Episode
General Dynamics (GD): Record $136.5B Backlog, a Beat AND a Raise — So Why Did the Stock Fall?
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- Jul 29, 2026
- Duration seconds
- 914
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Summary
General Dynamics Corporation (GD) Q2 2026 — General Dynamics (GD), the maker of Virginia- and Columbia-class submarines, Abrams tanks, GDIT government IT services and Gulfstream business jets, reported Q2 2026 (quarter ended July 5, 2026) before the open on July 29: revenue $14.094B (+8.1% YoY, beating the ~$13.52B consensus) and diluted EPS $4.24 (+13.4%) versus $3.96 expected — a 28-cent beat, with revenue growth in all four segments. Operating margin expanded 40 bps to 10.4%; operating earnings rose 11.9% to $1.46B. Total backlog hit a record $136.5B, up 31.6% YoY, with records in every segment and a 1.4-to-1 company book-to-bill on $20B of orders. Operating cash flow was $1.88B, or 162% of net earnings; cash nearly doubled to $4.33B and net debt fell to $3.18B from $5.68B at year-end. On the call management raised FY26 guidance to $16.80-$16.90 EPS on ~$55.7B revenue at a ~10.5% margin. And the stock still fell: GD opened at $397.40, touched a record $398.96 intraday, then reversed to about $380.96, down 3.1% from Tuesday's $393.19 close. Our read on why: the $0.35 guidance raise is barely more than the $0.28 quarterly beat, so the second half was lifted only ~$0.07, and $55.7B implies second-half revenue growth of just +2.9% versus +9.1% in the first half. Aerospace (Gulfstream) produced $107M of the $155M increase in operating earnings — 69% of the profit growth from the most cyclical business GD owns — on 41 aircraft deliveries versus 38. Combat Systems, the segment tied to European rearmament, grew revenue 0.3% with operating earnings down 1.9%, even as its backlog rose 77%. And 24% of the record backlog ($32.4B) is unfunded. Our owner-earnings DCF (GAAP net earnings + D&A - capex, stock comp left in as a real expense) puts normalized owner earnings near $4…