GENERAL DYNAMICS CORP
For the period ended Jul 5, 2026. Filed Jul 29, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 5, 2026 · Filed Jul 29, 2026
GD$354.06-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-04-05; filed 2026-04-29.
0000040533-26-000012
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-07-05; filed 2026-07-29.
0000040533-26-000032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 105 previous paragraphs and 107 current paragraphs.
63 unchanged; 39 reworded; 4 added; 3 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 19 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
We expect the Aerospace segment’s 2026 revenue to be approximately $13.8 billion with operating margin of approximately 14.7%.
Current report
We expect the Marine Systems segment’s 2026 revenue to be approximately $18 billion with operating margin of approximately 7.4%.
Current report
We expect the Combat Systems segment’s 2026 revenue to be approximately $9.8 billion with operating margin of approximately 13.8%.
Current report
We expect the Technologies segment’s 2026 revenue to be approximately $14.1 billion with operating margin of approximately 9.4%.
Removed paragraphs (3)
Previous report
We entered 2026 with the government operating under a continuing resolution (CR). Full-year appropriations were enacted in early February for all federal departments except for the Department of Homeland Security, which remains partially shutdown. This shutdown has not had a material impact on our business.
Previous report
2026 Outlook
Previous report
We expect our full-year diluted earnings per share (EPS) to be between $16.45 and $16.55.
Reworded paragraphs (39)
Previous wording
As a global aerospace and defense company, we compete in domestic and international markets, serving both government and commercial customers. Our financial performance is significantly influenced by U.S. government spending levels, administration priorities and the overall economy.
Current wording
As a global aerospace and defense company, we compete in domestic and international markets, serving both government and commercial customers. Our financial performance is significantly influenced by U.S. government spending levels, administration priorities and the overall economy. In the federal market, defense spending has been at increased levels, and the administration has publicly stated support for further increases.
Previous wording
In the federal market, defense spending has been at increased levels, and the administration has publicly stated support for further increases. This is reflected in the significant demand in U.S. Navy shipbuilding, particularly submarines. We have invested significantly in our facilities and workforce to increase production capacity to meet this demand, and expect to continue to do so. The increased demand has placed great pressure on the shipbuilding industrial base, which was already impacted by significant demographic issues coming out of the global pandemic. Together with the Navy customer, we have been working to stabilize and grow the supply chain to meet this heightened demand.
Current wording
There is significant demand in U.S. Navy shipbuilding, particularly submarines. We have invested significantly in our facilities and workforce to increase production capacity to meet this demand, and expect to continue to do so. The increased demand has placed pressure on the shipbuilding industrial base, which was already impacted by significant demographic issues coming out of the global pandemic. Together with the Navy customer, we have been working to stabilize and grow the supply chain to meet this heightened demand.
Previous wording
We have also been investing in the development of the next generation of combat vehicles and artillery. While the U.S. Army is reviewing its funding priorities and begins transitioning to next-generation combat vehicles, we expect short-term combat vehicle production volumes to be down slightly. Demand for our munitions products has been high and is expected to remain at an elevated level given ongoing conflicts and regional threats.
Current wording
We have also been investing in the development of the next generation of combat vehicles and artillery. While the U.S. Army is reviewing its funding priorities and begins transitioning to next-generation combat vehicles, we expect short-term combat vehicle production volumes to be down slightly. Demand for our munitions products has been high and is expected to remain at an elevated level given ongoing conflicts and the administration's support for further increases.
Previous wording
In our principal commercial market, Aerospace is experiencing strong demand for business jets. We believe our investments in a new family of Gulfstream aircraft will continue to fuel demand. The most recent addition is the G800, which entered into service last year. In addition, we expect the growing installed base of aircraft will continue to lead to increased demand for global aircraft services. The ongoing sanctions on Russia have restricted access to a segment of the market.
Current wording
In our principal commercial market, our Aerospace group is experiencing strong demand for business jets. We believe our investments in a new family of Gulfstream aircraft will continue to fuel demand. The most recent addition is the G800, which entered into service last year. In addition, we expect the growing installed base of aircraft will continue to lead to increased demand for global aircraft services. The ongoing sanctions on Russia have restricted access to a segment of the market.
Previous wording
Our Aerospace business has been impacted by inflationary pressures and tariffs. On February 20, 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were not authorized. Following the ruling, Customs and Border Protection (CBP) has established a process to refund previously-paid IEEPA tariffs. However, the timing of the collection of previously paid IEEPA tariffs is uncertain. These developments were not material to our results of operations. Non-IEEPA tariffs continue to impact the business, but do not present a significant burden in their current form.
Current wording
Our Aerospace business has been impacted by inflationary pressures and ongoing tariffs. In February 2026, the U.S. Supreme Court held that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unauthorized, and a phased process was developed to refund the previously paid tariffs. To date, we have received refunds of some of these tariffs. However, the timing of collection of remaining tariff refunds is uncertain. Overall, tariffs as applied in their current form and tariffs yet to be refunded are not material to our results of operations.
Previous wording
Our consolidated revenue increased in the first quarter of 2026 across all four operating segments, including over 20% growth in our Marine Systems segment driven by increased material volume. Operating margin increased 10 basis points in the first quarter of 2026.
Current wording
Our consolidated revenue increased in the second quarter and first six months of 2026 driven by growth across all four operating segments, primarily in our Aerospace and Marine Systems segments. Operating margin increased 40 basis points in the second quarter and 20 basis points in the first six months of 2026 due to improved operating performance in our Aerospace and Marine Systems segments.
Previous wording
The increase in the Aerospace segment’s revenue in the first quarter of 2026 consisted of the following:
Current wording
The increase in the Aerospace segment’s revenue in the second quarter and first six months of 2026 consisted of the following:
Previous wording
Aircraft manufacturing revenue increased in the first quarter of 2026 due primarily to additional aircraft deliveries. Aircraft services revenue was up in the first quarter of 2026 due primarily to increased customer demand for aircraft maintenance, a larger installed base and customer flight activity.
Current wording
Aircraft manufacturing revenue increased in the second quarter and first six months of 2026 due primarily to the number and mix of aircraft deliveries. Aircraft services revenue was up in the second quarter and first six months of 2026 due primarily to higher fixed-base operator (FBO) activity and increased customer demand for aircraft maintenance.
Previous wording
The increase in the segment’s operating earnings in the first quarter of 2026 consisted of the following:
Current wording
The increase in the segment’s operating earnings in the second quarter and first six months of 2026 consisted of the following:
Previous wording
Aircraft manufacturing operating earnings increased in the first quarter of 2026 due primarily to increased deliveries and improved performance. Aircraft services operating earnings increased in the first quarter of 2026 due to higher volume and a favorable service mix. In total, the Aerospace segment’s operating margin increased 70 basis points in the first quarter of 2026 compared with the prior-year period resulting from the same factors.
Current wording
Aircraft manufacturing operating earnings increased in the second quarter and first six months of 2026 due primarily to increased deliveries and aircraft mix. Aircraft services operating earnings increased in the second quarter and first six months of 2026 due to higher volume and a favorable services mix. In total, the Aerospace segment’s operating margin increased 130 basis points in the second quarter and 100 basis points in the first six months of 2026 compared with the prior-year periods due to improved operating performance.
Previous wording
The increase in the Marine Systems segment’s revenue in the first quarter of 2026 consisted of the following:
Current wording
The increase in the Marine Systems segment’s revenue in the second quarter and first six months of 2026 consisted of the following:
Previous wording
Revenue from U.S. Navy ship construction was up in the first quarter of 2026 due primarily to increased material and labor volume on Columbia-class and Virginia-class submarine construction and higher throughput on the John Lewis-class (T-AO-205) fleet replenishment oiler at our NASSCO shipyard. The Marine Systems segment’s operating margin increased 30 basis points in the first quarter of 2026 on improved performance.
Current wording
Revenue from U.S. Navy ship construction was up in the second quarter and first six months of 2026 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. The Marine Systems segment’s operating margin increased 40 basis points in the second quarter and first six months of 2026 on improved performance at each of our shipyards.
Previous wording
The increase in the Combat Systems segment’s revenue in the first quarter of 2026 consisted of the following:
Current wording
The increase in the Combat Systems segment’s revenue in the second quarter and first six months of 2026 consisted of the following:
Previous wording
Weapon systems and munitions revenue increased in the first quarter of 2026 due primarily to increased artillery production. International military vehicles increased due to higher volume on several wheeled and tracked vehicle programs in Europe. Revenue from U.S. military vehicles decreased in the first quarter of 2026 due to lower U.S. Army demand as part of their recapitalization efforts and the termination of the M10 Booker program. Overall, the Combat Systems segment’s operating margin increased 20 basis points in the first quarter of 2026 driven by favorable program mix.
Current wording
Weapon systems and munitions revenue increased in the second quarter and first six months of 2026 due primarily to increased artillery production. International military vehicles increased in the second quarter and first six months of 2026 due primarily to higher volume on several wheeled and tracked vehicle programs in Europe. Revenue from U.S. military vehicles decreased in the second quarter and first six months of 2026 due to lower U.S. Army demand as part of its recapitalization efforts and the termination of the M10 Booker program. Overall, the Combat Systems segment’s operating margin decreased in the second quarter and first six months of 2026 due to program mix.
Previous wording
The increase in the Technologies segment’s revenue in the first quarter of 2026 consisted of the following:
Current wording
The increase in the Technologies segment’s revenue in the second quarter and first six months of 2026 consisted of the following:
Previous wording
The Technologies segment’s revenue increased in the first quarter of 2026 due primarily to higher volume across several C5ISR programs, most notably in the group's space portfolio and international markets. Overall, the Technologies segment’s operating margin decreased 10 basis points in the first quarter of 2026.
Current wording
The Technologies segment’s revenue increased in the second quarter and first six months of 2026 due primarily to higher volume across several C5ISR programs, particularly systems supporting a variety of land and air platforms and international programs. Overall, the Technologies segment’s operating margin decreased 20 basis points in the second quarter and first six months of 2026 due to program mix.
Previous wording
Corporate operating costs totaled $38 in the first quarter of 2026 compared with $33 in the first quarter of 2025 and consisted of equity-based compensation expense and other miscellaneous expenses.
Current wording
Corporate operating costs totaled $49 in the second quarter and $87 in the first six months of 2026 compared with $45 in the second quarter and $78 in the first six months of 2025 and consisted of equity-based compensation expense and other miscellaneous expenses. Corporate operating costs are expected to be approximately $180 in 2026.
Previous wording
The increase in product revenue in the first quarter of 2026 consisted of the following:
Current wording
The increase in product revenue in the second quarter and first six months of 2026 consisted of the following:
Previous wording
Ship construction revenue increased due primarily to higher volume on the Columbia-class and Virginia-class submarine programs. Aircraft manufacturing revenue increased in the first quarter of 2026 due to additional aircraft deliveries. Weapon systems and munitions revenue increased in the first quarter of 2026 due primarily to increased artillery production. The primary drivers of the increase in product operating costs were the changes in volume on the programs described above.
Current wording
Aircraft manufacturing revenue increased in the second quarter and first six months of 2026 due to additional aircraft deliveries. Ship construction revenue increased due primarily to higher volume on the Columbia-class submarine program. Weapon systems and munitions revenue increased in the second quarter and first six months of 2026 due primarily to increased artillery production. The primary drivers of the increase in product operating costs were the changes in volume on the programs described above.
Previous wording
The increase in service revenue in the first quarter of 2026 consisted of the following:
Current wording
The increase in service revenue in the second quarter and first six months of 2026 consisted of the following:
Previous wording
Increased C5ISR solutions and IT services volume drove the higher service revenue in the first quarter of 2026. Ship services revenue was up in the first quarter of 2026 due to higher volume of engineering and repair work. The primary drivers of the increase in service operating costs were the changes in volume on the programs described above.
Current wording
Ship services revenue was up in the second quarter and first six months of 2026 due to higher volume of engineering and repair work. The increase in C5ISR solutions and IT services revenue was driven by higher volume across the Technologies segment. Aircraft services revenue was up in the second quarter and first six months of 2026 due primarily to FBO activity and additional customer demand for aircraft maintenance. Military vehicle services revenue was down in the second quarter and first six months of 2026 due primarily to lower vehicle support volume. The primary drivers of the increase in service operating costs were the changes in volume on the programs described above.
Previous wording
As a percentage of revenue, G&A expenses increased to 5.4% in the first three months of 2026 compared with 5.1% in the first three months of 2025.
Current wording
As a percentage of revenue, G&A expenses were 5.2% in the first six months of 2026 compared with 5.0% in the first six months of 2025. We expect G&A expenses as a percentage of revenue in 2026 to be generally consistent with 2025.
Previous wording
Net other income was $18 in the first three months of 2026 compared with $21 in the first three months of 2025, and represents primarily the non-service components of pension and other post-retirement benefits.
Current wording
Net other income was $14 in the first six months of 2026 compared with $36 in the first six months of 2025, and represents primarily the non-service components of pension and other post-retirement benefits. In 2026, we expect net other income to be approximately $15.
Previous wording
Net interest expense decreased to $69 in the first three months of 2026 from $89 in the prior-year period, reflecting lower interest expense associated with commercial paper issuances. See Note H to the unaudited Consolidated Financial Statements in Part I, Item 1, for additional information regarding our debt obligations, including interest rates.
Current wording
Net interest expense decreased to $118 in the first six months of 2026 from $177 in the prior-year period, reflecting lower interest expense associated with commercial paper issuances. See Note H to the unaudited Consolidated Financial Statements in Part I, Item 1, for additional information regarding our debt obligations, including interest rates. In 2026, we expect net interest expense to be approximately $270.
Previous wording
Our effective tax rate was 17.8% in the first three months of 2026 compared with 17.2% in the prior-year period.
Current wording
Our effective tax rate was 17.7% in the first six months of 2026 compared with 17.4% in the prior-year period. For 2026, we anticipate a full-year effective tax rate of approximately 17.5%.
Previous wording
Our total backlog, including funded and unfunded portions, was $130.8 billion at the end of the first quarter of 2026 compared with $118 billion on December 31, 2025. Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the unaudited Consolidated Financial Statements in Part I, Item 1. Our total estimated contract value, which combines total backlog with estimated potential contract value, was $188.4 billion on April 5, 2026.
Current wording
Our total backlog, including funded and unfunded portions, was $136.5 billion at the end of the second quarter of 2026 compared with $130.8 billion at the end of the first quarter. Our total backlog is equal to our remaining performance obligations under contracts with customers as discussed in Note B to the unaudited Consolidated Financial Statements in Part I, Item 1. Our total estimated contract value, which combines total backlog with estimated potential contract value, was $186.9 billion on July 5, 2026.
Previous wording
The following table details the backlog and estimated potential contract value of each segment at the end of the first quarter of 2026 and fourth quarter of 2025:
Current wording
The following table details the backlog and estimated potential contract value of each segment at the end of the second and first quarters of 2026:
Previous wording
Aerospace funded backlog represents primarily new aircraft orders for which we have definitive purchase contracts and deposits from customers. Unfunded backlog consists of agreements to provide future aircraft maintenance and support services. The Aerospace segment ended the first quarter of 2026 with backlog of $22.3 billion.
Current wording
Aerospace funded backlog represents primarily new aircraft orders for which we have definitive purchase contracts and deposits from customers. Unfunded backlog consists of agreements to provide future aircraft maintenance and support services. The Aerospace segment ended the second quarter of 2026 with backlog of $24 billion.
Previous wording
Orders for new Gulfstream aircraft reflected strong demand across our portfolio of products and services. The segment achieved a book-to-bill ratio (orders divided by revenue) of 1.2-to-1 in the first quarter of 2026.
Current wording
Orders for new Gulfstream aircraft reflected very strong demand across our portfolio of products and services. The segment achieved a book-to-bill ratio (orders divided by revenue) of 1.5-to-1 in the second quarter of 2026 and 1.3-to-1 in the first six months, even as revenue grew more than 10% in each period.
Previous wording
Beyond total backlog, estimated potential contract value represents primarily options and other agreements with existing customers to purchase new aircraft and long-term aircraft services agreements. On April 5, 2026, estimated potential contract value in the Aerospace segment was $1 billion.
Current wording
Beyond total backlog, estimated potential contract value represents primarily options and other agreements with existing customers to purchase new aircraft and long-term aircraft services agreements. On July 5, 2026, estimated potential contract value in the Aerospace segment was $1.2 billion.
Previous wording
Total backlog in our defense segments was $108.6 billion on April 5, 2026. The increase was driven by a $15.4 billion award within the Marine Systems segment for continued design and support work on the Columbia-class submarines program. In the first quarter of 2026, the defense segments achieved a book-to-bill ratio of 2.2-to-1. Estimated potential contract value in our defense segments was $56.6 billion on April 5, 2026.
Current wording
Total backlog in our defense segments was $112.5 billion on July 5, 2026. The defense segments achieved a book-to-bill ratio of 1.4-to-1 in the second quarter of 2026 and 1.8-to-1 in the first six months. The increase in backlog was primarily driven by awards in the Marine Systems segment for continued construction of Virginia-class submarines and to produce armored combat support vehicles in the Combat Systems segment. Estimated potential contract value in our defense segments was $49.2 billion on July 5, 2026.
Previous wording
We ended the first quarter of 2026 with a cash and equivalents balance of $3.7 billion compared with $2.3 billion at the end of 2025. Following is a discussion of our major operating, investing and financing activities in the first three months of 2026 and 2025, as classified on the Consolidated Statement of Cash Flows in Part I, Item 1:
Current wording
We ended the second quarter of 2026 with a cash and equivalents balance of $4.3 billion compared with $2.3 billion at the end of 2025. Following is a discussion of our major operating, investing and financing activities in the first six months of 2026 and 2025, as classified on the Consolidated Statement of Cash Flows in Part I, Item 1:
Previous wording
Cash provided by operating activities was $2.2 billion in the first three months of 2026 compared with cash used by operating activities of $148 in the same period in 2025. The primary driver of cash flows in both periods was net earnings. Cash flows in the first quarter of 2026 were affected positively by reductions in operating working capital led by the Combat Systems segment. Cash flows in the first quarter of 2025 were affected negatively by growth in operating working capital, particularly driven by timing in our Aerospace and Combat Systems segments.
Current wording
Cash provided by operating activities was $4 billion in the first six months of 2026 compared with $1.5 billion in the same period in 2025. The primary driver of cash flows in both periods was net earnings. Cash flows in the first six months of 2026 were affected positively by reductions in operating working capital led by our Combat Systems and Aerospace segments.
Previous wording
Cash used by investing activities was $202 in the first three months of 2026 compared with $130 in the same period in 2025. Our investing activities include cash paid for capital expenditures; business acquisitions; purchases, sales and maturities of marketable securities; and proceeds from asset sales. The primary use of cash for investing activities in both periods was capital expenditures. Capital expenditures were $203 in the first three months of 2026, up 43% compared with $142 in the same period of 2025, and are expected to remain elevated for the remaining quarters of 2026.
Current wording
Cash used by investing activities was $424 in the first six months of 2026 compared with $216 in the same period in 2025. Our investing activities include cash paid for capital expenditures; business acquisitions; purchases, sales and maturities of marketable securities; and proceeds from asset sales. The primary use of cash for investing activities in both periods was capital expenditures. Capital expenditures were $437 in the first six months of 2026, up 29% compared with $340 in the same period of 2025, and are expected to continue to increase in the second half of 2026.
Previous wording
Cash used by financing activities was $629 in the first three months of 2026 compared with $175 in the same period in 2025. Financing activities include the use of cash for repurchases of common stock to cover dilution, payment of dividends, and debt and commercial paper repayments. Our financing activities also include proceeds received from debt and commercial paper issuances and employee stock option exercises.
Current wording
Cash used by financing activities was $1.6 billion in the first six months of 2026 compared with $1.4 billion in the same period in 2025. Financing activities include the use of cash for payment of dividends, debt and commercial paper repayments and repurchases of common stock to cover dilution. Our financing activities also include proceeds received from debt and commercial paper issuances and employee stock option exercises.
Previous wording
On March 9, 2026, our board of directors (Board) declared a quarterly dividend of $1.59 per share, the 29th consecutive annual increase. Previously, the Board had increased the quarterly dividend to $1.50 per share in March 2025. Cash dividends paid were $405 in the first three months of 2026 compared with $383 in the same period in 2025.
Current wording
On March 9, 2026, our board of directors (Board) declared a quarterly dividend of $1.59 per share, the 29th consecutive annual increase. Previously, the Board had increased the quarterly dividend to $1.50 per share in March 2025. Cash dividends paid were $834 in the first six months of 2026 compared with $785 in the same period in 2025.
Previous wording
We paid $217 and $600 in the first three months of 2026 and 2025, respectively, to repurchase our outstanding shares to cover dilution. On April 5, 2026, 6.1 million shares remained authorized by our Board for repurchase, representing 2.3% of our total shares outstanding.
Current wording
We paid $319 and $600 in the first six months of 2026 and 2025, respectively, to repurchase our outstanding shares to cover dilution. On July 5, 2026, 5.8 million shares remained authorized by our Board for repurchase, representing 2.2% of our total shares outstanding.
Previous wording
Fixed-rate notes of $500 mature in both June and August 2026. We are evaluating the refinancing of these notes and will continue to monitor market conditions as maturities draw near. For additional information regarding our debt obligations, including scheduled debt maturities and interest rates, see Note H to the unaudited Consolidated Financial Statements in Part I, Item 1.
Current wording
In June 2026, we repaid fixed-rate notes of $500 at the scheduled maturity using cash on hand. Fixed-rate notes of $500 mature in August 2026. We currently plan to repay these notes using cash on hand but will continue to monitor market conditions as well as the need for future borrowings. For additional information regarding our debt obligations, including scheduled debt maturities and interest rates, see Note H to the unaudited Consolidated Financial Statements in Part I, Item 1.
Previous wording
Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. We review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. The aggregate impact of adjustments in contract estimates changed our operating earnings (and diluted earnings per share) by $54 ($0.16) and $31 ($0.09) for the three-month periods ended April 5, 2026, and March 30, 2025, respectively. No adjustment on any one contract was material to the unaudited Consolidated Financial Statements for the three-month periods ended April 5, 2026, or March 30, 2025.
Current wording
Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. Contract estimates are based on various assumptions to project the outcome of future events that often span several years. We review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. The aggregate impact of adjustments in contract estimates changed our operating earnings (and diluted earnings per share) by $29 ($0.08) and $83 ($0.24) for the three- and six-month periods ended July 5, 2026, and $31 ($0.09) and $62 ($0.18)
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
for the three- and six-month periods ended June 29, 2025, respectively. No adjustment on any one contract was material to the unaudited Consolidated Financial Statements for the three- and six-month periods ended July 5, 2026, or June 29, 2025.