Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENT OF EARNINGS

			Year Ended December 31
(Dollars in millions, except per-share amounts)			2025						2024						2023
Revenue:
Products			$	33,021					$	28,635					$	24,595
Services			19,529						19,081						17,677
			52,550						47,716						42,272
Operating costs and expenses:
Products			(27,965)						(24,332)						(20,591)
Services			(16,634)						(16,020)						(15,009)
General and administrative (G&A)			(2,595)						(2,568)						(2,427)
			(47,194)						(42,920)						(38,027)
Operating earnings			5,356						4,796						4,245
Other, net			61						68						82
Interest, net			(314)						(324)						(343)
Earnings before income tax			5,103						4,540						3,984
Provision for income tax, net			(893)						(758)						(669)
Net earnings			$	4,210					$	3,782					$	3,315
Earnings per share
Basic			$	15.65					$	13.81					$	12.14
Diluted			$	15.45					$	13.63					$	12.02

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			Year Ended December 31
(Dollars in millions)						2025						2024						2023
Net earnings						$	4,210					$	3,782					$	3,315
Changes in unrealized cash flow hedges						113						(117)						10
Foreign currency translation adjustments						638						(438)						413
Changes in retirement plans’ funded status						398						208						722
Other comprehensive income (loss), pretax						1,149						(347)						1,145
Provision for income tax, net						(114)						(12)						(152)
Other comprehensive income (loss), net of tax						1,035						(359)						993
Comprehensive income						$	5,245					$	3,423					$	4,308

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED BALANCE SHEET

			December 31
(Dollars in millions)			2025						2024
ASSETS
Current assets:
Cash and equivalents			$	2,333					$	1,697
Accounts receivable			2,406						2,977
Unbilled receivables			8,380						8,248
Inventories			9,232						9,724
Other current assets			1,897						1,740
Total current assets			24,248						24,386
Noncurrent assets:
Property, plant and equipment, net			7,525						6,467
Intangible assets, net			1,375						1,520
Goodwill			21,009						20,556
Other assets			3,092						2,951
Total noncurrent assets			33,001						31,494
Total assets			$	57,249					$	55,880
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt			$	1,006					$	1,502
Accounts payable			2,678						3,344
Customer advances and deposits			9,824						9,491
Other current liabilities			3,288						3,487
Total current liabilities			16,796						17,824
Noncurrent liabilities:
Long-term debt			7,007						7,260
Other liabilities			7,824						8,733
Commitments and contingencies (see Note M)
Total noncurrent liabilities			14,831						15,993
Shareholders’ equity:
Common stock			482						482
Surplus			4,403						4,062
Retained earnings			44,080						41,487
Treasury stock			(22,860)						(22,450)
Accumulated other comprehensive loss			(483)						(1,518)
Total shareholders’ equity			25,622						22,063
Total liabilities and shareholders’ equity			$	57,249					$	55,880

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

			Year Ended December 31
(Dollars in millions)			2025						2024						2023
Cash flows from operating activities – continuing operations:
Net earnings			$	4,210					$	3,782					$	3,315
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation of property, plant and equipment			680						644						608
Amortization of intangible and finance lease right-of-use assets			244						242						255
Equity-based compensation expense			196						183						181
Deferred income tax provision (benefit)			256						(86)						(177)
(Increase) decrease in assets, net of effects of business acquisitions:
Accounts receivable			556						16						38
Unbilled receivables			(146)						(261)						913
Inventories			450						(1,195)						(2,219)
Increase (decrease) in liabilities, net of effects of business acquisitions:
Accounts payable			(664)						247						(303)
Customer advances and deposits			(4)						343						2,415
Other, net			(658)						197						(316)
Net cash provided by operating activities			5,120						4,112						4,710
Cash flows from investing activities:
Capital expenditures			(1,161)						(916)						(904)
Other, net			(123)						(37)						(37)
Net cash used by investing activities			(1,284)						(953)						(941)
Cash flows from financing activities:
Dividends paid			(1,593)						(1,529)						(1,428)
Repayment of fixed-rate notes			(1,500)						(500)						(1,250)
Proceeds from fixed-rate notes			747						—						—
Purchases of common stock			(637)						(1,501)						(434)
Other, net			(207)						161						18
Net cash used by financing activities			(3,190)						(3,369)						(3,094)
Net cash used by discontinued operations			(10)						(6)						(4)
Net increase (decrease) in cash and equivalents			636						(216)						671
Cash and equivalents at beginning of year			1,697						1,913						1,242
Cash and equivalents at end of year			$	2,333					$	1,697					$	1,913

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

			Common Stock												Retained						Treasury						Accumulated Other Comprehensive						Total Shareholders’
(Dollars in millions)			Par						Surplus						Earnings						Stock						Loss						Equity
December 31, 2022			$	482					$	3,556					$	37,403					$	(20,721)					$	(2,152)					$	18,568
Net earnings			—						—						3,315						—						—						3,315
Cash dividends declared			—						—						(1,448)						—						—						(1,448)
Equity-based awards			—						204						—						101						—						305
Shares purchased			—						—						—						(434)						—						(434)
Other comprehensive income			—						—						—						—						993						993
December 31, 2023			482						3,760						39,270						(21,054)						(1,159)						21,299
Net earnings			—						—						3,782						—						—						3,782
Cash dividends declared			—						—						(1,565)						—						—						(1,565)
Equity-based awards			—						302						—						113						—						415
Shares purchased			—						—						—						(1,509)						—						(1,509)
Other comprehensive loss			—						—						—						—						(359)						(359)
December 31, 2024			482						4,062						41,487						(22,450)						(1,518)						22,063
Net earnings			—						—						4,210						—						—						4,210
Cash dividends declared			—						—						(1,617)						—						—						(1,617)
Equity-based awards			—						341						—						227						—						568
Shares purchased			—						—						—						(637)						—						(637)
Other comprehensive income			—						—						—						—						1,035						1,035
December 31, 2025			$	482					$	4,403					$	44,080					$	(22,860)					$	(483)					$	25,622

The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except share and per-share amounts or unless otherwise noted)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Dynamics is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; ship construction and repair; land combat vehicles, weapon systems and munitions; and technology products and services.

The following is a discussion of certain significant accounting policies, and further discussion is contained in other notes to these financial statements.

Basis of Consolidation and Classification. The Consolidated Financial Statements include the accounts of General Dynamics Corporation and our wholly owned and majority-owned subsidiaries. We eliminate all intercompany balances and transactions in the Consolidated Financial Statements.

Consistent with industry practice, we classify assets and liabilities related to long-term contracts as current, even though some of these amounts may not be realized within one year.

Use of Estimates. The nature of our business requires that we make estimates and assumptions in accordance with U.S. generally accepted accounting principles (GAAP). These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. We base our estimates on historical experience, currently available information and various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates.

Research and Development Expenses. Company-sponsored research and development (R&D) expenses, including Aerospace product-development costs, were $486 in 2025, $565 in 2024 and $510 in 2023. The decrease in 2025 was due primarily to reduced R&D expenditures after completion of the G800 certification process. R&D expenses are included in operating costs and expenses in the Consolidated Statement of Earnings in the period in which they are incurred. Customer-sponsored R&D expenses are charged directly to the related contracts.

The Aerospace segment has cost-sharing arrangements with some of its suppliers that enhance the segment’s internal development capabilities and offset a portion of the financial cost associated with the segment’s product development efforts. These arrangements explicitly state that supplier contributions are for reimbursement of costs we incur in the development of new aircraft models and technologies, and we retain substantial rights in the products developed under these arrangements. We record amounts received from these cost-sharing arrangements as a reduction of R&D expenses. We have no obligation to refund any amounts received under the agreements regardless of the outcome of the development efforts. Under the typical terms of an agreement, payments received from suppliers for their share of the costs are based on milestones and are recognized as received. Our policy is to defer payments in excess of the costs we have incurred.

Interest, Net. Net interest expense consisted of the following:

Year Ended December 31			2025						2024						2023
Interest expense			$	402					$	393					$	399
Interest income			(88)						(69)						(56)
Interest expense, net			$	314					$	324					$	343

See Note K for information regarding our debt obligations, including interest rates.

Cash and Equivalents and Investments in Debt and Equity Securities. We consider securities with a maturity of three months or less to be cash equivalents. Our cash balances are invested primarily in time deposits rated A-/A3 or higher. Our investments in other securities are included in other current and noncurrent assets on the Consolidated Balance Sheet. We report our equity securities at fair value with subsequent changes in fair value recognized in net earnings. We report our available-for-sale debt securities at fair value with unrealized gains and losses recognized as a component of other comprehensive income (loss) in the Consolidated Statement of Comprehensive Income. We had no material trading or held-to-maturity debt securities on December 31, 2025 or 2024. We record equity method investments initially at cost, and periodically update the carrying value based on activity associated with our investment.

Acquisitions. In the last three years, we acquired two businesses in our Aerospace segment, two businesses in our Combat Systems segment and two businesses in our Technologies segment. The operating results of these acquisitions have been included in our reported results since their respective closing dates. The purchase prices of the acquisitions have been allocated to the estimated fair value of net tangible and intangible assets acquired, with any excess purchase price recorded as goodwill.

Long-lived Assets and Goodwill. We review long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. We assess the recoverability of the carrying value of assets held for use based on a review of undiscounted projected cash flows. Impairment losses, where identified, are measured as the excess of the carrying value of the long-lived assets over the estimated fair value as determined by discounted cash flows.

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired in a business combination. We review goodwill for impairment annually at each of our reporting units or when circumstances indicate that the likelihood of an impairment is greater than 50%. Our reporting units are consistent with our operating segments in Note O. We use both qualitative and quantitative approaches when testing goodwill for impairment. When determining the approach to be used, we consider the current facts and circumstances of each reporting unit as well as the excess of each reporting unit’s estimated fair value over its carrying value based on our most recent quantitative assessments. Our qualitative approach evaluates the business environment and various events impacting the reporting unit including, but not limited to, macroeconomic conditions, changes in the business environment and reporting unit-specific events. If, based on the qualitative assessment, we determine that it is more likely than not that the fair value of a reporting unit is greater than its carrying value, then a quantitative assessment is not necessary. However, if a quantitative assessment is determined to be necessary, we compare the fair value of a reporting unit to its carrying value and, if necessary, recognize an impairment loss for the amount by which the carrying value exceeds the reporting unit’s fair value. Our estimate of a reporting unit’s fair value is based primarily on the discounted cash flows of the underlying operations.

In the fourth quarter of 2025, we completed qualitative assessments of goodwill for each of our reporting units. Our Aerospace, Marine Systems and Combat Systems reporting units’ estimated fair values significantly exceeded their respective carrying values based on our most recent quantitative assessments, which were performed in the fourth quarter of 2018. Our Technologies reporting unit’s estimated fair value exceeded its carrying value by approximately 25% at the time of our last quantitative assessment in the fourth quarter of 2022. Our qualitative assessments this year did not present indicators of impairment.

For a summary of our goodwill by reporting unit, see Note H.

Recent Accounting Pronouncements. In 2025, we adopted Accounting Standards Update (ASU) 2023-09, Improvements to Income Tax Disclosures, using the prospective method of adoption. The ASU modifies our disclosure for income tax expense.

In November 2024, the FASB issued ASU 2024-03, Disaggregation - Income Statement Expenses. The ASU requires disclosure of certain disaggregated costs and expenses on an annual and interim basis in the notes to the financial statements. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, using the prospective or retrospective methods of adoption, with early adoption permitted. Although we have not determined the method or period of adoption, we expect to disclose additional information as required by the standard. There are other ASUs that have been issued by the FASB but are not yet effective. We do not expect that the adoption of these standards will have a material impact on our results of operations, financial condition or cash flows.

B. REVENUE

Performance Obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for revenue. A contract’s transaction price is allocated to each distinct performance obligation within that contract and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. Some of our contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the product life cycle (development, production, maintenance and support). For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service. We classify revenue as products or services based on the predominant attributes of the associated performance obligation.

Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in customer specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as part of the existing contract.

Our performance obligations are satisfied over time as work progresses or at a point in time. Revenue from products and services transferred to customers over time accounted for 75% of our revenue in 2025, 76% in 2024 and 79% in 2023. Substantially all of our revenue in the defense segments is recognized over time because control is transferred continuously to our customers. Typically, revenue

is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, overhead and, when appropriate, G&A expenses.

Revenue from goods and services transferred to customers at a point in time accounted for 25% of our revenue in 2025, 24% in 2024 and 21% in 2023. Most of our revenue recognized at a point in time is for the manufacture of business jet aircraft in our Aerospace segment. Revenue on these contracts is recognized when the customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the fully outfitted aircraft.

On December 31, 2025, we had $118 billion of remaining performance obligations, which we refer to as total backlog. We expect to recognize approximately 35% of our remaining performance obligations as revenue in 2026, an additional 35% by the end of 2028 and the balance thereafter.

Contract Estimates. The majority of our revenue is derived from long-term contracts and programs that can span several years. Accounting for long-term contracts and programs involves the use of various techniques to estimate total contract revenue and costs. We estimate the profit on a contract as the difference between the total estimated revenue and expected costs to complete a contract and recognize that profit over the life of the contract.

Contract estimates are based on various assumptions to project the outcome of future events that often span several years. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer.

The nature of our contracts gives rise to several types of variable consideration, including claims, award fees and incentive fees. We include in our contract estimates additional revenue for contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. In evaluating these criteria, we consider the contractual/legal basis for the claim, the cause of any additional costs incurred, the reasonableness of those costs and the objective evidence available to support the claim. We include award fees or incentive fees in the estimated transaction price when there is a basis to reasonably estimate the amount of the fee. These estimates are based on historical award experience, anticipated performance and our best informed judgment at the time.

As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our contract-related estimates regularly. We recognize adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified.

The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating costs and expenses or revenue. The aggregate impact of adjustments in contract estimates changed our revenue, operating earnings and diluted earnings per share as follows:

Year Ended December 31			2025						2024						2023
Revenue			$	302					$	176					$	191
Operating earnings			160						56						112
Diluted earnings per share			$	0.46					$	0.16					$	0.32

While no adjustment on any one contract was material to the Consolidated Financial Statements in 2025, 2024 or 2023, our Marine Systems segment’s 2024 results were affected negatively by supplier quality issues and late supply chain deliveries causing cost growth and schedule delays on the Virginia-class submarine Block IV contract.

We have a large, long-term contract with an international customer for tracked vehicles in which our estimates for contract revenue include variable consideration. It is reasonably possible that the actual amount of variable consideration realized could be less than our estimate, which could have a material unfavorable impact on our results of operations.

Revenue by Category. Our portfolio of products and services consists of more than 8,000 active contracts. The following series of tables presents our revenue disaggregated by several categories.

Revenue by major products and services was as follows:

Year Ended December 31			2025						2024						2023
Aircraft manufacturing			$	9,413					$	7,811					$	5,710
Aircraft services			3,697						3,438						2,911
Total Aerospace			13,110						11,249						8,621
Nuclear-powered submarines			12,608						10,392						8,631
Surface ships			2,932						2,819						2,698
Repair and other services			1,183						1,132						1,132
Total Marine Systems			16,723						14,343						12,461
Military vehicles			4,970						5,101						5,036
Weapon systems and munitions			3,104						2,932						2,442
Engineering and other services			1,172						964						790
Total Combat Systems			9,246						8,997						8,268
Information technology (IT) services			9,057						8,761						8,459
C5ISR* solutions			4,414						4,366						4,463
Total Technologies			13,471						13,127						12,922
Total revenue			$	52,550					$	47,716					$	42,272

*Command, control, communications, computers, cyber, intelligence, surveillance and reconnaissance

Revenue by contract type was as follows:

Year Ended December 31, 2025			Aerospace						Marine Systems						Combat Systems						Technologies						Total Revenue
Fixed-price			$	12,050					$	7,995					$	8,131					$	5,577					$	33,753
Cost-reimbursement			—						8,725						1,038						5,910						15,673
Time-and-materials			1,060						3						77						1,984						3,124
Total revenue			$	13,110					$	16,723					$	9,246					$	13,471					$	52,550
Year Ended December 31, 2024
Fixed-price			$	10,250					$	6,800					$	7,973					$	5,376					$	30,399
Cost-reimbursement			—						7,542						951						5,749						14,242
Time-and-materials			999						1						73						2,002						3,075
Total revenue			$	11,249					$	14,343					$	8,997					$	13,127					$	47,716
Year Ended December 31, 2023
Fixed-price			$	7,645					$	6,202					$	7,321					$	5,646					$	26,814
Cost-reimbursement			—						6,258						880						5,457						12,595
Time-and-materials			976						1						67						1,819						2,863
Total revenue			$	8,621					$	12,461					$	8,268					$	12,922					$	42,272

Our segments operate under fixed-price, cost-reimbursement and time-and-materials contracts. Our production contracts are primarily fixed-price. Under these contracts, we agree to perform a specific scope of work for a fixed amount. Contracts for research, engineering, repair and maintenance, and other services are typically cost-reimbursement or time-and-materials. Under cost-reimbursement contracts, the customer reimburses contract costs incurred and pays a fixed, incentive or award-based fee. The amount for an incentive or award fee is determined by our ability to achieve targets set in the contract, such as cost, quality, schedule and performance. Under time-and-materials contracts, the customer pays a fixed hourly rate for direct labor and generally reimburses us for the cost of materials.

Each of these contract types presents advantages and disadvantages. Typically, we assume more risk with fixed-price contracts. However, these types of contracts offer additional profits when we complete the work for less than originally estimated. Cost-reimbursement contracts generally subject us to lower risk. Accordingly, the associated base fees are usually lower than fees earned on fixed-price contracts. Under time-and-materials contracts, our profit may vary if actual labor-hour rates vary significantly from the negotiated rates. Also, because these contracts may provide little or no fee for managing material costs, the content mix can impact profitability.

Revenue by customer was as follows:

Year Ended December 31, 2025			Aerospace						Marine Systems						Combat Systems						Technologies						Total Revenue
U.S. government:
Department of War (DoW)			$	311					$	16,575					$	4,966					$	7,936					$	29,788
Non-DoW			84						3						12						4,855						4,954
Foreign military sales (FMS)			18						136						849						12						1,015
Total U.S. government			413						16,714						5,827						12,803						35,757
U.S. commercial			7,149						4						236						168						7,557
Non-U.S. government			954						5						2,981						465						4,405
Non-U.S. commercial			4,594						—						202						35						4,831
Total revenue			$	13,110					$	16,723					$	9,246					$	13,471					$	52,550
Year Ended December 31, 2024
U.S. government:
DoW			$	253					$	14,204					$	5,102					$	7,632					$	27,191
Non-DoW			—						2						8						4,800						4,810
FMS			43						132						857						31						1,063
Total U.S. government			296						14,338						5,967						12,463						33,064
U.S. commercial			6,237						2						258						198						6,695
Non-U.S. government			1,447						3						2,599						422						4,471
Non-U.S. commercial			3,269						—						173						44						3,486
Total revenue			$	11,249					$	14,343					$	8,997					$	13,127					$	47,716
Year Ended December 31, 2023
U.S. government:
DoW			$	303					$	12,325					$	4,580					$	7,512					$	24,720
Non-DoW			—						3						10						4,698						4,711
FMS			69						129						651						47						896
Total U.S. government			372						12,457						5,241						12,257						30,327
U.S. commercial			5,398						2						233						200						5,833
Non-U.S. government			493						2						2,692						388						3,575
Non-U.S. commercial			2,358						—						102						77						2,537
Total revenue			$	8,621					$	12,461					$	8,268					$	12,922					$	42,272

Contract Balances. The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheet. In our defense segments, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, we sometimes receive advances or deposits from our customers, particularly on our international contracts, before revenue is recognized, resulting in contract liabilities. These assets and liabilities are reported on the Consolidated Balance Sheet on a contract-by-contract basis at the end of each reporting period. In our Aerospace segment, we generally receive deposits from customers upon contract execution and upon achievement of contractual milestones. These deposits are liquidated when revenue is recognized. Changes in the contract asset and

liability balances during the year ended December 31, 2025, were not materially impacted by any other factors.

Revenue recognized in 2025, 2024 and 2023 that was included in the contract liability balance at the beginning of each year was $8 billion, $5.8 billion and $4.2 billion, respectively. This revenue represented primarily the sale of business jet aircraft.

C. EARNINGS PER SHARE

We compute basic earnings per share (EPS) using net earnings for the period and the weighted average number of common shares outstanding during the period. Diluted EPS incorporates the additional shares issuable upon the assumed exercise of stock options and the release of restricted stock and restricted stock units (RSUs).

Basic and diluted weighted average shares outstanding were as follows (in thousands):

Year Ended December 31			2025						2024						2023
Basic weighted average shares outstanding			269,080						273,858						273,143
Dilutive effect of stock options and restricted stock/RSUs*			3,345						3,627						2,582
Diluted weighted average shares outstanding			272,425						277,485						275,725

*Excludes unvested stock options, and vested stock options that had exercise prices in excess of the average market price of our common stock during the year and, therefore, the effect of including these options would be antidilutive. These options totaled 922 in 2025, 1,033 in 2024 and 2,961 in 2023.

D. INCOME TAXES

Income Tax Provision. We calculate our provision for federal, state and foreign income taxes based on current tax law. The following is a summary of our net provision for income taxes for continuing operations:

Year Ended December 31			2025						2024						2023
Current:
U.S. federal			$	357					$	622					$	619
State			3						32						27
Foreign			277						190						200
Total current			637						844						846
Deferred:
U.S. federal			282						(90)						(131)
State			16						(4)						7
Foreign			(42)						8						(53)
Total deferred			256						(86)						(177)
Provision for income taxes, net:
U.S. federal			639						532						488
State			19						28						34
Foreign			235						198						147
Provision for income taxes, net			$	893					$	758					$	669
Net income tax payments			$	568					$	560					$	1,100

The reported tax provision differs from the amounts paid because some income and expense items are recognized in different time periods for financial reporting than for income tax purposes. This includes the impact of the requirement, effective January 1, 2022, through December 31, 2024, to capitalize and amortize over five years certain R&D expenditures that were previously deductible immediately for tax purposes. Among other changes, the Budget Reconciliation Act of 2025 (Act) allows for the immediate deduction of domestic research and development expenditures beginning January 1, 2025, and permits the accelerated deduction of amounts capitalized under prior law. We otherwise do not expect the Act to have a material effect on our tax provision.

State and local income taxes allocable to U.S. government contracts are included in operating costs and expenses in the Consolidated Statement of Earnings and, therefore, are not included in the provision above.

The reconciliation from the statutory federal income tax rate to our effective income tax rate, applying ASU 2023-09 prospectively, follows:

Year Ended December 31						2025
U.S. federal statutory income tax						$	1,072					21.0		%
Tax credits
Research and development tax credit						(180)						(3.5)
Effects of cross-border tax laws
Foreign-derived intangible income						(36)						(0.7)
State tax on commercial operations, net of federal benefits						15						0.3
Foreign tax effects						38						0.7
Nontaxable or nondeductible items						37						0.7
Other reconciling items
Equity-based compensation						(43)						(0.8)
Other, net						(10)						(0.2)
Effective income tax rate						$	893					17.5		%

The reconciliation from the statutory federal income tax rate to our effective income tax rate, applying ASC 740 prior to the adoption of ASU 2023-09, follows:

Year Ended December 31						2024						2023
U.S. federal statutory income tax rate						21.0		%				21.0		%
Domestic tax credits						(3.3)						(3.3)
Equity-based compensation						(1.0)						(0.4)
Foreign-derived intangible income						(1.7)						(1.6)
State tax on commercial operations, net of federal benefits						0.5						0.7
Global impact of international operations						1.0						0.5
Other, net						0.2						(0.1)
Effective income tax rate						16.7		%				16.8		%

Cash paid for income taxes (net of refunds) consisted of the following:

Year Ended December 31						2025
Federal						$	331
State						4
Foreign
Canada						98
Saudi Arabia						59
Other						76
Total Foreign						233
Cash paid for income taxes (net of refunds)						$	568

Earnings from continuing operations before taxes by foreign and domestic operations follows:

Year Ended December 31						2025
Domestic						$	4,199
Foreign						904
Total						$	5,103

Net Deferred Tax Liability. The tax effects of temporary differences between reported earnings and taxable income consisted of the following:

December 31			2025						2024
Research and development expenditures			$	500					$	968
Lease liabilities			412						441
Tax loss and credit carryforwards			384						185
Salaries and wages			215						223
Workers’ compensation			160						153
Retirement benefits			115						251
Other			385						383
Deferred assets			2,171						2,604
Valuation allowances			(158)						(169)
Net deferred assets			$	2,013					$	2,435
Intangible assets			$	(1,057)					$	(1,063)
Contract accounting methods			(670)						(682)
Property, plant and equipment			(450)						(447)
Lease right-of-use assets			(401)						(425)
Capital Construction Fund qualified ships			(57)						(57)
Other			(315)						(315)
Deferred liabilities			$	(2,950)					$	(2,989)
Net deferred tax liability			$	(937)					$	(554)

Our deferred tax assets and liabilities are included in other noncurrent assets and liabilities on the Consolidated Balance Sheet. Our net deferred tax liability consisted of the following:

December 31			2025						2024
Deferred tax asset			$	19					$	19
Deferred tax liability			(956)						(573)
Net deferred tax liability			$	(937)					$	(554)

We believe it is more likely than not that we will generate sufficient taxable income in future periods to realize our deferred tax assets, subject to the valuation allowances recognized.

Our deferred tax balance associated with our retirement benefits includes a deferred tax asset of $359 on December 31, 2025, and $446 on December 31, 2024, related to the amounts recorded in accumulated other comprehensive loss (AOCL) to recognize the funded status of our retirement plans. For a reconciliation of the change in funded status of our defined benefit plans in 2025, see Note S.

One of our deferred tax liabilities results from our participation in the Capital Construction Fund (CCF), a program established by the U.S. government and administered by the Maritime Administration that supports the acquisition, construction, reconstruction or operation of U.S. flag merchant marine vessels. The program allows us to defer federal and state income taxes on earnings derived from eligible programs as long as the proceeds are deposited in the fund and withdrawals are used for qualified activities. We had U.S. government accounts receivable pledged (and thereby deposited) to the CCF of $348 and $333 on December 31, 2025 and 2024, respectively.

On December 31, 2025, we had net operating loss carryforwards of $663, substantially all of which are associated with jurisdictions that have an indefinite carryforward period.

Tax Uncertainties. We participate in the Internal Revenue Service (IRS) Compliance Assurance Process (CAP), a real-time review of our consolidated federal corporate income tax return. The IRS has examined our consolidated federal income tax returns through 2024. We are currently in a CAP phase (Bridge Plus) in which the IRS considers certain tax return information in advance to expedite their risk assessment and review of our return.

For all periods open to examination by tax authorities, we periodically assess our liabilities and contingencies based on the latest available information. Where we believe there is more than a 50% chance that our tax position will not be sustained, we record our best estimate of the resulting tax liability, including interest, in the Consolidated Financial Statements. We include any interest or penalties incurred in connection with income taxes as part of income tax expense.

Based on all known facts and circumstances and applicable tax law, we believe the total amount of any unrecognized tax benefits on December 31, 2025, was not material to our results of operations, financial condition or cash flows. In addition, there are no tax positions for which it is reasonably possible that the unrecognized tax benefits will vary significantly over the next 12 months, producing, individually or in the aggregate, a material effect on our results of operations, financial condition or cash flows.

The Organization for Economic Co-operation and Development has issued “Pillar Two” model rules introducing a new global minimum tax of 15% on a country-by-country basis, with certain aspects intended to be effective on January 1, 2024, and other aspects on January 1, 2025. Because we generally do not have material operations in jurisdictions with tax rates lower than the proposed Pillar Two

minimum, any legislation enacted consistent with the Pillar Two model rules is not expected to have a material effect on our results of operations, financial condition or cash flows.

E. ACCOUNTS RECEIVABLE

Accounts receivable represent amounts billed and currently due from customers. Payment is typically received from our customers either at periodic intervals (e.g., biweekly or monthly) or upon achievement of contractual milestones. Accounts receivable consisted of the following:

December 31			2025						2024
Non-U.S. government			$	365					$	1,299
U.S. government			1,424						1,239
Commercial			617						439
Total accounts receivable			$	2,406					$	2,977

Receivables from non-U.S. government customers historically has included amounts related to long-term production programs for the Spanish Ministry of Defence (MoD). A different ministry, the Spanish Ministry of Industry, had funded work on these programs in advance of costs incurred by the company, which we reported in current customer advances and deposits on the Consolidated Balance Sheet. In 2025, we collected $1.1 billion from the MoD and simultaneously repaid the advance from the Ministry of Industry. There were no outstanding receivables from the MoD on December 31, 2025, in contrast to $1 billion on December 31, 2024. With respect to our other receivables, we expect to collect substantially all of the year-end 2025 balance during 2026.

F. UNBILLED RECEIVABLES

Unbilled receivables represent revenue recognized on long-term contracts (contract costs and estimated profits) less associated advances and progress billings. These amounts will be billed in accordance with the agreed-upon contractual terms. Unbilled receivables consisted of the following:

December 31			2025						2024
Unbilled revenue			$	43,059					$	40,634
Advances and progress billings			(34,679)						(32,386)
Net unbilled receivables			$	8,380					$	8,248

On December 31, 2025 and 2024, net unbilled receivables included $1.3 billion and $1.2 billion, respectively, associated with a large international tracked vehicle contract in our Combat Systems segment. We expect a significant decline in this balance over the next two years as contract deliveries, including vehicles, occur through early 2028. Other than the balance related to the tracked vehicle contract, we expect to bill substantially all of the remaining year-end 2025 net unbilled receivables balance during 2026, and the amount not expected to be billed in 2026 results primarily from the agreed-upon contractual billing terms.

G&A costs in unbilled revenue on December 31, 2025 and 2024, were $484 and $444, respectively.

G. INVENTORIES

The majority of our inventories are for business jet aircraft. Our inventories are stated at the lower of cost or net realizable value. Work in process represents largely labor, material and overhead costs associated with aircraft in the manufacturing process, and is based primarily on the estimated average unit cost in a production lot. Substantially all of our raw materials are valued on either the average cost or the first-in, first-out method. We record pre-owned aircraft acquired in connection with the sale of new aircraft at the lower of the trade-in value or the estimated net realizable value.

Inventories consisted of the following:

December 31			2025						2024
Work in process			$	5,938					$	6,279
Raw materials			3,248						3,396
Finished goods			18						26
Pre-owned aircraft			28						23
Total inventories			$	9,232					$	9,724

The decrease in total inventories during 2025 was due primarily to Gulfstream aircraft deliveries, which included the G800 that began deliveries in the third quarter of 2025. Customer deposits associated with firm orders for these aircraft are reported in customer advances and deposits and other noncurrent liabilities on the Consolidated Balance Sheet.

H. GOODWILL AND INTANGIBLE ASSETS

Goodwill. The changes in the carrying amount of goodwill by reporting unit were as follows:

			Aerospace						Marine Systems						Combat Systems						Technologies						Total Goodwill
December 31, 2023 (a)			$	3,199					$	297					$	2,812					$	14,278					$	20,586
Acquisitions (b)			9						—						39						158						206
Other (c)			(123)						—						(93)						(20)						(236)
December 31, 2024 (a)			3,085						297						2,758						14,416						20,556
Acquisitions (b)			20						—						2						92						114
Other (c)			259						—						65						15						339
December 31, 2025 (a)			$	3,364					$	297					$	2,825					$	14,523					$	21,009

(a)Goodwill in the Technologies reporting unit was net of $1.8 billion of accumulated impairment losses.

(b)Included adjustments during the purchase price allocation period.

(c)Consisted primarily of adjustments for foreign currency translation.

Intangible Assets. Intangible assets consisted of the following:

			Gross Carrying Amount (a)			Accumulated Amortization			Net Carrying Amount						Gross Carrying Amount (a)			Accumulated Amortization			Net Carrying Amount
December 31			2025												2024
Contract and program intangible assets (b)			$	3,241		$	(2,119)		$	1,122					$	3,278		$	(1,989)		$	1,289
Trade names and trademarks			575			(345)			230						511			(289)			222
Technology and software			77			(54)			23						61			(52)			9
Other intangible assets			60			(60)			—						60			(60)			—
Total intangible assets			$	3,953		$	(2,578)		$	1,375					$	3,910		$	(2,390)		$	1,520

(a)Changes in gross carrying amounts consisted primarily of foreign currency translation and adjustments for divested intangible assets.

(b)Consisted of acquired backlog and probable follow-on work and associated customer relationships.

We did not recognize any impairments of our intangible assets during the last three years. The amortization lives (in years) of our intangible assets on December 31, 2025, were as follows:

Intangible Asset						Range of Amortization Life
Contract and program intangible assets						7-30
Trade names and trademarks						30
Technology and software						7-15
Other intangible assets						7

Amortization expense is included in operating costs and expenses in the Consolidated Statement of Earnings. Amortization expense for intangible assets was $174 in 2025, $180 in 2024 and $194 in 2023. We expect to record annual amortization expense over the next five years as follows:

Year Ended December 31			Amortization Expense
2026			$	175
2027			169
2028			147
2029			131
2030			121

I. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment (PP&E) is carried at historical cost, net of accumulated depreciation. Net PP&E by major asset class consisted of the following:

December 31			2025						2024
Machinery and equipment			$	7,383					$	7,067
Buildings and improvements			5,763						4,886
Construction in process			1,462						1,173
Land and improvements			522						438
Total PP&E			15,130						13,564
Accumulated depreciation			(7,605)						(7,097)
PP&E, net			$	7,525					$	6,467

We depreciate most of our assets using the straight-line method and the remainder using accelerated methods. Buildings and improvements are depreciated over periods of up to 50 years. Machinery and equipment are depreciated over periods of up to 30 years. Our government customers provide certain facilities and equipment for our use that are not included above. During 2025, we exercised an option to buy approximately $490 of PP&E that was under lease.

J. LEASES

We determine at its inception whether an arrangement that provides us control over the use of an asset is a lease. We recognize at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term. We have elected not to recognize an ROU asset and lease liability for leases with terms of 12 months or less. Some of our leases include options to extend the term of the lease for up to 40 years or to terminate the lease within one year. When it is reasonably certain that we will exercise the option, we include the impact of the option in the lease term for purposes of determining total future lease payments. As most of our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate on the commencement date to calculate the present value of future payments.

Certain of our leases include variable payments, which may be calculated based on the Consumer Price Index (CPI) or similar indices at the lease commencement date. To the extent these variable payments are not considered fixed, we exclude such payments from the ROU asset and lease liability and expense as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease, such as commissions.

In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. For our real estate leases, we apply a practical expedient to include these non-lease components in calculating the ROU asset and lease liability. For all other types of leases, non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.

Our leases are for office space, manufacturing facilities, and machinery and equipment. Real estate represents more than 75% of our lease obligations.

The components of lease costs were as follows:

Year Ended December 31			2025						2024						2023
Finance lease cost:
Amortization of ROU assets			$	70					$	62					$	61
Interest on lease liabilities			24						21						14
Operating lease cost			331						317						320
Short-term lease cost			74						74						76
Variable lease cost			36						39						34
Sublease income			(17)						(16)						(17)
Total lease costs, net			$	518					$	497					$	488

Additional information related to leases was as follows:

Year Ended December 31			2025						2024						2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	332					$	319					$	322
Operating cash flows from finance leases			23						20						13
Financing cash flows from finance leases*			556						64						55
ROU assets obtained in exchange for lease liabilities:
Operating leases			250						292						279
Finance leases*			(37)						155						240

*In 2025, financing cash flows from finance leases included approximately $490 for the exercise of options to purchase the underlying assets. This transaction also impacted ROU assets obtained in exchange for lease liabilities.

Additional quantitative lease information was as follows:

December 31			2025						2024
Weighted-average remaining lease term:
Operating leases			10.9 years						10.8 years
Finance leases			15.7 years						14.4 years
Weighted-average discount rate:
Operating leases			4		%				4		%
Finance leases			5		%				4		%

The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on the Consolidated Balance Sheet on December 31, 2025:

Year Ended December 31			Operating Leases						Finance Leases
2026			$	305					$	55
2027			265						46
2028			202						39
2029			156						36
2030			108						30
Thereafter			703						328
Total future lease payments			1,739						534
Less imputed interest			355						142
Present value of future lease payments			1,384						392
Less current portion of lease liabilities			260						39
Long-term lease liabilities			$	1,124					$	353
ROU assets			$	1,284					$	392

On December 31, 2024, operating and finance lease liabilities and the related ROU assets were as follows:

			Operating Leases						Finance Leases
Current portion of lease liabilities			$	253					$	66
Long-term lease liabilities			1,133						462
ROU assets			1,295						501

Lease liabilities are included on the Consolidated Balance Sheet in current and noncurrent other liabilities, while ROU assets are included in noncurrent other assets.

On December 31, 2025, we had additional future payments on leases that had not yet commenced of $25. These leases will commence in 2026 and have lease terms ranging from one to 10 years.

K. DEBT

Debt consisted of the following:

December 31						2025						2024
Fixed-rate notes due:			Interest rate:
April 2025			3.250%			$	—					$	750
May 2025			3.500%			—						750
June 2026			1.150%			500						500
August 2026			2.125%			500						500
April 2027			3.500%			750						750
November 2027			2.625%			500						500
May 2028			3.750%			1,000						1,000
April 2030			3.625%			1,000						1,000
June 2031			2.250%			500						500
August 2035			4.950%			750						—
April 2040			4.250%			750						750
June 2041			2.850%			500						500
November 2042			3.600%			500						500
April 2050			4.250%			750						750
Other			Various			74						76
Total debt principal						8,074						8,826
Less unamortized debt issuance costs and discounts						61						64
Total debt						8,013						8,762
Less current portion						1,006						1,502
Long-term debt						$	7,007					$	7,260

In March 2025, we repaid fixed-rate notes of $750 with cash on hand and commercial paper issuances. In May 2025, we issued $750 of fixed-rate notes that mature in August 2035. The proceeds were used to repay fixed-rate notes of $750 that matured in May 2025. Interest payments associated with our debt were $376 in 2025, $385 in 2024 and $378 in 2023.

The aggregate amounts of scheduled principal maturities of our debt are as follows:

Year Ended December 31			Debt Principal
2026			$	1,006
2027			1,257
2028			1,007
2029			7
2030			1,007
Thereafter			3,790
Total debt principal			$	8,074

On December 31, 2025, we had no commercial paper outstanding, but we maintain the ability to access the commercial paper market in the future. In addition, we have a $5 billion committed bank

credit facility for general corporate purposes and working capital needs and to support our commercial paper issuances. These credit facilities include a $4 billion facility expiring March 2027 and a $1 billion 364-day facility that we established in early April 2025. We may renew or replace this credit facility in whole or in part at or prior to its expiration date. We also have an effective shelf registration on file with the Securities and Exchange Commission (SEC) that allows us to access the debt markets.

Our financing arrangements contain a number of customary covenants and restrictions. We were in compliance with all covenants and restrictions on December 31, 2025.

L. OTHER LIABILITIES

A summary of significant other liabilities by balance sheet caption follows:

December 31			2025						2024
Salaries and wages			$	1,125					$	1,325
Dividends payable			407						390
Lease liabilities			299						319
Workers’ compensation			236						244
Other			1,221						1,209
Total other current liabilities			$	3,288					$	3,487
Customer deposits on commercial contracts			$	2,649					$	2,996
Lease liabilities			1,477						1,595
Retirement benefits			1,134						2,024
Other			2,564						2,118
Total other liabilities			$	7,824					$	8,733

M. COMMITMENTS AND CONTINGENCIES

Litigation

On October 6, 2023, a putative class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against General Dynamics Corporation, certain of its subsidiaries and various other companies alleging that they conspired, in violation of the Sherman Act, not to solicit naval architects and marine engineers from each other. The named plaintiffs purport to represent a class of individuals consisting of all naval architects and marine engineers employed by the shipyard and consultancy defendants, their predecessors, their subsidiaries and/or their related entities in the United States at any time since January 1, 2000. The plaintiffs allege that the conspiracy suppressed compensation paid to the putative class members, and the plaintiffs seek trebled monetary damages, attorneys’ fees, injunctive and other equitable relief. On May 9, 2025, the U.S. Court of Appeals for the Fourth Circuit reversed an earlier decision of the District Court dismissing the plaintiffs’ complaint and remanded the case for further proceedings. On September 11, 2025, the defendants filed a petition for a writ of certiorari with the U.S. Supreme Court. Given the current status of this matter, we are unable to express a view regarding the ultimate outcome or, if the outcome is adverse, to estimate an amount or range of reasonably possible loss. Depending on the outcome of this matter, there could be a material impact on our results of operations, financial condition and cash flows.

Additionally, various other claims and legal proceedings incidental to the normal course of business are pending or threatened against us. These other matters relate to such issues as government

investigations and claims, the protection of the environment, asbestos-related claims and employee-related matters. The nature of litigation is such that we cannot predict the outcome of these other matters. However, based on information currently available, we believe any potential liabilities in these other proceedings, individually or in the aggregate, will not have a material impact on our results of operations, financial condition or cash flows.

Environmental

We are subject to and affected by a variety of federal, state, local and foreign environmental laws and regulations. We are directly or indirectly involved in environmental investigations or remediation at some of our current and former facilities and third-party sites that we do not own but where we have been designated a potentially responsible party (PRP) by the U.S. Environmental Protection Agency or a state environmental agency. Based on historical experience, we expect that a significant percentage of the total remediation and compliance costs associated with these facilities will continue to be allowable contract costs and, therefore, recoverable under U.S. government contracts.

As required, we provide financial assurance for certain sites undergoing or subject to investigation or remediation. We accrue environmental costs when it is probable that a liability has been incurred and the amount can be reasonably estimated. Where applicable, we seek insurance recovery for costs related to environmental liabilities. We do not record insurance recoveries before collection is considered probable. Based on all known facts and analyses, we do not believe that our liability at any individual site, or in the aggregate, arising from such environmental conditions will be material to our results of operations, financial condition or cash flows. We also do not believe that the range of reasonably possible additional loss beyond what has been recorded would be material to our results of operations, financial condition or cash flows.

Other

Government Contracts. As a government contractor, we are subject to U.S. government audits and investigations relating to our operations, including claims for fines, penalties, and compensatory and treble damages. We believe the outcome of such ongoing government audits and investigations will not have a material impact on our results of operations, financial condition or cash flows.

In the performance of our contracts, we routinely request contract modifications that require additional funding from the customer. Most often, these requests are due to customer-directed changes in the scope of work. While we are entitled to recovery of these costs under our contracts, the administrative process with our customer may be protracted. Based on the circumstances, we periodically file requests for equitable adjustment (REAs) that are sometimes converted into claims. In some cases, these requests are disputed by our customer. We believe our outstanding modifications, REAs and other claims will be resolved without material impact to our results of operations, financial condition or cash flows.

Letters of Credit and Guarantees. In the ordinary course of business, we have entered into letters of credit, bank guarantees, surety bonds and other similar arrangements with financial institutions and insurance carriers totaling approximately $2.4 billion on December 31, 2025. In addition, from time to time and in the ordinary course of business, we contractually guarantee the payment or performance of our subsidiaries arising under certain contracts.

Aircraft Trade-ins. In connection with orders for new aircraft in contract backlog, some Gulfstream customers hold options to trade in aircraft as partial consideration in their new-aircraft transaction. These trade-in commitments are generally structured to establish the fair market value of the trade-in aircraft at a date generally 45 or fewer days preceding delivery of the new aircraft to the customer. At that time, the

customer is required to either exercise the option or allow its expiration. Other trade-in commitments are structured to guarantee a predetermined trade-in value. These commitments present more risk in the event of an adverse change in market conditions. In either case, any excess of the preestablished trade-in price above the fair market value at the time the new aircraft is delivered is treated as a reduction of revenue in the new-aircraft sales transaction. As of December 31, 2025, the estimated change in fair market values from the date of the commitments was not material.

Labor Agreements. On December 31, 2025, approximately one-fifth of the employees of our subsidiaries were working under collectively bargained terms and conditions, including 64 collective agreements that we have negotiated directly with unions and works councils. A number of these agreements expire within any given year. Historically, we have been successful at renegotiating these labor agreements without any material disruption of operating activities. In 2026, we expect to negotiate the terms of 25 agreements covering approximately 9,300 employees. We do not expect the renegotiations will, either individually or in the aggregate, have a material impact on our results of operations, financial condition or cash flows.

Product Warranties. We provide warranties to our customers associated with certain product sales. We record estimated warranty costs in the period in which the related products are delivered. The warranty liability recorded at each balance sheet date is based generally on the number of months of warranty coverage remaining for the products delivered and the average historical monthly warranty payments. Warranty obligations incurred in connection with long-term production contracts are accounted for within the contract estimates at completion. Our other warranty obligations, primarily for business jet aircraft, are included in other current and noncurrent liabilities on the Consolidated Balance Sheet.

The changes in the carrying amount of warranty liabilities for each of the past three years were as follows:

Year Ended December 31			2025						2024						2023
Beginning balance			$	642					$	597					$	603
Warranty expense			143						137						90
Payments			(127)						(106)						(101)
Adjustments			(2)						14						5
Ending balance			$	656					$	642					$	597

N. SHAREHOLDERS’ EQUITY

Authorized Stock. Our authorized capital stock consists of 500 million shares of $1 per share par value common stock and 50 million shares of $1 per share par value preferred stock. The preferred stock is issuable in series, with the rights, preferences and limitations of each series to be determined by our board of directors (Board).

Shares Issued and Outstanding. On December 31, 2025, we had 481,880,634 shares of common stock issued and 270,389,759 shares of common stock outstanding, including unvested restricted stock of 406,995 shares. On December 31, 2024, we had 481,880,634 shares of common stock issued and 270,340,502 shares of common stock outstanding. No shares of our preferred stock were outstanding on either date. The only changes in our shares outstanding during 2025 and 2024 resulted from shares repurchased in the open market and share activity under our equity compensation plans. See Note R for additional details.

Share Repurchases. On December 4, 2024, the Board authorized management to repurchase up to 10 million additional shares of the company’s outstanding stock. In 2025, we repurchased 2.5 million of our outstanding shares for $637 to cover dilution. On December 31, 2025, 6.8 million shares remained authorized by our Board for repurchase, representing 2.5% of our total shares outstanding. We repurchased 5.4 million shares for $1.5 billion in 2024 and 2 million shares for $434 in 2023.

Dividends per Share. Our Board declared dividends per share of $6.00 in 2025, $5.68 in 2024 and $5.28 in 2023. We paid cash dividends of $1.6 billion in 2025, $1.5 billion in 2024 and $1.4 billion in 2023.

Accumulated Other Comprehensive Loss. The changes, pretax and net of tax, in each component of AOCL consisted of the following:

			Changes in Unrealized Cash Flow Hedges						Foreign Currency Translation Adjustments			Changes in Retirement Plans’ Funded Status			AOCL
December 31, 2022			$	4					$	260		$	(2,416)		$	(2,152)
Other comprehensive income, pretax			10						413			722			1,145
Provision for income tax, net			(3)						—			(149)			(152)
Other comprehensive income, net of tax			7						413			573			993
December 31, 2023			11						673			(1,843)			(1,159)
Other comprehensive loss, pretax			(117)						(438)			208			(347)
Provision for income tax, net			30						—			(42)			(12)
Other comprehensive loss, net of tax			(87)						(438)			166			(359)
December 31, 2024			(76)						235			(1,677)			(1,518)
Other comprehensive income, pretax			113						638			398			1,149
Provision for income tax, net			(27)						—			(87)			(114)
Other comprehensive income, net of tax			86						638			311			1,035
December 31, 2025			$	10					$	873		$	(1,366)		$	(483)

Amounts reclassified out of AOCL related primarily to changes in our retirement plans’ funded status and included pretax recognized net actuarial losses and amortization of prior service credit. See Note S for these amounts, which are included in our net annual pension and other post-retirement benefit cost (credit).

O. SEGMENT INFORMATION

We have four operating segments: Aerospace, Marine Systems, Combat Systems and Technologies. We organize our segments in accordance with the nature of products and services offered. Our chief operating decision maker is our Chairman and Chief Executive Officer (CEO).

We measure each segment’s profitability based on operating earnings. Segment operating earnings exclude net interest and other income and expense items. The Chairman and CEO uses segment operating earnings as an input when assessing segment performance and when making decisions to allocate financial resources between segments. The Chairman and CEO uses operating earnings in assessing segment performance by comparing operating earnings to prior period results and plan-to-actual variances. The Chairman and CEO also uses forecasted expense information for each segment to manage operations.

Summary financial information for each of our segments follows:

			Revenue (a)												Other Segment Items (b)												Operating Earnings
Year Ended December 31			2025			2024			2023						2025			2024			2023						2025			2024			2023
Aerospace			$	13,110		$	11,249		$	8,621					$	(11,364)		$	(9,785)		$	(7,439)					$	1,746		$	1,464		$	1,182
Marine Systems			16,723			14,343			12,461						(15,546)			(13,408)			(11,587)						1,177			935			874
Combat Systems			9,246			8,997			8,268						(7,915)			(7,721)			(7,121)						1,331			1,276			1,147
Technologies			13,471			13,127			12,922						(12,194)			(11,867)			(11,720)						1,277			1,260			1,202
Corporate (c)			—			—			—						—			—			—						(175)			(139)			(160)
Total			$	52,550		$	47,716		$	42,272					$	(47,019)		$	(42,781)		$	(37,867)					$	5,356		$	4,796		$	4,245

(a)See Note B for additional revenue information by segment.

(b)Other segment items consist of material and labor costs, depreciation and amortization, and other overhead and general and administrative expenses.

(c)Corporate operating costs consisted of equity-based compensation expense and other miscellaneous expenses.

The following is additional summary financial information for each of our segments:

			Capital Expenditures												Depreciation and Amortization*												Identifiable Assets
Year Ended December 31			2025			2024			2023						2025			2024			2023						2025			2024			2023
Aerospace			$	336		$	235		$	200					$	254		$	220		$	200					$	16,815		$	16,192		$	15,099
Marine Systems			517			424			511						270			243			217						7,313			7,019			6,209
Combat Systems			144			135			107						112			117			108						10,111			10,275			10,479
Technologies			160			119			85						276			294			327						19,252			19,286			19,534
Corporate			4			3			1						12			12			11						3,758			3,108			3,489
Total			$	1,161		$	916		$	904					$	924		$	886		$	863					$	57,249		$	55,880		$	54,810

• Depreciation and amortization by reportable segment is included within the other segment items expense caption.

Our revenue from our operations located outside the U.S. was $5.4 billion in 2025, $5 billion in 2024 and $4.3 billion in 2023, and associated earnings from continuing operations before income taxes were $904 in 2025, $732 in 2024 and $631 in 2023. The long-lived assets associated with these operations were less than 5% of our total long-lived assets for the past three years.

The following table presents our revenue by geographic area based on the location of our customers:

Year Ended December 31			2025						2024						2023
North America:
United States			$	43,314					$	39,759					$	36,160
Other			1,248						1,278						961
Total North America			44,562						41,037						37,121
Europe			3,540						3,161						2,765
Asia/Pacific			2,001						1,546						1,086
Africa/Middle East			2,015						1,680						1,147
South America			432						292						153
Total revenue			$	52,550					$	47,716					$	42,272

P. FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between marketplace participants.

Various valuation approaches can be used to determine fair value, each requiring different valuation inputs. The following hierarchy classifies the inputs used to determine fair value into three levels:

• Level 1 – quoted prices in active markets for identical assets or liabilities.

• Level 2 – inputs, other than quoted prices, observable by a marketplace participant either directly or indirectly.

• Level 3 – unobservable inputs significant to the fair value measurement.

We did not have any significant non-financial assets or liabilities measured at fair value on December 31, 2025 or 2024.

Our financial instruments include cash and equivalents, accounts receivable and payable, marketable securities held in trust and other investments, short- and long-term debt, and derivative financial instruments. The carrying values of cash and equivalents and accounts receivable and payable on the Consolidated Balance Sheet approximate their fair value. The following tables present the fair values of our other financial assets and liabilities on December 31, 2025 and 2024, and the basis for determining their fair values:

			Carrying Value						Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Financial Assets (Liabilities)			December 31, 2025
Measured at fair value:
Marketable securities held in trust:
Cash and equivalents			$	19					$	19					$	17					$	2					$	—
Available-for-sale debt securities			140						140						—						140						—
Commingled equity funds			51						51						51						—						—
Commingled fixed-income funds			6						6						6						—						—
Other investments			53						53						32						—						21
Cash flow hedge assets			75						75						—						75						—
Cash flow hedge liabilities			(49)						(49)						—						(49)						—
Measured at amortized cost:
Short- and long-term debt principal			(8,074)						(7,610)						—						(7,610)						—
			December 31, 2024
Measured at fair value:
Marketable securities held in trust:
Cash and equivalents			$	36					$	36					$	27					$	9					$	—
Available-for-sale debt securities			128						128						—						128						—
Commingled equity funds			48						48						48						—						—
Commingled fixed-income funds			6						6						6						—						—
Other investments			40						40						28						—						12
Cash flow hedge assets			52						52						—						52						—
Cash flow hedge liabilities			(140)						(140)						—						(140)						—
Measured at amortized cost:
Short- and long-term debt principal			(8,826)						(8,103)						—						(8,103)						—

Our Level 1 assets include commingled equity and fixed-income funds that are valued using a unit

price or net asset value (NAV). These funds are actively traded and valued using quoted prices for identical securities from the market exchanges. The fair value of our Level 2 assets and liabilities, which consist primarily of fixed-income securities, cash flow hedges and our fixed-rate notes, is determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets. Our Level 3 assets include direct private equity investments that are measured using inputs unobservable to a marketplace participant.

Q. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to market risk, primarily from foreign currency exchange rates, commodity prices and investments. We may use derivative financial instruments to hedge some of these risks as described below. We do not use derivative financial instruments for trading or speculative purposes.

Foreign Currency Risk. Our foreign currency exchange rate risk relates to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies. To the extent possible, we include in our contracts terms that are designed to protect us from this risk. Otherwise, we enter into derivative financial instruments, principally foreign currency forward purchase and sale contracts, designed to offset and minimize our risk. The dollar-weighted two-year average maturity of these instruments generally matches the duration of the activities that are at risk.

Commodity Price Risk. We are subject to commodity price risk, primarily on long-term, fixed-price contracts. To the extent possible, we include in our contracts terms that are designed to protect us from these risks. Some of the protective terms included in our contracts are considered derivative financial instruments but are not accounted for separately, because they are clearly and closely related to the host contract. We have not entered into any material commodity hedging contracts but may do so as circumstances warrant. We do not believe that changes in commodity prices will have a material impact on our results of operations or cash flows.

Investment Risk. Our investment policy allows for purchases of fixed-income securities with an investment-grade rating and a maximum maturity of up to five years. On December 31, 2025 and 2024, we held $2.3 billion and $1.7 billion in cash and equivalents, respectively, but held no material marketable securities other than those held in trust to meet some of our obligations under workers’ compensation and non-qualified pension plans. On December 31, 2025 and 2024, we held marketable securities in trust of $216 and $218, respectively. These marketable securities are reflected at fair value on the Consolidated Balance Sheet in other current and noncurrent assets. See Note P for additional details.

Hedging Activities. We had notional forward exchange contracts outstanding of $8.5 billion and $6.2 billion on December 31, 2025 and 2024, respectively. These derivative financial instruments are cash flow hedges and are reflected at fair value on the Consolidated Balance Sheet in other current assets and liabilities. See Note P for additional details.

Changes in fair value (gains and losses) related to derivative financial instruments that qualify as cash flow hedges are deferred in AOCL until the underlying transaction is reflected in earnings. Alternatively, gains and losses on derivative financial instruments that do not qualify for hedge accounting are recorded each period in earnings. All gains and losses from derivative financial instruments recognized in the Consolidated Statement of Earnings are presented in the same line item as the underlying transaction, generally operating costs and expenses.

Net gains and losses recognized in earnings on derivative financial instruments that do not qualify for hedge accounting were not material to our results of operations in any of the past three years. Net gains and losses reclassified to earnings from AOCL related to qualified hedges were also not material to our results of operations in any of the past three years, and we do not expect the amount of these gains and losses that will be reclassified to earnings during the next 12 months to be material.

We had no material derivative financial instruments designated as fair value or net investment hedges on December 31, 2025 and 2024.

Foreign Currency Financial Statement Translation. We translate foreign currency balance sheets from our international businesses’ functional currency (generally the respective local currency) to U.S. dollars at the end-of-period exchange rates, and statements of earnings at the average exchange rates for each period. The resulting foreign currency translation adjustments are a component of AOCL.

The impact of translating our non-U.S. operations’ revenue and earnings into U.S. dollars was not material to our results of operations in any of the past three years. In addition, the effect of changes in foreign exchange rates on non-U.S. cash balances was not material in any of the past three years.

R. EQUITY COMPENSATION PLANS

Equity Compensation Overview. We have equity compensation plans for employees, as well as for non-employee members of our Board. The equity compensation plans seek to provide an effective means of attracting and retaining directors, officers and key employees, and to provide them with incentives to enhance our growth and profitability. Under the equity compensation plans, awards may be granted to officers, employees or non-employee directors in common stock, options to purchase common stock, restricted shares of common stock, participation units (including RSUs, stock appreciation rights and phantom stock units) or any combination of these.

Annually, we grant awards of stock options, restricted stock and RSUs to participants in our equity compensation plans in early March. Additionally, we may make limited ad hoc grants on a quarterly basis for new hires or promotions. We issue common stock under our equity compensation plans from treasury stock. On December 31, 2025, in addition to the shares reserved for issuance upon the exercise of outstanding stock options, approximately 13 million shares have been authorized for awards that may be granted in the future.

Equity-based Compensation Expense. Equity-based compensation expense is included in G&A expenses. The following table details the components of equity-based compensation expense recognized in net earnings in each of the past three years:

Year Ended December 31			2025						2024						2023
Stock options			$	61					$	60					$	65
Restricted stock/RSUs			94						85						78
Total equity-based compensation expense, net of tax			$	155					$	145					$	143

Stock Options. Stock options granted under our equity compensation plans are issued with an exercise price at the fair value of our common stock determined by the average of the high and low stock prices as listed on the New York Stock Exchange (NYSE) on the date of grant. Participants generally vest in stock options over three years – with 50% of the options vesting after two years and the remaining 50% vesting the following year – and expire 10 years after the grant date.

We recognize compensation expense related to stock options on a straight-line basis over the vesting period of the awards, net of estimated forfeitures, except for awards to retirement-eligible participants that are recognized on an accelerated basis. Estimated forfeitures are based on our historical forfeiture experience. We estimate the fair value of stock options on the date of grant using the Black-Scholes option pricing model with the following assumptions for each of the past three years:

Year Ended December 31			2025						2024						2023
Expected volatility			22.5-22.7%						23.2-23.3%						22.7-22.9%
Weighted average expected volatility			22.5		%				23.3		%				22.8		%
Expected term (in months)			72						60						60
Risk-free interest rate			3.9-4.6%						4.2-4.6%						3.6-4.7%
Expected dividend yield			2.2		%				2.2		%				2.3		%

We determine the above assumptions based on the following:

• Expected volatility is based on the historical volatility of our common stock

• Expected term is based on our historical experience

• Risk-free interest rate is the yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option at the grant date

• Expected dividend yield is based on our historical dividend yield

The resulting weighted average fair value per stock option granted (in dollars) was $62.18 in 2025, $60.55 in 2024 and $47.46 in 2023. Stock option expense reduced pretax operating earnings (and on a diluted per-share basis) by $77 ($0.22) in 2025, $75 ($0.21) in 2024 and $82 ($0.24) in 2023. On December 31, 2025, we had $37 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 1.7 years.

A summary of stock option activity during 2025 follows:

In Shares and Dollars			Shares Under Option						Weighted Average Exercise Price Per Share
Outstanding on December 31, 2024			10,150,922						$	206.08
Granted			1,327,450						258.36
Exercised			(2,346,690)						188.17
Forfeited/canceled			(81,080)						257.89
Outstanding on December 31, 2025			9,050,602						$	217.93
Vested and expected to vest on December 31, 2025			8,966,663						$	217.50
Exercisable on December 31, 2025			5,782,637						$	195.45

Summary information with respect to our stock options’ intrinsic value and remaining contractual term on December 31, 2025, follows:

			Weighted Average Remaining Contractual Term (in years)						Aggregate Intrinsic Value
Outstanding			6.1						$	1,075
Vested and expected to vest			6.1						1,068
Exercisable			4.8						817

In the table above, intrinsic value is calculated as the excess, if any, of the market price of our stock on the last trading day of the year over the exercise price of the options. For stock options exercised, intrinsic value is calculated as the difference between the market price on the date of exercise and the exercise price. The total intrinsic value of stock options exercised was $280 in 2025, $249 in 2024 and $75 in 2023.

Restricted Stock/RSUs. Grants of restricted stock are awards of shares of common stock. RSUs represent obligations that have a value derived from or related to the value of our common stock, and are payable in cash or common stock. The fair value of restricted stock and RSUs equals the average of the high and low market prices of our common stock as listed on the NYSE on the date of grant.

Participants generally vest in restricted stock and RSUs, over a three-year restriction period after the grant date, during which recipients may not sell, transfer, pledge, assign or otherwise convey their restricted shares to another party. During this period, restricted stock recipients receive cash dividends on their restricted shares and are entitled to vote those shares, while RSU recipients receive dividend-equivalent units instead of cash dividends and are not entitled to vote their RSUs or dividend-equivalent units.

We grant RSUs with one or more performance measures (performance stock units or PSUs) determined by the compensation committee of the Board as described in our proxy statement. Depending on the company’s performance, the number of PSUs earned may be less than, equal to or greater than the original number of PSUs awarded subject to a payout range.

We recognize compensation expense related to restricted stock and RSUs on a straight-line basis over the vesting period of the awards, except for restricted stock awards to retirement-eligible participants that are recognized on an accelerated basis. Compensation expense related to restricted stock and RSUs reduced pretax operating earnings (and on a diluted per-share basis) by $119 ($0.35) in 2025, $108 ($0.31) in 2024 and $99 ($0.28) in 2023. On December 31, 2025, we had $104 of unrecognized compensation cost related to restricted stock and RSUs, which is expected to be recognized over a weighted average period of 1.9 years.

A summary of restricted stock and RSU activity during 2025 follows:

In Shares and Dollars			Shares/ Share-Equivalent Units						Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2024			1,284,736						$	252.27
Granted			540,027						266.36
Vested			(446,794)						246.07
Forfeited			(43,858)						258.84
Nonvested at December 31, 2025			1,334,111						$	260.27

The total fair value of vesting shares was $115 in 2025, $148 in 2024 and $96 in 2023.

S. RETIREMENT PLANS

We provide retirement benefits to eligible employees through a variety of plans:

• Defined contribution

• Defined benefit

◦Pension (qualified and non-qualified)

◦Other post-retirement benefit

Substantially all of our plans use a December 31 measurement date, consistent with our fiscal year.

Defined Contribution Plans

We provide eligible employees the opportunity to participate in defined contribution plans (commonly known as 401(k) plans), which permit contributions on a before-tax and after-tax basis. Employees may contribute to various investment alternatives. In most of these plans, we match a portion of the employees’ contributions. Our contributions to these plans totaled $560 in 2025, $517 in 2024 and $462 in 2023. On December 31, 2025 and 2024, the defined-contribution plans held approximately 14 million and 15 million shares of our common stock respectively, each representing approximately 5% and 6% of our outstanding shares, on December 31, 2025 and 2024, respectively.

Defined Benefit Plans

Plan Descriptions. We have trusteed, qualified pension plans covering eligible employees aligned with the markets in our business: U.S. government, non-U.S. government and commercial. Some of these plans require employees to make contributions to the plan. We also sponsor several non-qualified pension plans, which provide eligible executives with additional benefits, including excess benefits over limits imposed on qualified plans by federal tax law. The principal factors affecting the benefits earned by participants in our pension plans are employees’ years of service and compensation levels. Our primary U.S. pension plans, which comprise the majority of our unfunded obligation, were closed to new salaried participants on January 1, 2007, and were closed to new hourly participants in subsequent collective bargaining agreements over the next several years. Additionally, we have made several changes to these plans for certain participants that limit or cease the benefits that accrue for future service.

In addition to pension benefits, we maintain plans that provide post-retirement health care and life insurance coverage for certain employees and retirees. These benefits vary by employment status, age, service and salary level at retirement. The coverage provided and the extent to which the retirees share in the cost of the program vary throughout the company. The plans provide health care and life insurance benefits only to those employees who retire directly from our service and not to those who terminate service prior to eligibility for retirement.

Contributions. It is our policy to fund our qualified pension plans in a manner that optimizes the tax deductibility and contract recovery of contributions considered within our capital deployment framework. Therefore, we may make discretionary contributions in addition to the required contributions determined in accordance with IRS regulations. We contributed $537 to our qualified pension plans in 2025, which is reported in other operating activities in our Consolidated Statement of Cash Flows. Our 2025 contribution included the payment of our required 2026 contribution of $293.

We maintain several tax-advantaged accounts, primarily Voluntary Employees’ Beneficiary Association (VEBA) trusts, to fund the obligations for some of our other post-retirement benefit plans. For non-funded plans, claims are paid as received. Contributions to our other post-retirement benefit plans were not material in 2025 and are not expected to be material in 2026.

Benefit Payments. We expect the following benefits to be paid from our defined benefit plans over the next 10 years:

			Pension Benefits						Other Post-Retirement Benefits
2026			$	913					$	44
2027			924						43
2028			932						42
2029			939						41
2030			931						40
2031-2035			4,528						186

Benefit Cost. Our annual benefit cost consists of five primary elements:

• The cost of benefits earned by employees for services rendered during the year

• An interest charge on our plan liabilities

• An expected return on our plan assets for the year

• Actuarial gains and losses, which result from changes in assumptions and differences between actual and expected return on assets and participant experience

• The cost or credit attributed to prior service resulting from changes we make to plan benefit terms

For qualified pension plans and other post-retirement benefit plans, actuarial gains and losses and prior service costs or credits are initially deferred in AOCL and then amortized on a straight-line basis over future years. For our qualified U.S. government pension plans, we amortize actuarial gains and losses over a custom amortization period based on the amount of pension costs allocable to our U.S. government contracts. For the remaining qualified pension plans and other post-retirement benefit plans, we amortize only the amount of actuarial gains and losses that exceeds 10% of the greater of plan assets or benefit obligations. This amount is amortized over the average remaining service period of plan participants who are active employees unless all or almost all of a plan’s participants are inactive or are not accruing additional benefits. In such cases, the amortization period is based on the average remaining life expectancy of the plan participants. To further reduce the volatility of our annual benefit cost, gains and losses resulting from the return on plan assets are included over five years in the determination of the amortizable amount of actuarial gains and losses. For non-qualified pension plans, we recognize actuarial gains and losses immediately.

Net annual benefit cost (credit) consisted of the following:

			Pension Benefits
Year Ended December 31			2025						2024						2023
Service cost			$	72					$	73					$	66
Interest cost			599						627						650
Expected return on plan assets			(739)						(821)						(829)
Net actuarial loss			117						189						752
Prior service credit			(6)						(6)						(13)
Settlement/curtailment/other			(5)						87						3
Net annual benefit cost			$	38					$	149					$	629

			Other Post-Retirement Benefits
Year Ended December 31			2025						2024						2023
Service cost			$	4					$	4					$	4
Interest cost			27						28						30
Expected return on plan assets			(35)						(33)						(32)
Net actuarial gain			(31)						(31)						(30)
Prior service cost			1						2						2
Settlement/curtailment/other			8						(15)						5
Net annual benefit credit			$	(26)					$	(45)					$	(21)

In October 2024, we purchased an irrevocable group annuity contract (referred to as a buy-out contract) for $673 using retirement plan assets held in trust to transfer the related outstanding qualified pension obligations to two insurance companies. As a result of the transaction, the insurance companies are now required to pay and administer the retirement benefits owed to approximately 16,000 U.S. retirees and beneficiaries, with no change to the amount, timing or form of the monthly retirement benefit payments. In connection with this transaction, we recognized a non-cash settlement charge of approximately $80 in our qualified U.S. government pension plans related to the GAAP acceleration of deferred actuarial losses included in AOCL for the plans.

Our contractual arrangements with the U.S. government provide for the recovery of pension and other post-retirement benefit costs related to employees working on government contracts, including settlement costs. The amount allocated to U.S. government contracts is determined in accordance with the Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS), which may result in a timing difference with the amount determined under GAAP. We defer this difference on the Consolidated Balance Sheet. At this time, the amount allocated to contracts exceeds cumulative benefit costs, resulting in a deferred credit that is reported in other noncurrent liabilities. To the extent there is a non-service component of net annual benefit cost (credit) for our defined benefit plans, it is reported in other income (expense) in the Consolidated Statement of Earnings.

Funded Status. We recognize an asset or liability on the Consolidated Balance Sheet equal to the funded status of each of our defined benefit plans. The funded status is the difference between the fair value of the plan’s assets and its benefit obligation. The following is a reconciliation of the benefit obligations and plan/trust assets, and the resulting funded status, of our defined benefit plans:

			Pension Benefits												Other Post-Retirement Benefits
Year Ended December 31			2025						2024						2025						2024
Change in Benefit Obligation
Benefit obligation at beginning of year			$	(12,189)					$	(13,736)					$	(538)					$	(598)
Service cost			(72)						(73)						(4)						(4)
Interest cost			(599)						(627)						(27)						(28)
Amendments			2						1						—						—
Actuarial gain (loss)			(182)						643						1						32
Settlement/curtailment/other			(134)						727						(6)						11
Benefits paid			854						876						45						49
Benefit obligation at end of year			$	(12,320)					$	(12,189)					$	(529)					$	(538)
Change in Plan/Trust Assets
Fair value of assets at beginning of year			$	10,500					$	11,886					$	645					$	649
Actual return on plan assets			1,223						128						56						28
Employer contributions			537						73						—						—
Settlement/curtailment/other			130						(733)						—						—
Benefits paid			(833)						(854)						(28)						(32)
Fair value of assets at end of year			$	11,557					$	10,500					$	673					$	645
Funded status at end of year			$	(763)					$	(1,689)					$	144					$	107

Our pension benefit obligation was reduced during 2024 by the previously discussed buy-out contract and the actuarial gain created by the change in the weighted-average discount rate.

Amounts recognized on the Consolidated Balance Sheet consisted of the following:

			Pension Benefits												Other Post-Retirement Benefits
December 31			2025						2024						2025						2024
Noncurrent assets			$	171					$	130					$	375					$	347
Current liabilities			(23)						(22)						(8)						(13)
Noncurrent liabilities			(911)						(1,797)						(223)						(227)
Net (liability) asset recognized			$	(763)					$	(1,689)					$	144					$	107

Amounts deferred in AOCL for our defined benefit plans consisted of the following:

			Pension Benefits												Other Post-Retirement Benefits
December 31			2025						2024						2025						2024
Net actuarial loss (gain)			$	2,047					$	2,453					$	(286)					$	(294)
Prior service (credit) cost			(45)						(46)						9						10
Total amount recognized in AOCL, pretax			$	2,002					$	2,407					$	(277)					$	(284)

The following is a reconciliation of the change in AOCL for our defined benefit plans:

			Pension Benefits												Other Post-Retirement Benefits
Year Ended December 31			2025						2024						2025						2024
Net actuarial (gain) loss			$	(302)					$	50					$	(22)					$	(27)
Prior service credit			(2)						(1)						—						—
Amortization of:
Net actuarial (loss) gain from prior years			(117)						(189)						31						31
Prior service credit (cost)			6						6						(1)						(2)
Settlement/curtailment/other			10						(81)						(1)						5
Change in AOCL, pretax			$	(405)					$	(215)					$	7					$	7

A pension plan’s funded status is the difference between the plan’s assets and its projected benefit obligation (PBO). The PBO is the present value of future benefits attributed to employee services rendered to date, including assumptions about future compensation levels. On December 31, 2025 and 2024, most of our pension plans had a PBO that exceeded the plans’ assets. Summary information for those plans follows:

December 31			2025						2024
PBO			$	(11,540)					$	(11,476)
Fair value of plan assets			10,606						9,657

A pension plan’s accumulated benefit obligation (ABO) is the present value of future benefits attributed to employee services rendered to date, excluding assumptions about future compensation levels. The ABO for all pension plans was $12.2 billion and $12.1 billion on December 31, 2025 and 2024, respectively. The ABO for all other post-retirement plans was $529 and $538 on December 31, 2025 and 2024, respectively. On December 31, 2025 and 2024, most of our defined benefit plans had an ABO that exceeded the plans’ assets.

Summary information for those plans follows:

			Pension Benefits												Other Post-Retirement Benefits
December 31			2025						2024						2025						2024
ABO			$	(11,423)					$	(11,380)					$	(251)					$	(227)
Fair value of plan assets			10,606						9,657						33						—

Assumptions. We calculate the plan assets and liabilities for a given year and the net annual benefit cost for the subsequent year using assumptions determined as of December 31 of the year in question.

The following table summarizes the weighted average assumptions used to determine our benefit obligations:

Assumptions on December 31			2025						2024
Pension Benefits
Benefit obligation discount rate			5.16		%				5.40		%
Rate of increase in compensation levels			2.42		%				2.58		%
Other Post-Retirement Benefits
Benefit obligation discount rate			5.21		%				5.41		%
Health care cost trend rate:
Trend rate for next year			8.25		%				7.50		%
Ultimate trend rate			5.00		%				5.00		%
Year rate reaches ultimate trend rate			2036						2035

The following table summarizes the weighted average assumptions used to determine our net annual benefit cost:

Assumptions for Year Ended December 31			2025						2024						2023
Pension Benefits
Discount rates:
Benefit obligation			5.40		%				4.83		%				5.08		%
Service cost			3.60		%				3.90		%				4.50		%
Interest cost			5.09		%				4.74		%				4.98		%
Expected long-term rate of return on assets			6.12		%				6.35		%				6.34		%
Rate of increase in compensation levels			2.52		%				2.66		%				2.60		%
Other Post-Retirement Benefits
Discount rates:
Benefit obligation			5.41		%				4.89		%				5.16		%
Service cost			5.35		%				4.91		%				5.26		%
Interest cost			5.14		%				4.83		%				5.09		%
Expected long-term rate of return on assets			5.38		%				5.07		%				5.04		%

We base the discount rates on a current yield curve developed from a portfolio of high-quality, fixed-income investments with maturities consistent with the projected benefit payout period.

We determine the long-term rates of return on assets based on consideration of historical and forward-looking returns and the current and expected asset allocation. In 2025, we decreased the expected long-term rates of return on assets by 23 basis point for our pension plans and increased the expected long-term rates of return on assets by 31 basis points for our other post-retirement benefit plans, resulting from changes in our asset allocations.

Retirement plan assumptions are based on our best judgment, including consideration of current and future market conditions. Given the long-term nature of the assumptions being made, actual outcomes can and often do differ from these estimates. Changes in these estimates impact future pension and other post-retirement benefit costs. As previously discussed, our contractual arrangements with the U.S. government provide for the recovery of pension and other post-retirement benefit costs. Therefore, the impact of annual changes in financial reporting assumptions on the cost for these plans does not immediately affect our operating results.

Assets. A committee of our Board is responsible for the strategic oversight of our defined benefit plan assets held in trust. Management develops investment policies and provides oversight of a third-party investment manager who reports to the committee on a regular basis. The outsourced third-party investment manager develops investment strategies and makes all day-to-day investment decisions related to defined benefit plan assets in accordance with our investment policy and target allocation percentages with the objective of generating future returns at or above our assumed long-term rates of return used to determine net annual benefit cost.

Our investment policy endeavors to strike the appropriate balance between asset growth and funded status protection. The objective of the policy is to generate asset returns that will increase the funded status of our plans while systematically reducing cost and deficit risk as funded status of the plans improve. Several of our U.S. pension plans are now utilizing a target asset allocation strategy that will automatically increase investments in liability-hedging assets (primarily commingled fixed-income funds) and decrease investments in return-seeking assets (primarily commingled equity funds) as the plans reach specific funded status targets. At the end of 2025, our target asset allocation ranges for plans that are less than fully funded were 40%-60% return-seeking assets and 40%-60% liability-hedging assets.

More than 90% of our pension plan assets are held in a single trust for our primary qualified U.S. government and commercial pension plans. On December 31, 2025, the trust was invested largely in commingled funds comprised primarily of equity and fixed-income securities. The trust also invests in other asset classes consistent with our investment policy. Our investment policy allows the use of derivative instruments when appropriate to reduce anticipated asset volatility, to gain exposure to an asset class or to adjust the duration of fixed-income assets.

We hold assets in VEBA trusts for some of our other post-retirement benefit plans. On December 31, 2025, these trusts were invested largely in fixed-income securities and commingled funds comprised primarily of equity and fixed-income securities. Our asset allocation strategy for the VEBA trusts considers funded status, potential fluctuations in our other post-retirement benefit obligation, the taxable nature of certain VEBA trusts, tax deduction limits on contributions and the regulatory environment.

Our defined benefit plan assets are reported at fair value. See Note P for a discussion of the hierarchy for determining fair value. Our Level 1 assets include commingled equity and fixed-income funds that are valued using a unit price or NAV. These funds are actively traded and valued using quoted prices for identical securities from the market exchanges. Our Level 2 assets include fixed-income securities and commingled equity and fixed-income funds whose underlying investments are valued using observable marketplace inputs. The fair value of plan assets invested in fixed-income securities is generally determined under a market approach using valuation models that incorporate observable inputs such as interest rates, bond yields and quoted prices for similar assets. Our plan assets invested in Level 2 commingled funds are valued using a unit price or NAV obtained from the fund’s transfer agent or investment manager that is based on the underlying, observable investments of the fund. Our Level 3 assets consist of insurance deposit contracts, retirement annuity contracts, real estate funds, and corporate debt securities.

Certain investments valued using NAV as a practical expedient are excluded from the fair value hierarchy but are included in the tables below to permit reconciliation to total plan assets. These investments are redeemable at NAV generally on a monthly or quarterly basis, and most have redemption notice periods of up to 90 days. The unfunded commitments related to these investments were not material on December 31, 2025 or 2024.

The fair value of our pension plan assets by investment category and the corresponding level within the fair value hierarchy were as follows:

			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Asset Category			December 31, 2025
Cash and equivalents			$	485					$	19					$	466					$	—
Commingled funds:
Equity funds			3,958						496						3,462						—
Fixed-income funds			6,503						193						6,310						—
Real estate funds			15						—						—						15
Other investments:
Insurance deposit contracts			221						—						—						221
Retirement annuity contracts			26						—						—						26
Total plan assets in fair value hierarchy			$	11,208					$	708					$	10,238					$	262
Plan assets measured using NAV as a practical expedient:
Real estate funds			298
Equity funds			51
Hedge funds			—
Total pension plan assets			$	11,557

			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Asset Category			December 31, 2024
Cash and equivalents			$	177					$	16					$	161					$	—
Commingled funds:
Equity funds			3,597						514						3,083						—
Fixed-income funds			6,048						195						5,853						—
Real estate funds			14						—						—						14
Other investments:
Insurance deposit contracts			183						—						—						183
Retirement annuity contracts			22						—						—						22
Total plan assets in fair value hierarchy			$	10,041					$	725					$	9,097					$	219
Plan assets measured using NAV as a practical expedient:
Real estate funds			421
Equity funds			37
Hedge funds			1
Total pension plan assets			$	10,500

The fair value of our other post-retirement benefit plan assets by category and the corresponding level within the fair value hierarchy were as follows:

			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Asset Category			December 31, 2025
Cash and equivalents			$	13					$	—					$	13					$	—
Commingled funds:
Equity funds			83						31						52						—
Fixed-income funds			102						6						96						—
Fixed-income securities			472						—						469						3
Total plan assets in fair value hierarchy			$	670					$	37					$	630					$	3
Plan assets measured using NAV as a practical expedient:
Real estate funds			3
Total other post-retirement benefit plan assets			$	673

			Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)
Asset Category (a)			December 31, 2024
Cash and equivalents			$	7					$	—					$	7
Commingled funds:
Equity funds			120						74						46
Fixed-income funds			102						11						91
Fixed-income securities			411						—						411
Total plan assets in fair value hierarchy			$	640					$	85					$	555
Plan assets measured using NAV as a practical expedient:
Real estate funds			5
Total other post-retirement benefit plan assets			$	645

(a)We had no Level 3 investments on December 31, 2024.

Changes in our Level 3 defined benefit plan assets during 2025 and 2024 were as follows:

			Insurance Deposits Contracts						Retirement Annuity Contracts						Real Estate Funds			Corporate Debt Securities						Total Level 3 Assets
December 31, 2023			$	184					$	25					$	13		$	—					$	222
Actual return on plan assets:
Unrealized (losses) gains , net			(9)						(3)						1			—						(11)
Purchases, sales and settlements, net			8						—						—			—						8
December 31, 2024			183						22						14			—						219
Actual return on plan assets:
Unrealized gains, net			35						4						2			—						41
Realized losses, net			—						—						(1)			—						(1)
Purchases, sales and settlements, net			3						—						—			3						6
December 31, 2025			$	221					$	26					$	15		$	3					$	265

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

General Dynamics Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying Consolidated Balance Sheet of General Dynamics Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, the related Consolidated Statements of Earnings, Comprehensive Income, Cash Flows, and Shareholders’ Equity for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated January 30, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Estimates used to recognize revenue for select long-term contracts

As discussed in Note B to the consolidated financial statements, accounting for long-term contracts involves estimating total contract revenue and costs. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying performance obligations.

For a select group of long-term contracts in the defense segments, we identified the assessment of certain assumptions that are an input into the amount of revenue recognized during the period as a critical audit matter. Examples of these assumptions are estimates of labor hours, the cost of materials for the work to be performed and the transaction price. The evaluation of one or more of the assumptions used to recognize revenue for the select group of long-term contracts required a high level of subjective auditor judgment due to the nature of the individual contracts and related contract performance risks. Specifically, changes to certain assumptions may have a significant impact on the revenue recorded during the period.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the assumptions used to recognize revenue for the select group of long-term contracts. This included contract-level controls over certain revenue and cost assumptions. For certain contracts, we compared the Company’s historical estimates of costs to actual costs incurred to assess the Company’s ability to estimate accurately. Based on the nature of the individual contract, we evaluated certain revenue and cost assumptions by:

–reading the underlying contract and any related amendments to obtain an understanding of the contractual requirements and related performance obligations

–assessing the enforceable rights and obligations of the underlying contractual terms when changes to price or scope, or both, are not yet agreed

–assessing costs incurred to date and the relative progress toward satisfying the performance obligation(s) of the contract

–assessing, if relevant, the estimated costs at completion by considering similar or predecessor contracts and programs

–inquiring of financial and operational personnel of the Company to identify factors that should be considered within the estimated costs at completion or indications of potential management bias

–inspecting correspondence, if any, between the Company and the customer regarding actual to date and expected performance

–analyzing the sufficiency of the Company’s assessment of contract performance risks included within the estimated costs at completion.

Discount rates used in pension benefit obligation

As discussed in Note S to the consolidated financial statements, the Company’s pension benefit obligation and the associated plan assets were $12.3 billion and $11.6 billion, respectively, on December 31, 2025. The weighted-average discount rate assumption used in estimating the pension benefit obligation as of December 31, 2025, of 5.16% was based on a current yield curve developed from a portfolio of high-quality, fixed-income investments with maturities consistent

with the projected benefit payout period. The selected discount rates have a significant effect on the measurement of the pension benefit obligation.

We identified the evaluation of the discount rates for certain plans’ pension benefit obligations as a critical audit matter. This is due to the extent of specialized skills required to assess the discount rate assumption used to discount estimated future benefit payments. In addition, certain plans’ pension benefit obligations were sensitive to changes in this assumption.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the pension benefit obligation process. This included a control related to the determination of the discount rate assumption. We involved an actuarial professional with specialized skills and knowledge, who assisted in:

–evaluating the Company’s methodology used to develop the discount rates

–checking the accuracy of the discount rates using the cash flows and spot rates provided by the Company

–evaluating the Company’s determination of the discount rates by comparing changes in the discount rates from the prior year against changes in published indices using publicly available market data.

						/s/ KPMG LLP

We have served as the Company’s auditor since 2002.

McLean, Virginia

January 30, 2026