RTX Corporation makes money in two very different ways that happen to fit together well. Its Pratt & Whitney division builds jet engines for commercial airliners and military jets, then earns steady income for decades maintaining and repairing those same engines. Its Collins Aerospace division makes hundreds of smaller parts for aircraft, from landing gear to cabin seats, and likewise sells spare parts and repair services long after the original sale. Its Raytheon division makes missiles, radars, and air defense systems for governments around the world. The engines and parts businesses depend on how many planes are flying. The weapons business depends on how much governments choose to spend on defense. Put together, RTX collects money upfront when it sells new equipment, then collects again and again as customers pay for maintenance, spare parts, and ammunition restocking. The diagram below traces where the money goes.
How RTX Corporation Makes Money
flowchart LR
A["U.S. Government
Contracts 38%"] --> B["Defense Systems
Raytheon: Missiles,
Radars, Sensors"]
C["Commercial Customers
Aircraft Makers,
Airlines"] --> D["Aircraft Engines
Pratt & Whitney:
GTF, F135"]
C --> E["Aerospace Parts
Collins: Power,
Control, Interiors"]
B --> F["Total Sales
88.6B"]
D --> F
E --> F
F --> G["Operating Cash
10.6B"]
G --> H["R&D & Capacity
Investment"]
H --> D
H --> E
H --> B
B --> I["Aftermarket Services
& Spare Parts
24.4B Revenue"]
D --> I
E --> I
I --> J["Customer Lock-in
and Recurring
Revenue"]
J --> F
Five years of financial data tell a story of a business that is growing but not smoothly. Revenue climbed from $64.4 billion in 2021 to $88.6 billion in 2025. That is real growth. But the path was bumpy. In 2023, Pratt & Whitney discovered a flaw in the powder metal used to make parts inside its PW1100G engine, which powers the popular Airbus A320neo. Thousands of engines had to be pulled from service for inspection. The charge hit the 2023 numbers hard, with operating profit margin falling to just 5.2 percent. The company also paid over one billion dollars in legal settlements in 2024 for violations including bribing foreign officials, illegally sending products to China, and overcharging the U.S. Department of Defense.
2023
crisis
The Powder Metal Problem
Pratt & Whitney found a rare flaw in the powder metal used to make parts inside certain PW1100G-JM engines. These engines power the Airbus A320neo family, one of the most common airliners in the world. Thousands of engines had to come out of service for accelerated inspections, costing RTX significant money through at least 2026 and disrupting airline schedules globally.
By 2025, the recovery was visible. Revenue reached $88.6 billion and operating profit margin climbed to 10.5 percent, the strongest in this five-year window. Operating cash flow jumped to $10.6 billion. Free cash flow reached $7.9 billion. Net debt, which had swelled to $36.0 billion in 2023 partly because of the engine crisis costs and legal settlements, fell back to $27.1 billion by 2025. The direction of travel improved significantly, even if the gross margin, sitting just above 20 percent, remains thin for a technology company.
RTX Revenue 2021 to 2025 (billions of dollars)
Revenue grew steadily across five years, with the biggest single-year jump coming in 2024 and 2025 as the engine crisis faded and defense demand accelerated.
One forward-looking number stands out above all others. RTX ended 2025 with a backlog of $268 billion in firm orders, up from $218 billion at the end of 2024. That backlog represents work the company has already been hired to do. About 25 percent of it is expected to convert into revenue within the next 12 months. The rest stretches further out, providing unusual visibility into future revenue for a company this size.
$268B
Total backlog at end of 2025, up from $218B a year earlier
What a Backlog Actually Means
A backlog is the pile of confirmed orders a company has received but not yet delivered. It is not a guarantee of future profit, because costs can rise after the order is locked in. But it does mean the revenue is already spoken for. A growing backlog generally signals that customers are placing more new orders than the company is shipping out.
The international side of the business is growing fast. Sales to international customers reached $41.3 billion in 2025, which is 47 percent of total revenue, up from 43 percent in both 2023 and 2024. Demand for weapons like the Patriot missile system, AMRAAM air-to-air missiles, Stinger portable missiles, Javelin anti-tank missiles, and NASAMS air defense systems has surged as countries react to conflicts in Ukraine and the Middle East. Meanwhile the U.S. Congress passed supplementary funding that includes $156.2 billion for the Department of Defense, with specific allocations for munitions and a new missile defense initiative called Golden Dome for America, for which RTX has said its portfolio is positioned to play a role.
$41.3B
International sales in 2025, representing 47% of total revenue
The risks facing RTX are specific and documented, not just generic warnings. The PW1100G powder metal problem is still running. Inspections and engine removals will cost the company significant money through 2026. The company is now also operating under three separate government oversight agreements for three years each, following the legal settlements. Those agreements require an independent compliance monitor watching over Raytheon and a special compliance officer watching over export controls. Failure to satisfy either agreement could mean additional fines or suspension from government contracts. On top of that, a large portion of the defense work is done on fixed-price contracts, where RTX absorbs any cost overruns itself. Supply chain disruptions, material shortages, and inflation make cost overruns a real and ongoing threat. The company relies on materials like cobalt, tantalum, rhenium, and titanium, many of which come from foreign suppliers or single sources that cannot easily be replaced.
Fixed-Price Contracts: Why They Are Risky
A fixed-price contract means RTX agrees to deliver a product for one set price, no matter what it actually costs to build it. If raw material prices rise, or a design turns out to be harder than expected, RTX pays the difference out of its own profit. This is different from a cost-plus contract, where the government reimburses the contractor for actual costs plus a fee.
China has already announced sanctions against the Raytheon business unit and a Collins joint venture, linked to arms sales to Taiwan. If China enforces or expands those sanctions, it could disrupt operations in ways that are currently hard to predict. New U.S. tariffs on imports from all trading partners, introduced since February 2025, are adding cost pressure across the supply chain, though RTX has said it does not currently expect a material effect from tariffs as they stand today.
RTX paid down nearly nine billion dollars of net debt in two years, even while absorbing the engine crisis costs and legal settlements. The direction of the balance sheet improved, though debt remains substantial.
RTX employs approximately 54,000 engineering professionals out of a total workforce of about 180,000 people across 52 countries. Keeping those engineers, and hiring more with security clearances for classified programs, is something the company flags as an ongoing challenge, particularly in specific locations where competition for technical talent is intense.
The Bet
RTX's aftermarket engine business keeps growing only if the GTF engine family, especially the PW1100G powering the A320neo, earns back the trust of airlines after the powder metal crisis and continues to win the next round of narrowbody aircraft engine competitions. The GTF powers more than 2,600 aircraft today, and every one of those planes needs decades of maintenance. If the crisis permanently damages customer confidence, or if a competitor wins the next-generation engine platform for a major aircraft, the long-tail service revenue that justifies the upfront cost of building those engines shrinks. The whole commercial engine model assumes that the install base keeps growing and that airlines keep returning to Pratt & Whitney shops, not competitors, for overhauls.
Open question
RTX is collecting more orders than ever, paying down debt, and benefiting from a world that is spending more on defense. The backlog of $268 billion provides unusual visibility. But the company is simultaneously managing an engine crisis with costs running through 2026, three years of mandatory compliance oversight following serious legal violations, fixed-price contract exposure in an inflationary environment, and geopolitical risks from China that have no clear resolution. Can RTX execute cleanly enough on its existing backlog, repair its compliance culture, and restore full confidence in its engine business, all at the same time, without another large unexpected charge disrupting the financial recovery that 2025 appeared to promise?
Compiled · 10-K · FY2025
Government Contract Risk
A large part of the company's money comes from contracts with the U.S. Department of War and other government agencies. If the government cuts its defense spending, stops funding certain programs, or terminates contracts, the company could lose significant revenue and profits. The government can also end contracts without warning, and the company might not be paid for all costs it has already spent.
Fixed-Price Contract Risk
On fixed-price contracts, the company receives one set price no matter what it actually costs to do the work. If the company's costs go higher than expected because of design problems, supply issues, or mistakes in estimating costs, the company has to absorb those extra costs and makes less profit. This is especially risky on development contracts where problems are hard to predict.
Pratt & Whitney Engine Issue
In 2023, Pratt & Whitney found a rare problem in powder metal used to make parts for certain jet engines (the PW1100 model that powers Airbus A320neo aircraft). This discovery has caused thousands of engines to be taken out of service for inspections, costing the company significant money through 2026 and damaging its reputation with customers.
Supply Chain Disruption
The company depends on suppliers around the world to provide raw materials and parts, but global shortages, geopolitical tensions, sanctions (especially against Russia and China), and inflation have made materials harder and more expensive to get. These problems have slowed production and increased costs, and are expected to continue causing delays and price increases.
Export Control and Compliance
In August 2024, the company signed an agreement with the U.S. Department of State to fix violations of export control laws regarding military equipment and technology sales. For three years, the company must follow strict new rules and have its compliance audited. Failure to comply could result in fines, suspension from government contracts, or restrictions on sales.
10-K Item 1A · Risk Factors
