As at 20 February 2026

Executive Summary

Key highlights

In this report, we review the latest FY25 results for the year ended 31 December 2025.

Financial results at a glance:

• Total group sales increased from $80.7 billion in FY24 to $88.6 billion in FY25, a 10% YoY rise, as all three segments grew. Gains reflected higher commercial OE and aftermarket volumes at Collins and Pratt & Whitney, and increased land, air, and naval defence program activity at Raytheon, supported by robust global demand.

• Total operating profit increased from $6.5 billion in FY24 to $9.3 billion in FY25. Selling, general, and administrative expenses grew by roughly 5%, lower than sales growth, underscoring solid cost control and operating leverage across the portfolio.

• RTX delivered FY25 adjusted EPS of $6.29, up 10% YoY (FY24: $5.73), alongside GAAP EPS of $4.96, which reflects $1.15 per share of acquisition accounting adjustment and smaller restructuring and non-recurring items. Margin expansion was evident, with total segment operating margin improving to 11.8% (FY24: 10.5%).

• Operating cash flow rose from $7.2 billion in FY24 to $10.6 billion in FY25, with free cash flow increasing from $4.5 billion to $7.9 billion over the same period. The improvement was underpinned by higher operating profits and favourable movements in contract liabilities and payables, alongside disciplined capital spending of $2.6 billion.

• Segment performance was broad-based: Collins’ sales grew 7% with higher widebody and narrowbody OE and a double-digit increase in commercial aftermarket; Pratt & Whitney grew sales 17% on strong large-engine OE, aftermarket, and military volumes; Raytheon delivered 5% higher sales.

• Backlog reached a record $268 billion at year-end 2025, comprising $161 billion of commercial and $107 billion of defence, with a full-year, book-to-bill of 1.56x. This expanding order book, including major missile, engine, and avionics awards, provides strong multi-year revenue visibility and underpins RTX’s confidence in continued growth.

Analyst thesis

Our recommendation is based on:

• Diversified portfolio with structural balance: RTX’s ~46% commercial and ~54% defence revenue mix provides earnings resilience across cycles. Core platforms support high switching costs and durable franchise value across the three segments, each generating roughly $28–$30 billion in revenue over the past year.

• Record backlog supports multi-year coverage: RTX ended FY25 with a ~$268 billion backlog (+23% YoY) and 1.56x book-to-bill, reflecting strong order momentum. Exposure to long-cycle defence programs and multi-year OEM and aftermarket contracts underpins revenue visibility and operating leverage.

• Secular defence and aftermarket tailwinds: Rising NATO and European defence commitments support missile and munitions demand, while Pratt & Whitney’s 4,000+ GTF installed base and fleet ageing dynamics drive high-single-digit aftermarket growth and margin expansion.

• Valuation limits near-term upside: Following strong share price performance over the past year, RTX trades at ~29–30x forward earnings, a premium relative to legacy defence contractors. The current multiple suggests the market has largely priced in the company's backlog strength and secular growth tailwinds, leaving limited room for further upside re-rating