 174% in Q1 alone. Aerospace margins expanded to 15% on record first-quarter G800 deliveries. Guidance sentiment shifted from maintained to raised, with full-year EPS guidance lifted to $16.45-$16.55. Management disclosed potential dual-sourcing of the Columbia-class steam turbine to improve supply-chain resilience.

Guidance delta

Management raised full-year FY2026 EPS guidance to $16.45-$16.55, marking a shift from the maintained stance in Q4 FY2025. The prior revenue target of $54.3-$54.8 billion and 10.4% operating margin outlook was not explicitly revised in the provided analysis. Capex continues to increase as the company invests in shipyard capacity and unmanned platforms.

Key takeaways

• Revenue rose 10.3% YoY to $13.5B and EPS climbed 12% to $4.10, beating consensus on both lines.
• Order intake of $26B at a 2:1 book-to-bill ratio drove backlog to a record $131B, up 48% YoY.
• Free cash flow conversion hit 174% in Q1, with $2.2B operating cash and $3.7B cash on hand.
• Aerospace margins expanded to 15% on record Gulfstream G800 deliveries.
• Marine Systems growth was driven by Columbia- and Virginia-class submarine programs and increased shipyard investment.

Management priorities

• Continue shipyard investments to accelerate Columbia and Virginia submarine production.
• Ramp up G800 deliveries, targeting the 25th unit this quarter and sustained cadence.
• Develop and field Bluefin unmanned undersea platforms.
• Expand AI and cyber capabilities through GDIT.
• Explore dual-sourcing of critical turbine components for the Columbia program.