General Dynamics builds America’s nuclear submarines, Abrams tanks and Gulfstream business jets, and runs a large government IT business. Its backlog is a record $136.5 billion, up 32% in a year, mostly submarines. It is the prime least exposed to Anduril.
Today’s close against the report’s numbers, updated every weekday. The analysis is as of October 22, 2026; the rating as of October 22, 2026. Both change only when the report is revised.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price, its 52-week range and the analysts’ average target. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 22, 2026, ahead of its third-quarter results on October 30. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds no GD shares directly.
General Dynamics has four segments. Marine Systems (about a third of sales) is Electric Boat, which builds the Columbia-class ballistic-missile submarines and, with HII, the Virginia-class attack submarines. Technologies is government IT (GDIT) and mission systems. Combat Systems builds Abrams tanks, Stryker vehicles and artillery shells. Aerospace is Gulfstream business jets and their servicing.
Most sales go to the U.S. government, but Gulfstream gives it a commercial business that depends on corporate profits and wealthy buyers rather than on the defense budget.
Second-quarter revenue rose 8% to $14.1 billion and earnings 13% to $4.24 a share, ahead of forecasts. Orders of nearly $20 billion gave a book-to-bill of 1.4 and lifted backlog 32% to $136.5 billion. Gulfstream delivered 41 jets at a 14.5% margin.
General Dynamics raised 2026 guidance for the second time this year: revenue of about $55.7 billion at a 10.5% operating margin and earnings of $16.80–16.90 a share, with Marine revenue raised by almost $1.3 billion to about $18 billion. Electric Boat is on track for two Virginia-class and one Columbia-class submarine a year in the early 2030s. Third-quarter results come on October 30.
Anduril does build for the sea: its Dive-XL and Ghost Shark autonomous submarines are designed to be built quickly and in numbers. But they complement crewed nuclear submarines rather than replace them, and no new entrant can build a Columbia-class boat. Anduril makes no tanks or business jets. The most exposed part of General Dynamics is its IT business, where software-first companies, including Anduril with its Lattice platform and Palantir, compete for the Pentagon’s data and command systems.
| Market | Where General Dynamics stands | How exposed |
|---|---|---|
| Nuclear submarines | One of two U.S. builders; prime on Columbia | Low: drone submarines add to the fleet, not replace it |
| Tanks, vehicles, shells | Abrams, Stryker and a large artillery-shell business | Low to medium: drones change ground warfare, but not who builds tanks |
| Government IT | GDIT, one of the largest federal IT contractors | Medium: software-first rivals and budget cuts to contractors |
| Business jets | Gulfstream, about a quarter of sales | None |
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Apr 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $38.5B | $39.4B | $42.3B | $47.7B | $52.5B | $53.8B |
| Operating margin | 10.8% | 10.7% | 10.0% | 10.1% | 10.2% | 10.2% |
| Net income | $3.3B | $3.4B | $3.3B | $3.8B | $4.2B | $4.3B |
| Operating cash flow | $4.3B | $4.6B | $4.7B | $4.1B | $5.1B | $7.4B |
| Capital spending | $0.9B | $1.1B | $0.9B | $0.9B | $1.2B | $1.2B |
| Free cash flow | $3.4B | $3.5B | $3.8B | $3.2B | $4.0B | $6.2B |
Sales have grown about 7% a year since 2021 at an operating margin close to 10% every year: General Dynamics’ record is steady rather than spectacular. The last column covers the four quarters to April; second-quarter results, above, were ahead of that pace. The quarterly view shows each quarter.
At the end of June General Dynamics had about $4.3 billion of cash and net debt of only $3.2 billion. It expects free cash flow of about 105% of net income this year, with capital spending of 3.5–4% of sales, much of it to expand submarine yards.
| Assumption | Base case | Basis |
|---|---|---|
| Sales, 2026 | $55.7B | Guidance |
| Growth, 2027 and 2028 | 7%, then 6% | Submarine ramp and record backlog; fades to 3% by year 10 |
| Operating margin | 10.5% rising to 11% | Marine margins improving slowly |
| Reinvestment | $1 for every $3 of new sales | Shipyard expansion |
| Discount rate | 8.4% | Beta 0.80 for defense peers (its own is 0.70), 8% debt |
| Terminal growth | 3.0% | With a 15% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 4% / 3% | 7% / 6% | 9% / 8% |
| Long-run operating margin | 10% | 11% | 12% |
| Discount rate | 9.4% | 8.4% | 7.4% |
| Value per share | $229 | $336 | $494 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $349. The bear case is submarine delays and a business-jet downturn; the bull case is Electric Boat reaching full production sooner, with better margins.
| Discount rate | 7.0% | 7.5% | 8.0% | 8.5% | 9.0% |
|---|---|---|---|---|---|
| Value per share | $454 | $403 | $362 | $328 | $300 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To justify the price, you need | Against |
|---|---|
| Sales growth of about 7.3% a year for two years, then the same fade | 7% and 6% |
| Or a long-run operating margin of about 11.5% | 11% |
The price is close to the base case: investors are paying for roughly management’s plan. Analysts average about $402. The shares are about 12% below their high, part of the sector’s fall as investors priced in a Democratic Congress after the November 3 midterms.
| Risk | Why it matters |
|---|---|
| Shipyard execution | Submarine programs have run late; labor and suppliers are the constraint. |
| Marine margins | Around 7%, the lowest of its segments; cost overruns land on General Dynamics. |
| Business jets | Gulfstream depends on corporate profits and wealthy buyers. |
| Federal IT | Contractor spending cuts and software-first rivals squeeze GDIT. |
| Budgets and politics | A Democratic Congress could trim the defense increase, though submarines have support in both parties. |
Upside: Block VI Virginia-class contracts, faster submarine production, new Gulfstream models and European orders for vehicles and shells.
General Dynamics has the steadiest record of the primes, a backlog up 32% in a year, and the least exposure to new entrants: no start-up builds nuclear submarines or business jets. The price is close to the base case.
What would change the value: Third-quarter results on October 30, Block VI submarine contracts and Gulfstream deliveries against the 160 guided are the next inputs.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $349. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades within 10% of our estimated value.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating is the same whether the index is assumed to grow 6% or 10% a year. How ratings work
Against the Street: Analysts average about $402, assuming faster margin gains at Electric Boat than the 11% long-run margin here.
| Measure | General Dynamics | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 10.1% | 9.8% | 6 of 12 | Better than the median |
| Operating margin | 10.2% | 10.6% | 8 of 12 | Worse than the median |
| Price to earnings | 23.1× | 27.7× | 6 of 12 | Better than the median |
| Free cash flow yield | 6.2% | 3.0% | 1 of 12 | Better than the median |
Peers: the 11 other S&P 500 companies in Aerospace & Defense with complete data (AXON, BA, GE, HII, HWM, LHX, LMT, NOC, RTX, TDG, TXT). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
The steadiest of the primes, at about the plan’s price.
| What | Figures | Source |
|---|---|---|
| Latest results | $14.1B (Revenue, Q2 2026, +8%), $4.24 (Earnings per share, +13%), $1.6B (Free cash flow), $136.5B (Backlog, a record, +32%) and others | Q2 2026 earnings call; Q3 results date |
| The numbers (five-year table) | Five years of annual figures and the last twelve months | SEC XBRL company facts; latest: 10-K for the period to 2025-12-31, 10-Q for the period to 2026-07-05 |
| Price at writing | $350.75 (Close, Oct 22, 2026) | Yahoo Finance; the time of the quote is stated beside the price |
| Discount rate inputs | 10-year Treasury 5.15%, equity risk premium 4.5% | Fixed for every report so they can be compared; How ratings work |
| Valuation | Every value, case and sensitivity | This site’s model: XLSX, CSV |
| Checked by hand | 8 figures on October 23, 2026 | All match. Audit log |
| Input | Bear (10th percentile) | Base (median) | Bull (90th percentile) |
|---|---|---|---|
| Growth, first forecast year | 4.0% | 7.0% | 9.0% |
| Growth, second forecast year | 3.0% | 6.0% | 8.0% |
| Operating margin, near term | 10.0% | 10.5% | 11.0% |
| Operating margin, long run | 10.0% | 11.0% | 12.0% |
| Discount rate | 9.4% | 8.4% | 7.4% |
| Simulation result | |
|---|---|
| Expected value (average of 4,000 runs) | $342.11 |
| Likely range, 10th to 90th percentile | $258.86 to $433.93 |
| Median | $333.42 |
| Chance the value is above the price | 40% |
| Chance it is cheaper than the S&P 500 | 96% |
Each input is drawn from a split normal: its bear and bull values are the 10th and 90th percentiles, so the two sides can differ. Business inputs share a common factor (correlation 0.6); the discount rate moves on its own. Inputs not listed are held at their base value. How the simulation works.