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 technology 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 model spans the design, manufacture, and servicing of aircraft engines, avionics, missile systems, and intelligence solutions.
Revenue comes primarily from the sale of aerospace systems (Pratt & Whitney, Collins Aerospace), as well as defense products and services.
The company is organized into major segments: Pratt & Whitney (aircraft engines), Collins Aerospace Systems (avionics and aircraft systems), and other defense-related businesses.

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)
  • Raytheon Intelligence & Space and Raytheon Missiles & Defense reported no revenue this quarter.
• Growth is powered by strong demand for commercial aerospace products and continued recovery in global air travel, as well as defense modernization programs.

Gross Profit and Margins

• Gross Profit: $4.58B (20.4% gross margin)
  • Cost of Revenue: $17.9B (+11.5% YoY)
  • RTX maintains moderate margins due to its scalable aerospace manufacturing, high-value defense contracts, and operational efficiencies.
• Most costs come from manufacturing, supply chain, and procurement of advanced materials and components.

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 missile technologies
  • SG&A: $1.44B (+3.4% YoY, 6.4% of revenue) — includes sales, marketing, administrative, and corporate overhead
  • RTX continues to prioritize innovation in aerospace and defense while maintaining cost discipline and expanding global operations.

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 scale, operational efficiency, and strong pricing power in core markets.

What Drives RTX's Money Machine?

• Aerospace Systems Sales: 71%+ of revenue comes from Pratt & Whitney and Collins Aerospace, driven by aircraft engine deliveries, aftermarket services, and avionics upgrades
• Key Metric: Pratt & Whitney revenue up 16.4% YoY, reflecting robust demand for new engines and maintenance contracts
• Investment Area: R&D in propulsion and defense systems, supporting future product launches and long-term contracts
• Future Growth Areas: Advanced defense electronics and hypersonic technologies, though not yet profitable, are strategic bets for future market leadership

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 innovation and significant manufacturing costs, 8.5% of revenue drops to the bottom line.

Key Takeaways

• RTX's money comes overwhelmingly from aerospace systems sales and services
• High gross and net margins illustrate the power of RTX's scale and diversified business model
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by commercial aerospace recovery and defense modernization

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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 sales and services, primarily through its Pratt & Whitney and Collins Aerospace segments. Other revenue comes from defense-related contracts and services.

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, operational efficiency, and robust demand in core markets.

3. What are the largest expense categories for RTX?

The biggest expenses on RTX's income statement are cost of revenue (manufacturing and procurement), followed by operating expenses, particularly Research & Development (R&D) at $684M and Sales, General & Administrative (SG&A) at $1.44B in Q3 2025. R&D investment focuses on propulsion, avionics, and defense technologies.

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

Segments such as advanced defense electronics may operate at a loss despite generating revenue, as RTX aggressively invests in next-generation technologies and strategic programs, believing 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 previous years. This moderate rate is primarily due to tax benefits from international structuring and share-based compensation.