General Dynamics Corporation (GD)

General Dynamics Corporation Q1 2025 Financial Report

Report Date: 2025-04-30
Period Covered: Quarter ended March 31, 2025
Form Type: 10-Q

Executive Summary

General Dynamics delivered record quarterly revenue of $12.223 billion, up 14% year-over-year, and operating earnings of $1.268 billion (10.4% margin), up from $1.036 billion (9.7% margin) in Q1 2024. Net earnings rose 24% to $994 million ($3.66 per diluted share).

Revenue & Profit Analysis

• Product Revenue: $7.334 billion (+19.5%) driven by higher Gulfstream G700 deliveries and submarine program volume.
• Service Revenue: $4.889 billion (+6.4%) on stronger aircraft maintenance and IT services demand.
• Operating Income: Improved margins in Aerospace (+210 bp) and Technology (+110 bp) segments; Defense segments remained stable.
• Net Earnings: $994 million vs. $799 million; effective tax rate ~17.2%.

Segment Performance

Debt & Liquidity

• Total Debt: $9.678 billion at March 31, 2025 (vs. $8.826 billion at Dec 31, 2024).
• Debt Increase: 9.6% increase year-over-year; late-March pre-paid $750 million note.
• Cash & Equivalents: $1.242 billion.
• Free Cash Flow: $290 million (net cash used ops of $148 million less CapEx $142 million).
• Backlog: $88.7 billion funded (stable vs. $90.6 billion); total potential contract value $141.3 billion.

Drivers of Results

• Aerospace: G700/G800 certification progress; strong Gulfstream demand; higher service cycles.
• Defence: Increased Navy submarine construction; rising munitions demand; steady IT/C5ISR work.
• Margin Improvement: Efficiency gains, favorable contract mix, lower GA certification costs.

Risks & Headwinds

• Government Funding Uncertainty: Continuing resolutions may delay contract awards.
• Supply Chain & Inflation: Raw-material cost volatility; potential commodity hedging exposures.
• Contract Profitability: Variable consideration adjustments on long-term programs.

Pros & Cons

Pros:

• Diversified portfolio across Aerospace, Marine, Combat and Technology segments.
• Strong backlog and book-to-bill near 1.0.
• Consistent free cash flow generation and disciplined capital deployment (dividends & buybacks).

Cons:

• High working capital usage in Q1; seasonal cash drag expected to reverse later in year.
• Exposure to U.S. and foreign defense budget fluctuations.
• Large debt maturities in near term requiring refinancing or CP issuance.

Outlook & Direction

General Dynamics remains on a solid growth trajectory, underpinned by strong Aerospace demand and stable defense spending. Backlog provides multi-year revenue visibility, while new G800 deliveries and continued Navy program ramp-up should drive further margin expansion. Key challenges include managing working capital, refinancing near-term debt, and navigating budgetary uncertainty. Overall, the company’s financial health and diversified operations position it well for sustained performance.

Revenue breakdown Q1 2025 vs. Q1 2024:

• Product: $7,334 M (+19.5%)
• Service: $4,889 M (+6.4%)

Revenue by segment (Q1 2025 / Q1 2024):

• Aerospace: $3,026 M / $2,084 M
• Marine Systems: $3,589 M / $3,331 M
• Combat Systems: $2,176 M / $2,102 M
• Technologies: $3,432 M / $3,214 M

Revenue by contract type (Q1 2025):

• Fixed-price: $7,770 M
• Cost-reimbursable: $3,644 M
• Time & materials: $809 M

General Dynamics exhibits a healthy financial trajectory, leveraging a diversified defense and aerospace portfolio. Growth is supported by strong Gulfstream aircraft deliveries and stable defense program ramps. Backlog of $88.7 billion ensures revenue visibility through 2026, while new G800 type certification opens additional market potential. The balance sheet remains solid, though near-term debt maturities will require continued liquidity management. Key opportunities lie in aftermarket services expansion and international defense sales; primary challenges include U.S. budget uncertainty, supply-chain inflation, and contract cost overruns. Overall, the firm maintains robust cash generation and shareholder return capacity through dividends and buybacks, positioning it for sustained long-term value creation.