General Dynamics grew Q2 2026 revenue 8.1% to $14.1B and diluted EPS 13.4% to $4.24, led by Gulfstream and submarines, while $20B of orders lifted backlog 32% year over year to $136.5B.
Revenue
$14.1B
+8.1% YoY
Net income
$1.2B
+14.4% YoY
Diluted EPS
$4.24
+13.4% YoY
Operating margin
10.4%
Overview
General Dynamics makes Gulfstream business jets, U.S. Navy submarines, combat vehicles and artillery shells, and military communications and IT systems. In the second quarter of 2026 its revenue rose 8.1% to $14.09 billion and diluted earnings per share rose 13.4% to $4.24. The quarter ended July 5, 2026, and is compared with the quarter ended June 29, 2025. Both were 13-week quarters.
Two of the four businesses did almost all the work. Aerospace (Gulfstream) and Marine Systems (shipbuilding) supplied $903 million of the $1,053 million revenue increase. They also added $158 million of operating earnings, slightly more than the company's total rise of $155 million, so the other two segments together were roughly flat on profit. Earnings grew faster than revenue because the operating margin improved and interest expense fell. A small share-count effect worked the other way: diluted shares rose to 273.5 million from 270.9 million, so EPS grew a little less than net earnings' 14.4%.
The bigger story is orders. The company booked $20.0 billion of new orders against $14.1 billion of revenue. Total backlog, meaning signed work not yet delivered, reached $136.5 billion, up from $103.7 billion a year earlier.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$14,094M
$13,041M
+8.1%
Operating earnings
$1,460M
$1,305M
+11.9%
Operating margin
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Operating margin is the share of revenue left after the costs of running the business, before interest and tax.
Book-to-bill is new orders divided by revenue for the period. Above 1.0 means the order book is growing faster than the company is working through it.
Free cash flow is operating cash flow minus capital spending. This is a non-GAAP measure, meaning it is not defined by standard accounting rules; the company defines it in its release.
The release does not give a company-wide book-to-bill figure for Q2 2025. The Aerospace figure for that quarter was 1.3x.
Segment performance
Segment
Revenue
YoY
Operating earnings
YoY
Margin (Q2 2025)
Aerospace
$3,525M
+15.1%
$510M
+26.6%
14.5% (13.2%)
Marine Systems
$4,660M
+10.4%
$342M
+17.5%
7.3% (6.9%)
Combat Systems
$2,290M
+0.3%
$318M
−1.9%
13.9% (14.2%)
Technologies
$3,619M
+4.1%
$339M
+2.1%
9.4% (9.6%)
Corporate
n/a
n/a
−$49M
n/a
n/a
Total
$14,094M
+8.1%
$1,460M
+11.9%
10.4% (10.0%)
Aerospace (Gulfstream). Gulfstream delivered 41 jets, up from 38: 35 large-cabin and 6 mid-cabin. Revenue rose $463 million:
$338 million came from building aircraft, "due primarily to the number and mix of aircraft deliveries."
$125 million came from services, driven by "higher fixed-base operator (FBO) activity and increased customer demand for aircraft maintenance." An FBO is an airport service business for private aircraft.
Operating earnings rose $107 million. Aircraft building added $99 million and services added $32 million, partly offset by $24 million more in general, administrative and other expenses. The margin gained 130 basis points (1.3 percentage points), more than any other segment. The filing notes that a new model's early production batches usually carry lower margins, which then improve as production matures. The G800 entered service last year, so part of this gain may reflect that learning curve.
Marine Systems (submarines and ships). Revenue grew $440 million:
$281 million came from building Navy ships, "due primarily to increased material and labor volume on Columbia-class submarine construction and higher throughput on the John Lewis-class (T-AO-205) fleet replenishment oiler."
$159 million came from engineering and repair work.
The margin improved 40 basis points "on improved performance at each of our shipyards." At 7.3%, this is still the lowest-margin segment. Shipbuilding is labor-heavy work on long contracts, and the filing says the surge in submarine demand "has placed pressure on the shipbuilding industrial base." Marine revenue for the first six months rose 15.3%, faster than Q2's 10.4%, because Q1 grew more than 20%.
Combat Systems (vehicles, weapons, munitions). Revenue was about flat because two opposite trends cancelled out:
Artillery production added $95 million.
European wheeled and tracked vehicle programs added $38 million.
U.S. military vehicles fell $126 million "due to lower U.S. Army demand as part of its recapitalization efforts and the termination of the M10 Booker program."
The margin slipped 30 basis points because of program mix. The order book looks very different from the revenue line: Combat Systems backlog is $29.4 billion, up 77% from $16.6 billion a year ago. The filing points to awards "to produce armored combat support vehicles."
Technologies (C5ISR and IT services). Revenue rose $143 million. Of that, $112 million came from C5ISR, which stands for command, control, communications, computers, cyber, intelligence, surveillance and reconnaissance systems. The filing says growth was "particularly [in] systems supporting a variety of land and air platforms and international programs." IT services added the other $31 million. The margin eased 20 basis points because of program mix.
Below the operating line
Pre-tax earnings grew 14.2%, faster than operating earnings' 11.9%. The main reason is that net interest expense fell to $49 million from $88 million. For the six months, the filing attributes the drop to "lower interest expense associated with commercial paper issuances." Commercial paper is short-term corporate borrowing. The company repaid $500 million of fixed-rate notes in the first half, and total debt fell to $7.5 billion from $8.0 billion at the end of 2025. The Q2 tax rate was about 17.6%, against 17.7% a year earlier, so tax made no real difference.
Cash flow
Operating cash flow was $1.88 billion in the quarter, 162% of net earnings. For the first six months it was $4.04 billion, against $1.45 billion a year earlier. The filing says first-half cash was "affected positively by reductions in operating working capital led by our Combat Systems and Aerospace segments." Working capital is the cash tied up in day-to-day operations, such as inventory and unpaid customer bills.
The biggest single swing in the six-month cash-flow statement is customer advances and deposits. They added $1,168 million, against $106 million a year earlier. This is money customers paid up front, and it usually rises along with strong orders; the filing notes that Gulfstream's backlog includes customer deposits. The cash is real, but part of it is a timing benefit that reverses as the jets and vehicles are delivered.
Cash on hand reached $4.3 billion. Net debt (total debt minus cash) fell to $3.2 billion from $5.7 billion at the end of 2025. In the first half, the company paid $834 million in dividends. It also bought back 0.9 million shares for $319 million "to cover dilution," meaning to offset shares issued to employees rather than to reduce the share count.
Orders and backlog
Company-wide: $20.0 billion of orders, a 1.4x book-to-bill. Backlog of $136.5 billion rose $5.7 billion from the end of Q1 ($130.8 billion) and 31.6% from a year earlier.
Aerospace: $5.28 billion of orders on $3.53 billion of revenue, a 1.5x book-to-bill (1.3x a year earlier). Segment backlog reached $24.0 billion, up from $19.9 billion. The filing notes this came "even as revenue grew more than 10%."
Defense segments: book-to-bill of 1.4x in Q2 and 1.8x for the first half. Defense backlog reached $112.5 billion. The filing credits "continued construction of Virginia-class submarines" and the armored combat support vehicle award.
Beyond firm backlog: the company estimates another $50.4 billion of possible work, for a total estimated contract value of $186.9 billion. This extra amount comes from contract options customers have not yet exercised and from IDIQ contracts, where a ceiling is agreed but orders arrive over time. It fell from $57.6 billion at the end of Q1, mostly in Marine Systems ($12.5 billion to $7.4 billion). That fits with options being turned into firm orders.
The company expects to turn about 50% of backlog into revenue by the end of 2027 and another 30% by the end of 2029. In the Q1 10-Q, the figures were 55% and 25%. The new orders are weighted toward later years.
Takeaway: Revenue grew 8%, but new orders lifted backlog by almost a third in a year, to $136.5 billion. That is roughly 2.4 years of revenue at the current pace. General Dynamics does not need more demand. The question is whether its shipyards, the Gulfstream supply chain and its munitions lines can turn that backlog into revenue faster than today, and at better margins.
Outlook
The Q2 10-Q gives 2026 guidance by segment:
Segment
2026 revenue outlook
2026 operating margin outlook
H1 2026 actual (revenue / margin)
Aerospace
~$13.8B
~14.7%
$6.80B / 14.7%
Marine Systems
~$18.0B
~7.4%
$9.00B / 7.3%
Combat Systems
~$9.8B
~13.8%
$4.57B / 13.7%
Technologies
~$14.1B
~9.4%
$7.20B / 9.4%
Other 2026 guidance items:
Corporate costs of about $180 million.
Net interest expense of about $270 million, against $118 million in the first half.
Net other income of about $15 million.
A full-year tax rate of about 17.5%.
The Q2 10-Q does not repeat a company-wide EPS range. The Q1 10-Q guided to $16.45 to $16.55, and first-half diluted EPS of $8.35 is about 51% of the midpoint of that range.
Our own arithmetic on the guidance:
Total revenue: the segment figures add up to about $55.7 billion. That implies roughly $28.1 billion in the second half, against $27.6 billion in the first.
Combat Systems: needs about $5.2 billion in the second half, against $4.6 billion in the first. That step-up depends on the new vehicle awards and more artillery output making up for lower U.S. Army vehicle demand.
Technologies: its outlook implies about $6.9 billion in the second half, below its $7.2 billion first half.
Interest: the guidance implies higher second-half interest expense, about $152 million against $118 million.
Margins are at or very close to guidance in every segment. The main swing factor for the rest of the year is how much gets delivered, not pricing. That means Gulfstream deliveries and submarine output. The filing flags delays at an Israel-based supplier of mid-cabin airframes, caused by conflicts in the Middle East.
Note on six-month figures: General Dynamics' fiscal quarters are 13 weeks long, but the first quarter's length varies with the calendar. Q1 2026 ran from January 1 to April 5, while Q1 2025 ran from January 1 to March 30. The six-month comparisons (revenue +9.1%, EPS +12.8%) therefore include a few extra days. The Q2 comparison is like-for-like.