How GD (General Dynamics) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a defense contractor like General Dynamics makes money is essential for investors and anyone interested in the business of aerospace and defense. In this post, we break down General Dynamics's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

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Quick General Dynamics Overview

General Dynamics operates as a leading aerospace and defense company, designing, manufacturing, and supporting advanced military systems, submarines, aircraft, and combat vehicles. Revenue comes primarily from U.S. government contracts across four key segments: Marine Systems, Aerospace, Technologies, and Combat Systems.

Revenue Breakdown

• Total Revenue (Q4 2025): $14.4B (+7.8% YoY)
  • Marine Systems: $4.82B (33.5% of total, +21.7% YoY)
  • Aerospace: $3.79B (26.3% of total, +1.2% YoY)
  • Technologies: $3.24B (22.5% of total, -0.1% YoY)
  • Combat Systems: $2.54B (17.6% of total, +5.8% YoY)
  • Growth is powered by strong demand in Marine Systems, driven by submarine and shipbuilding contracts.

Gross Profit and Margins

• Gross Profit: $1.45B (10.1% gross margin)
  • Cost of Revenue: $12.9B (+14.9% YoY)
  • General Dynamics maintains moderate margins due to high fixed costs in manufacturing and supply chain pressures in defense production.
• Most costs come from materials, labor, and subcontractor services in defense manufacturing.

Operating Income and Expenses

• Operating Income: $1.45B (+2.0% YoY, 10.1% margin)
• Operating Expenses: Not broken out in detail; implied within operating income structure
  • General Dynamics continues to prioritize innovation while maintaining efficiency through long-term government contracts and operational leverage.

Net Income

• Pre-Tax Income: $1.40B (+2.3% YoY, 9.7% margin)
• Income Tax: $256.0M (18.3% effective tax rate)
• Net Income: $1.14B (-0.4% YoY, 7.9% net margin)
• General Dynamics converts a moderate portion of sales into profit due to scalability in defense contracts and pricing power with government clients.

What Drives General Dynamics's Money Machine?

• Marine Systems: 33.5%+ of revenue; fueled by Virginia-class submarines and Columbia-class programs, with robust 21.7% YoY growth
• Backlog and Contracts: Multi-year U.S. DoD contracts provide visibility; funded backlog supports steady revenue
• R&D and CapEx: Investments in next-gen technologies like hypersonics and unmanned systems
• Future growth areas: International sales and commercial aerospace recovery, though Technologies segment saw flat growth

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Visualizing General Dynamics's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially cost of revenue at 89.6% of sales) taking the largest chunk.
• Even after significant manufacturing costs, 7.9% of revenue drops to the bottom line.

Key Takeaways

• General Dynamics's money comes overwhelmingly from Marine Systems and Aerospace segments
• Moderate gross and net margins illustrate the power of General Dynamics's government contract stability
• Heavy investment in production capacity, balanced by efficiency in operating costs
• Ongoing growth is driven by DoD budget increases and segment diversification

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FAQ About General Dynamics's Income Statement

1. What is the main source of General Dynamics's revenue in 2025?

General Dynamics generates over 33.5% of its revenue from Marine Systems. Additional significant sources include Aerospace (26.3%) and Technologies (22.5%).

2. How profitable is General Dynamics in Q4 2025?

General Dynamics reported net income of $1.14B in Q4 2025, with a net margin of approximately 7.9%, reflecting moderate profitability driven by stable defense contracts offset by rising costs.

3. What are the largest expense categories for General Dynamics?

The biggest expenses on General Dynamics's income statement are operating expenses, particularly cost of revenue ($12.9B in Q4 2025), as the company prioritizes manufacturing scale-up for major programs.

4. Why does Technologies operate at a loss?

Technologies, despite generating $3.24B in revenue, contributes to overall margins amid flat YoY growth. This is because General Dynamics aggressively invests in IT services and mission systems, believing these will drive long-term growth—even if growth is modest today.

5. How does General Dynamics's effective tax rate compare to previous years?

General Dynamics's effective tax rate in Q4 2025 was 18.3%, consistent with previous years. This moderate rate is primarily due to tax benefits from government contract structures and international operations.