General Dynamics (NYSE: GD) reported second-quarter 2026 revenue of $14.09B and earnings per share of $4.24, both above analyst estimates, with Aerospace and Marine Systems showing the largest revenue gains among its business groups. The report matters because it is the clearest recent example of a theme investors keep asking about: whether steady government defense spending translates into reliable profit and cash. The next report is due Oct. 30, 2026.
Key facts
- Q2 FY2026 (quarter ended July 5, 2026): revenue was $14.09B, operating income $1.46B and net income $1.16B, all reported July 29, 2026.
- Earnings beat (reported July 29, 2026): EPS of 4.24 against an analyst estimate of 3.96, a difference of +$0.28. Revenue beat its estimate of $13.52B by $571.9M.
- Growth vs. year-ago quarter: revenue rose 8.1% and net income rose 14.4% from the quarter ended June 29, 2025.
- Share price (Oct. 22, 2026): 350.79 USD, up 1.76% on the day. The 52-week range is 306.77 to 400 USD.
- Next earnings (Oct. 30, 2026): analysts expect EPS of 4.12 and revenue of $13.72B.
What happened
The theme in brief. Defense spending is a recurring theme in recent market coverage, and companies that build ships, vehicles, aircraft and electronics tend to get long, multi-year contracts. For an investor, the appeal is predictability: revenue is tied to government programs rather than consumer moods. The catch is that these are low-margin, execution-heavy businesses. Delays, supply problems or cost overruns can erase the benefit of high demand.
General Dynamics as the example. In the quarter ended July 5, 2026, the company beat estimates on both revenue and EPS. Per its filing, sales rose in each of its business groups from a year earlier:
| Segment | Q2 FY2026 revenue | Q2 FY2025 revenue | |---|---|---| | Marine Systems | $4.66B | $4.22B | | Technologies | $3.62B | $3.48B | | Aerospace | $3.52B | $3.06B | | Combat Systems | $2.29B | $2.28B |
Marine Systems, which builds submarines and surface ships, is the largest by sales. Aerospace, the maker of Gulfstream business jets, added the most in dollar terms (from $3.06B to $3.52B, versus $4.22B to $4.66B for Marine Systems) and also grew fastest in percentage terms. Combat Systems was close to flat. No earnings call transcript was available for this piece, so we cannot quote management directly on the drivers. The segment data shows only which groups' revenue grew, not why.
The five-quarter trend. Margins have been steady rather than dramatic:
| Quarter | Revenue | Gross margin | Operating margin | Net income | |---|---|---|---|---| | Q2 FY2025 | $13.04B | 14.9% | 10.0% | $1.01B | | Q3 FY2025 | $12.91B | 15.2% | 10.3% | $1.06B | | Q4 FY2025 | $14.38B | 14.9% | 10.1% | $1.14B | | Q1 FY2026 | $13.48B | 15.9% | 10.5% | $1.13B | | Q2 FY2026 | $14.09B | 15.5% | 10.4% | $1.16B |
Operating margin (the share of each sales dollar left after running costs) has stayed in a narrow band. The Q2 FY2026 gross margin of 15.5% was a little below the prior quarter's 15.9%, but net income reached a five-quarter high. In short, profit grew mainly because sales grew, not because margins widened much.
Cash flow. Free cash flow (cash from operations minus capital spending) was $1.65B in Q2 FY2026, compared with $1.95B in Q1 FY2026 and $1.40B in the year-ago quarter. Operating cash flow was $1.88B. The company paid $429.0M in dividends and spent $102.0M on buybacks in the quarter. Buybacks were lower than in Q1 FY2026 ($217.0M) and Q4 FY2025 ($637.0M). Cash flow in this industry is lumpy because customer payments arrive on contract milestones, so single quarters can swing.
Why it matters for investors
Valuation versus peers. On trailing 12-month figures, GD trades at a P/E of 21.09 (price divided by the last year's earnings per share), price/sales of 1.73, and EV/EBITDA of 14.95. Its net margin is 8.2%. Here is how peers compare:
| Company | P/E | Net margin | |---|---|---| | General Dynamics | 21.09 | 8.2% | | Boeing (BA) | 70.24 | 2.6% | | BAE Systems (BAESY) | 27.45 | 7.2% | | Leonardo (FINMY) | 24.81 | 5.5% | | Huntington Ingalls (HII) | 16.60 | 5.0% |
GD earns the highest net margin in this group and trades at a lower P/E than Boeing, BAE and Leonardo, but a higher one than Huntington Ingalls.
Balance sheet. At the end of Q2 FY2026, GD held $4.33B in cash and short-term investments against $9.48B in total debt, so net debt was $5.15B. Debt/equity is 0.35. Its Piotroski score (a 0-9 measure of financial health) is 8, and its Altman Z score (a bankruptcy-risk gauge where higher is safer) is 4.16. The dividend yield is 1.8%.
Analyst view. Of 35 ratings, 20 are Buy, 14 are Hold and 1 is Sell, for a consensus of "Buy." Analysts' price targets average 407.43 USD (median 408.00), ranging from 360.00 to 465.00 USD. The recent share price of 350.79 USD is below even the lowest analyst target of 360.00 USD, though targets are opinions, not forecasts we endorse. Recent rating actions were mostly reiterations: RBC Capital (Sector Perform, Oct. 15), Bernstein (Market Perform, Oct. 14), TD Cowen (Buy, Oct. 9) and Citigroup (Neutral, Oct. 7). FMP's discounted cash flow model, which estimates what future cash is worth today, gives 322.78 USD per share, below the current price. Models like this depend heavily on their assumptions.
Stock Expert AI's MoonshotScore. GD scores 77.6, rated Strong. Compared with its sector, the pillars read: growth 85 and safety 83 (strong), momentum 68, valuation 65 and quality 62 (middling). The score suggests a company with solid growth and a sturdy balance sheet, but no bargain price. The quality pillar is measured relative to the sector, so it can read as middling even though GD's net margin is the highest among the peers listed above.
What could go wrong.
- Defense contractors in general depend on government budgets and contract timing, which are largely outside a company's control.
- Shipbuilding and aircraft production rely on supply chains and skilled labor, so delays can hit margins.
- Valuation is not low, and the quality pillar of 62 is among the weaker areas of the MoonshotScore.
- Among the 30 most recent insider filings, those dated in the last 90 days show 0 open-market purchases and 4 sales. Insider sales can happen for many personal reasons, but the absence of buying is worth noting.
What to watch next
GD reports on Oct. 30, 2026, with analysts expecting EPS of 4.12 and revenue of $13.72B. The revenue estimate is higher than the $12.91B reported for Q3 FY2025, while the EPS estimate is a bit lower than Q2's reported result. Watch these items:
- Whether operating margin holds near its recent range.
- Whether free cash flow rebounds from Q2 FY2026's $1.65B.
- Whether Combat Systems, the flat segment, begins to grow.
- Any change in management's outlook language on shipbuilding output and jet deliveries.
- Whether buybacks pick up again after the slower Q2 FY2026.
Frequently asked questions
Q: Did General Dynamics beat earnings estimates in the second quarter of 2026?
Yes. For the quarter ended July 5, 2026, reported July 29, GD posted EPS of 4.24 against an estimate of 3.96, and revenue of $14.09B against an estimate of $13.52B.
Q: Which General Dynamics business is growing fastest?
Aerospace. Its revenue rose from $3.06B to $3.52B in Q2 FY2026, the largest dollar gain and the fastest percentage growth of the four groups. Marine Systems also grew meaningfully, from $4.22B to $4.66B, and remains the largest by sales. Combat Systems was nearly flat.
Q: How is General Dynamics valued compared with other defense companies?
GD's trailing P/E is 21.09, versus 70.24 for Boeing, 27.45 for BAE Systems, 24.81 for Leonardo and 16.60 for Huntington Ingalls. Its net margin of 8.2% is the highest of that group. This is information, not a recommendation to buy or sell.
This is educational content, not investment advice. Past performance does not guarantee future results.