General Dynamics (GD) Delivers Across All Segments, Fueled by Record $168B Backlog

General Dynamics delivered a broad-based earnings beat this morning that rewarded investors across all four business segments. The stock opened 4.5% higher on the results, though it settled to a more modest gain as the day progressed. The real story here isn’t just that the company cleared expectations. It’s the consistency of execution and the scale of the backlog driving confidence into 2026.

The Aerospace segment is doing the heavy lifting. Revenue surged 30.3% to $3.23 billion, with operating margins expanding 100 basis points year over year. That kind of growth in a mature segment signals something important: demand for business jets remains robust, and General Dynamics is capturing share. CEO Phebe Novakovic highlighted the strength explicitly, noting that “order activity for business jets remains very strong.” This isn’t a blip. It’s a structural tailwind that should persist through next year.

Marine Systems wasn’t far behind, posting 13.8% revenue growth to $4.10 billion. Combined, these two segments accounted for over half of total revenue and are driving most of the earnings acceleration. I’d keep an eye on how long this pace holds. If it does, guidance could move higher in future quarters.

Here’s what caught my attention most. General Dynamics exited the quarter with a $167.7 billion backlog and a 1.5-to-1 book-to-bill ratio. That’s not just healthy. That’s a multi-year earnings visibility story. When a defense contractor has 18 months of revenue locked in, quarterly volatility becomes almost irrelevant. The company can focus on execution. That’s exactly what management signaled today.

Operating income rose 12.7% year over year to $1.33 billion, with the operating margin holding steady at 10.3%. The real margin expansion isn’t showing up in headline metrics yet. It’s embedded in the backlog conversion and the efficiency gains management is working through.

Key Figures

• Adjusted EPS: $3.88 (vs. $3.71 estimated); up 4.6% beat

• Revenue: $12.91B (vs. $12.53B estimated); up 3.0% beat, +10.6% year over year

• Operating Income: $1.33B; up 12.7% year over year

• Net Income: $1.06B; up 13.9% year over year

• Operating Margin: 10.3% (stable)

• Free Cash Flow: $1.90B

• Backlog: $167.7B with 1.5-to-1 book-to-bill ratio

• Quarterly Dividend: $0.403 per share

Operating cash flow hit $2.1 billion, representing 199% of net earnings. That’s the kind of cash generation that underpins shareholder returns and funds growth. Free cash flow of $1.90 billion provides real optionality.

Novakovic kept her remarks disciplined. She noted that “each of our four segments grew earnings and backlog in the quarter, reflecting solid execution coupled with growing demand.” That’s not hyperbole. It’s a factual summary of what happened. The company didn’t raise full-year guidance aggressively, which suggests management is taking a measured view of the remainder of the year. That restraint is refreshing in a market prone to exuberance.

The focus on execution and margin expansion came through clearly. Management isn’t chasing revenue at any cost. It’s optimizing for profitability and cash generation. That discipline tends to reward long-term holders.

The stock is trading near its 52-week high of $345.85, and the RSI has pulled back to a healthier 61.4, suggesting room for upside without overbought conditions. Analyst consensus targets $355.12, implying modest upside from current levels. The real test comes on the earnings call. Listen for how management frames demand trends into Q4 and early 2026. If the backlog conversion accelerates and margins continue expanding, the stock could rerate higher. Watch the forward guidance carefully. That’s where conviction will be tested.