General Dynamics Corporation Q2 2026 Earnings Recap

General Dynamics shares fell 2.8% after the earnings release despite solid revenue and earnings growth, as investors reacted cautiously to the company’s cautious outlook and notably higher capital expenditures expected in the second half, which will weigh on free cash flow conversion.

Key Takeaways

• Q2 revenue rose 8.1% year-over-year to $14.1 billion; operating earnings increased nearly 12% to $1.46 billion; EPS grew 13.4% to $4.24.
• Operating margin improved 40 basis points to 10.4%, led by Aerospace and Marine Systems segments.
• Strong cash flow with $1.9 billion generated in the quarter; free cash flow reached $1.6 billion, translating to a 142% cash conversion rate.
• Capital expenditures increased nearly 30% year-over-year to $234 million this quarter, with an expected rise to 3.5-4.0% of sales for the full year, reflecting heavy investment in shipyards.
• The company flagged a lighter second half in free cash flow due to higher capex, a $500 million pension contribution, increased cash taxes, and working down advance payments—concerns that likely muted investor enthusiasm.