tapebrief
RTX · Q3 2025

RTX · Q4 2025 Earnings

Bullish

RTX Corporation

Reported January 27, 2026

30-second summary

Q4 revenue grew 12% reported (+14% organic) to $24.24B with all three segments expanding, FY revenue landed at $88.6B (+10% YoY, +11% organic) and FY FCF at $7.94B — beating the January-year guide range across revenue, EPS, organic growth, and FCF. Management initiated FY2026 at $92.0–$93.0B revenue, $6.60–$6.80 adjusted EPS, and $8.25–$8.75B FCF, with organic growth stepping down to 5–6% from the 11% just delivered — framed as normalization off an outsized 2025 rather than demand softening, and validated by a record $268B backlog (+23% YoY) and FY2025 book-to-bill of 1.56. The standout structural signal: $10.5B FY2026 CapEx ($3.1B of it directly tied to munitions/sensor/engine capacity) and quantified digital-platform deployment now covering 50%+ of manufacturing hours mark a shift from tactical capacity adds to multi-year industrial expansion.

Headline numbers

EPS

Q4 FY2025

$1.55

Revenue

Q4 FY2025

$24.24B

+12.0% YoY

Gross margin

Q4 FY2025

19.4%

Free cash flow

Q4 FY2025

$3.19B

Operating margin

Q4 FY2025

10.7%

Key financials

Q4 FY2025
MetricQ4 FY2025YoYQ3 FY2025QoQ
Revenue$24.24B+12.0%$22.48B+7.8%
EPS$1.55—$1.70-8.8%
Gross margin19.4%———
Operating margin10.7%—11.2%-50bps
Free cash flow$3.19B—$4.03B-20.6%

Guidance

RTX decisively beat FY2025 guidance across revenue, EPS, organic growth, and FCF; FY2026 outlook moderates growth expectations while maintaining positive trajectory.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

MetricPeriodPrior guideActualΔResult
RevenueFY2025$86.5 to $87.0 billion$88.603 billion+$1.6 to $2.1 billion above guideBeat
Adjusted EPSFY2025$6.10 to $6.20$6.29+$0.09 to $0.19 above guideBeat
Organic Sales GrowthFY20258% to 9%14%+5 to 6 points above guideBeat
Free Cash FlowFY2025$7.0 to $7.5 billion$7.94 billion+$0.44 to $0.94 billion above guideBeat

New guidance

MetricPeriodGuideYoY
RevenueFY2026$92.0 to $93.0 billion+3.6% to +4.9% YoY
Adjusted EPSFY2026$6.60 to $6.80+4.9% to +8.1% YoY
Organic Sales GrowthFY20265% to 6%—
Free Cash FlowFY2026$8.25 to $8.75 billion+3.9% to +10.2% YoY

Segment KPIs

Q4 FY2025
SegmentQ4 FY2025YoY
Collins Aerospace$7.736B+3.0%
Pratt & Whitney$9.496B+25.0%
Raytheon$7.657B+7.0%

Other KPIs

Q4 FY2025
SegmentQ4 FY2025
Backlog$268 billion
Commercial Backlog$161 billion
Defense Backlog$107 billion
Collins Aerospace Adjusted Operating Margin15.8%
Pratt & Whitney Adjusted Operating Margin8.2%
Raytheon Adjusted Operating Margin11.6%
Operating Cash Flow$4.2 billion
Organic Sales Growth14%

Management tone

Narrative arc: Tariff defense (Q2) → Backlog execution and operational scale-up (Q3) → Multi-year industrial expansion thesis (Q4).

Capacity investment shifted from tactical response to a structural, decade-scale program. Q2's framing was Raytheon-specific ($250M to double GMT and Coyote production); Q3 widened to "supply chain execution is the binding constraint"; this quarter management committed to $10.5B FY2026 CapEx with $3.1B explicitly directed at munitions, sensors, and engine production capacity across Tucson, Andover, Collins, and Pratt sites simultaneously. The press release frames 2026 as the year three segments invest in capacity in parallel — an industrial expansion thesis rather than a working-capital story. The size of the commitment reads as confidence the demand cycle is multi-year.

The defense demand narrative was upgraded from cyclical replenishment to structural alliance commitment. Q2 and Q3 anchored defense demand in U.S. munitions replenishment and international book-to-bill. This quarter the prepared remarks introduce specific NATO and Asia-Pacific budgetary anchors: "NATO allies, which today spend around 2% of GDP on defense, have committed to increasing their core defense spending to approximately 3.5% of GDP by 2035." Asia-Pacific and Middle East budgets framed at 3–4% annual growth over five years. The shift converts a demand call from inventory math into multi-decade budgetary commitments — meaningfully de-risking the backlog conversion thesis.

The digital/AI manufacturing story moved from anecdote to quantified inflection. Prior quarters mentioned digital tools deployment as efficiency enabler; this quarter management quantified scale and ROI for the first time: "we've now connected factories that represent over 50% of our annual manufacturing hours to our digital platform" — with Pratt's Lansing facility cutting aged inventory ~45% and Raytheon's Andover cutting circuit card cycle times ~35%. This is the first quarter management has positioned proprietary digital tooling as a structural margin driver rather than a productivity overhead, signaling operational leverage to expect in 2026 segment margin expansion.

Commercial aftermarket framing got an installed-base quantification. Q3 introduced the V2500 retirement math; this quarter Collins gets a parallel framing — "$105 billion of out-of-warranty aircraft content at Collins" — converting the aftermarket runway into a quantified, sized opportunity. Combined with GTF Advantage EU certification received and aircraft certification "expected soon" (production cut-in begun, entry into service later 2026), the aftermarket+Advantage combo gives management a tangible 2027+ growth bridge beyond the moderated 2026 organic guide.

GTF program language hardened from on-track to mechanically delivering. Q2 framed the GTF setup as managing AOGs; Q3 quantified MRO output +21% YTD with 30% FY target. This quarter delivered the landing — Q4 output +39%, FY 1100 output +26%, heavier shop visits +40% YoY, AOGs down >20%. The program is now positioned as mechanically executing toward 2026 fleet stabilization, with the Advantage engine production cut-in adding a new growth vector on top.

Recurring themes management leaned on this quarter:

Sustained defense demand from NATO/allied rearmament and U.S. munitions replenishmentCommercial OE production rate increases across 737 MAX, A320neo, 787, and business jetsGTF fleet stabilization and Advantage engine near-term entry into serviceProprietary digital/AI-driven manufacturing optimization across 50%+ of production footprintRecord $268B backlog enabling 5-6% organic growth visibility in 2026Multi-year CapEx expansion ($3.1B in 2026) in munitions, sensors, and engine production

Risks management surfaced:

Higher corporate expenses and elevated effective tax rate impacting quarterly EPSTariff headwinds ($600M impact in 2025; implied ongoing exposure in 2026)Pension de-risking transaction headwind (~13 cents EPS in 2026 from lower pension income)Divestitures (~$50M margin headwind at Collins, implicit EPS drag from reduced asset base)Commercial aftermarket mix and higher SG&A offsetting volume gains at Pratt

Q&A highlights

Peter Arman · Baird

Update on DTF fleet management plan in year three, including financial and technical outlook and key items to expect going forward.

DTF financial and technical outlook remains on track. AOGs down over 20% from 2025 highs. MRO output up 26% in 1100, with heavier shop visits up 40% YoY. Q4 output up 39% with 16% turnaround time reduction. Plan to grow MRO output similarly in 2026 to continue reducing AOGs.

AOGs down >20% from 2025 highs1100 output up 26% in 2025Heavier shop visits up 40% YoYQ4 output up 39%

Ronald Epstein · Bank of America

How is management thinking about executive order on defense capital deployment and RTX being highlighted by the administration; what does it mean for capital allocation and dividend policy?

Management understands responsibility to national security and is fully aligned with department's mandate to ramp production and invest in capacity. Made good progress in 2025 with output up 20%+ on critical programs. Increasing CapEx to enable ramp. Remains committed to dividend while accommodating investment needs. Has active and constructive engagement with DoD on future needs.

2025 output up >20% on critical programsDividend commitment remains unchangedCapEx will increase to enable production rampActive and constructive engagement with DoD on future capacity needs

Kristen Lewek · Morgan Stanley

With RTX now largest aerospace defense company by sales, how is management thinking about portfolio composition and monetization opportunities given competitor carving out mission solutions business with government backing and IPO?

Management has strong conviction that RTX is constructed to meet current moment with ramp in defense and commercial. Breadth and scale provides competitive advantage in technology, cost structure, customer knowledge, and talent. Convergence of commercial and defense tech positions RTX uniquely versus competitors. Will continue to invest in capacity and technology with strong balance sheet.

RTX breadth and scale provides competitive advantageConvergence of commercial and defense technology favors integrated structureStrong balance sheet enables continued investmentUniquely positioned relative to competitors pursuing carve-outs

Robert Stallard · Vertical Research

Why does Pratt & Whitney 2026 OEM forecast look conservative given Airbus A320 and A220 production plans; can you break down the aerospace OEM components?

Large commercial engine deliveries up 6% in 2025; expect mid to high single-digit growth in 2026. Balancing support for flying fleet today versus Airbus installs. Continued MRO growth for GTF aircraft. Growth on installs but flattish on spare engine deliveries. Strong backlog. 2025 total deliveries up >50% versus 2019 levels. Investments coming online over next 24 months including powder metal tower, forging press, and Asheville turbine airfoil capacity.

2025 large commercial engine deliveries up 6%2026 expected to be mid-to-high single digits growth2025 total deliveries up >50% vs 2019Continued MRO growth on GTF aircraft

Scott Doshley · Deutsche Bank

Why does Pratt Commercial Aftermarket growth slow to high single digits in 2026 given Q4 strength; and when will casting output ramp at Asheville?

70% of Pratt's 2026 growth from commercial aftermarket at high single digits. Pratt Canada aftermarket growth in high single-digit range. V2500 shop visits expected ~800 (within 20 of 2025). PW4000/2000 retirements creating $100M headwind in 2026. GTF aftermarket continuing to grow with heavier shop visits and low double-digit margins with 1-2 point expansion expected. Casting foundry in buildup phase; expect more meaningful impact in 2028-2029 timeframe.

70% of Pratt 2026 growth from commercial aftermarketV2500 shop visits expected ~800 (flat to 2025)PW4000/2000 retirement headwind ~$100M in 2026GTF aftermarket low double-digit margins with 1-2 point expansion expected in 2026

Answers to last quarter's watch list

Q4 FCF and FY landing point — Q4 FCF came in at $3.20B, comfortably above the $2.3–$2.8B needed to land in the $7.0–$7.5B FY range; FY FCF actually landed at $7.94B, beating the high end of the FY guide by $0.44B. Management chose to overshoot rather than raise the range in January — the cleanest possible answer.
Resolved positively
Collins OE mix and margin trajectory — Collins Q4 adjusted margin held at 15.8% on +3% reported growth (decelerating from +8% in Q3). The press release flagged a ~$50M FY2026 operating profit headwind from divestitures and continued tariff exposure. The margin held flat sequentially but did not yet inflect upward, and the lower Q4 growth reflects mix and divestiture timing.
Continue monitoring
Pratt 30% MRO output growth target landing — Q4 output landed at +39% with FY 1100 output +26% and heavier shop visits +40% YoY. Management did not explicitly state whether the 30% target was hit, but the +26% FY 1100 figure suggests just below the round-number target while the Q4 inflection was clearly delivered. Either way, the trajectory now anchors continued AOG decline through 2026.
Resolved positively
Raytheon supply chain throughput — Q4 Raytheon revenue grew +7% on $107B of defense backlog, with the press release citing continued capacity investment in Tucson and Andover. Material receipt growth cadence was not separately quantified in the press release. The Q4 print is consistent with continued throughput improvement but doesn't yet show the acceleration management flagged as needed for 2026.
Continue monitoring

What to watch into next quarter

FY2026 organic growth landing trajectory — 5–6% organic guide is the floor management set; with $268B backlog and FY2025 book-to-bill of 1.56, watch whether Q1 actuals and FY2026 guide raises follow the FY2025 pattern (raised through the year) or whether 2026 stays close to the initial range.

GTF Advantage entry into service — management committed to EU certification received, aircraft certification "expected soon," and entry into service "later this year." Slippage on any of those milestones beyond Q3 would push the 2027+ growth bridge math out by a year.

Pratt aftermarket margin expansion — management guided GTF aftermarket margin expansion of 1–2 points in 2026 off the current low double-digit base. Watch Q1/Q2 Pratt segment margin trajectory to validate whether the implied 9–10% segment margin landing for FY2026 is tracking, particularly given Q4's 130bps YoY adjusted margin compression.

CapEx execution and FCF conversion — $10.5B FY2026 CapEx with $3.1B in capacity expansion is a step-up. FCF guide of $8.25–$8.75B against this CapEx requires operating cash flow to ramp; watch Q1 OCF for early read on whether the FCF guide range has cushion or is exposed.

Pension de-risking headwind absorption — ~$0.13 of FY2026 EPS headwind from pension de-risking embedded in the $6.60–$6.80 guide. If pension actions are not yet fully transacted, watch for any incremental EPS revision tied to transaction timing.

Sources

  1. RTX Corporation Q4 2025 / FY2025 Earnings Press Release (Form 8-K Exhibit 99), SEC EDGAR, January 27, 2026.
  2. RTX Corporation Q4 2025 Earnings Conference Call commentary as reported.

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