How RTX (RTX) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a defense and aerospace conglomerate like RTX makes money is essential for investors and anyone interested in the business of advanced aerospace and defense systems. In this post, we break down RTX's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick RTX Overview

RTX operates as a global leader in aerospace and defense, providing advanced systems and services for commercial, military, and government customers. Its business spans jet engines, avionics, missile defense, and space systems. Revenue comes primarily from the sale of aerospace systems (Pratt & Whitney, Collins Aerospace) and defense solutions, with a significant portion from long-term contracts and aftermarket services. The company’s main business segments include Pratt & Whitney, Collins Aerospace Systems, and other diversified operations.

Revenue Breakdown

• Total Revenue (Q3 2025): $22.5B (+11.9% YoY)
  • Pratt & Whitney: $8.42B (37.5% of total, +16.4% YoY)
  • Collins Aerospace Systems: $7.62B (33.9% of total, +7.7% YoY)
  • Other: $6.43B (28.6% of total)
  • Growth is powered by strong demand for commercial aerospace products, defense contracts, and robust aftermarket services.

Gross Profit and Margins

• Gross Profit: $4.58B (20.4% gross margin)
  • Cost of Revenue: $17.9B (+11.5% YoY)
  • RTX maintains robust margins due to its scalable aerospace manufacturing, high-value defense contracts, and operational efficiencies.
• Most costs come from raw materials, manufacturing, and direct labor associated with aerospace and defense production.

Operating Income and Expenses

• Operating Income: $2.46B (+21.3% YoY, 10.9% margin)
• Operating Expenses: $2.12B (+5.7% YoY)
  • R&D: $684M (–8.9% YoY, 3.0% of revenue) — Focused on next-generation propulsion, avionics, and defense technologies.
  • SG&A: $1.44B (+3.4% YoY, 6.4% of revenue) — Covers global sales, administrative support, and corporate functions.
  • RTX continues to prioritize innovation in aerospace and defense while maintaining efficiency in its cost structure.

Net Income

• Pre-Tax Income: $2.44B (+27.9% YoY, 10.8% margin)
• Income Tax: $432M (17.7% effective tax rate)
• Net Income: $1.92B (+30.3% YoY, 8.5% net margin)
• RTX converts a significant portion of sales into profit due to its scale, high-margin aftermarket services, and disciplined cost management.

What Drives RTX's Money Machine?

• Aerospace Systems (Pratt & Whitney, Collins Aerospace): Over 71% of revenue comes from these segments, driven by commercial jet engines, aircraft systems, and related services.
• Aftermarket Services: Recurring revenue from maintenance and parts supports stable cash flows and margins.
• R&D Investment: $684M in Q3 2025, targeting propulsion, digital avionics, and advanced defense systems.
• Future Growth Areas: Space systems, hypersonics, and autonomous defense platforms, though not yet major profit contributors.

Visualizing RTX's Financial Flows

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

• Most revenue flows into gross profit, with operating expenses (especially SG&A and R&D) taking the largest chunk.
• Even after large investments in R&D and global operations, 8.5% of revenue drops to the bottom line.

Key Takeaways

• RTX's money comes overwhelmingly from aerospace systems and defense contracts
• High gross and net margins illustrate the power of RTX's scale and high-value aftermarket business
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by commercial aerospace recovery, defense modernization, and innovation in next-gen technologies

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FAQ About RTX's Income Statement

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

RTX generates over 71% of its revenue from aerospace systems (Pratt & Whitney and Collins Aerospace), with the remainder from diversified defense and other operations. Aftermarket services and long-term contracts are also significant contributors.

2. How profitable is RTX in Q3 2025?

RTX reported net income of $1.92B in Q3 2025, with a net margin of approximately 8.5%, reflecting strong profitability driven by scale, high-margin aftermarket services, and disciplined cost control.

3. What are the largest expense categories for RTX?

The biggest expenses on RTX's income statement are cost of revenue (mainly manufacturing and direct costs), followed by operating expenses, particularly Research & Development (R&D) at $684M and Sales, General & Administrative (SG&A) at $1.44B in Q3 2025, as RTX prioritizes innovation and global operations.

4. Why does [segment/division] operate at a loss?

[If applicable: Certain segments, such as advanced space systems or emerging defense technologies, may operate at a loss due to heavy upfront R&D and capital investment, as RTX believes these will drive long-term growth—even if the division is unprofitable today.]

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

RTX's effective tax rate in Q3 2025 was 17.7%, consistent with prior years. This moderate rate is primarily due to international structuring and tax benefits from R&D and share-based compensation.