General Dynamics (GD) — Q2 2026 Earnings Preview
Key Preview Table: What to Watch for in Q2 2026
| Factor / Metric | Q2 2026E Consensus | Q2 2025 Actual | YoY Change | Guidance / Management Commentary | Notes |
|---|---|---|---|---|---|
| Revenue ($M) | $13,492 | $12,223 | +10.4% | Company guides FY26 revenue $54.3–$54.8B | Q1 2026 revenue was $13,481M (+10.3% YoY) |
| Diluted EPS | $3.94 | $3.66 | +7.7% | Updated FY26 EPS guide: $16.45–$16.55 | Q1 2026 EPS was $4.10 (+12% YoY); Q2 typically lower |
| Operating Margin (%) | 10.4% | FY26 guide: 10.4% (up 20 bps YoY) | Q1 2026 margin was 10.5% | ||
| Free Cash Flow ($M) | $(290) | FY26 FCF conversion target: 100% of net income | Q1 2026 FCF was $1,952M | ||
| Aerospace Revenue ($M) | $3,026 | FY26 guide: $13.6B (full year) | Q1 2026: $3,279M (+8.4% YoY) | ||
| Aerospace Op. Margin (%) | 14.3% | FY26 guide: ~14% | Q1 2026: 15.0% | ||
| Gulfstream Deliveries (units) | 36 | FY26 guide: 160 units | Q1 2026: 38 units (record Q1 deliveries) | ||
| Marine Systems Revenue ($M) | $3,589 | FY26 guide: $17.3–$17.7B (full year) | Q1 2026: $4,343M (+21% YoY) | ||
| Combat Systems Revenue ($M) | $2,176 | FY26 guide: $9.6–$9.7B (full year) | Q1 2026: $2,283M (+4.9% YoY) | ||
| Technologies Revenue ($M) | $3,432 | FY26 guide: up to $13.8B (full year) | Q1 2026: $3,576M (+4.2% YoY) | ||
| Backlog ($B) | $88.7 | Q1 2026: $130.8B | Record backlog, up 48% YoY | ||
| Book-to-Bill | 2.0x | Q1 2026: 2.0x | Robust order activity across all segments |
Summary and Conclusions
- Q2 2026 is set up for another strong quarter: Consensus expects revenue of $13.5B (+10% YoY) and EPS of $3.94 (+8% YoY), following a robust Q1 that beat expectations and saw record cash flow and backlog.
- Guidance has been raised: Management increased FY26 EPS guidance to $16.45–$16.55 (from $16.10–$16.20), citing strong Q1 performance, especially in Aerospace and Marine.
- Backlog and orders are at record highs: Q1 2026 backlog reached $130.8B (+48% YoY), with a book-to-bill of 2.0x, indicating sustained demand and future revenue visibility.
- Aerospace momentum is key: Watch for continued margin improvement (guided to ~14% for FY26), delivery cadence (targeting 160 Gulfstream units for the year), and any supply chain commentary.
- Marine Systems throughput and margin improvement: Q1 saw 21% revenue growth and margin expansion; management continues to highlight productivity gains and supply chain stabilization as drivers.
- Cash flow and capital deployment: Q1 FCF was exceptionally strong ($1.95B), but management expects a more balanced quarterly profile for the rest of the year, reiterating a 100% FCF conversion target for FY26.
- Year-over-year comparables are tough: Q2 2025 was already a strong quarter (+11% revenue YoY at the time), so Q2 2026 faces a high bar, but management commentary and consensus suggest continued double-digit growth.
Q2 2026: Most Important Factors to Watch
- Revenue Growth and Segment Mix
- Is double-digit growth sustained? Are Marine and Aerospace still the main drivers?
- Any signs of slowing in Technologies or Combat Systems?
- Aerospace Margins and Deliveries
- Does Aerospace maintain or exceed the 15% margin seen in Q1?
- Are Gulfstream deliveries on track for the 160-unit full-year target?
- Any new supply chain or tariff headwinds?
- Marine Systems Throughput and Margins
- Is the 21%+ revenue growth trend continuing?
- Are margins improving further as supply chain issues abate?
- Order Activity and Backlog
- Is book-to-bill remaining above 1x, supporting future growth?
- Any notable large contract wins or shifts in order mix?
- Free Cash Flow and Capital Expenditures
- Is FCF conversion tracking toward the 100% target?
- Are CapEx levels rising as planned (3.5–4% of sales), especially in shipyards?
- Management Commentary
- Updates on supply chain, labor, and inflationary pressures.
- Progress on major programs (Columbia/Virginia-class, G700/G800).
- Any changes to capital return policy or buyback appetite.
How Did They Report Last Year? (Q2 2025)
| Metric | Q2 2025 Actual | YoY Growth vs. Q2 2024 |
|---|---|---|
| Revenue ($M) | $12,223 | +11.3% |
| Operating Earnings ($M) | $1,268 | +17.4% |
| Net Earnings ($M) | $994 | +12.0% |
| Diluted EPS | $3.66 | +12.0% |
| Operating Margin (%) | 10.4% | +30 bps |
| Free Cash Flow ($M) | $(290) | |
| Aerospace Revenue ($M) | $3,026 | +21.2% |
| Marine Systems Revenue ($M) | $3,589 | +15.1% |
| Combat Systems Revenue ($M) | $2,176 | +1.6% |
| Technologies Revenue ($M) | $3,432 | +6.1% |
| Backlog ($B) | $88.7 | +14% |
| Book-to-Bill | 2.0x |
- Q2 2025 was a strong quarter: Double-digit revenue and EPS growth, margin expansion, and record backlog/order activity.
- Segment highlights: Aerospace and Marine led growth; Combat and Technologies were steady but less dynamic.
- Cash flow was weak in Q2 2025: Negative FCF, but this was expected to reverse in the back half of the year.
Forward Consensus and Guidance
FY 2026 Guidance (as of Q1 2026 call)
| Metric | FY26 Guidance | FY25 Actual | YoY Change (Guided) |
|---|---|---|---|
| Revenue ($M) | $54,300–$54,800 | $52,550 | +3.3% to +4.3% |
| Operating Margin (%) | 10.4% | 10.2% | +20 bps |
| EPS | $16.45–$16.55 (raised) | $15.45 | +6.5% to +7.1% |
| FCF Conversion | 100% of net income | 94% | +6 pts |
| CapEx (% of sales) | 3.5–4% | 2.2% | +130–180 bps |
| Aerospace Revenue | ~$13.6B | $13.1B | +3.8% |
| Aerospace Margin | ~14% | 13.3% | +70 bps |
| Gulfstream Deliveries | 160 units | 158 units | +1.3% |
| Marine Revenue | $17.3–$17.7B | $16.7B | +3.6% to +6.0% |
| Combat Revenue | $9.6–$9.7B | $9.2B | +4.3% to +5.4% |
| Technologies Revenue | up to $13.8B | $13.5B | +2.2% |
