How RTX (RTX) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a defense and aerospace leader like RTX makes money is essential for investors and anyone interested in the business of aerospace and defense. In this post, we break down RTX's quarterly income statement (Q4 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, engines, and intelligence solutions through its key segments including Pratt & Whitney engines, Collins Aerospace systems, and other defense-related operations. Revenue comes primarily from commercial and military aerospace products, engine sales, aftermarket services, and defense contracts. The company benefits from long-term government contracts and a growing commercial aviation market, with segments like Pratt & Whitney driving significant growth.

Revenue Breakdown

• Total Revenue (Q4 2025): $24.2B (+12.1% YoY)
  • Pratt & Whitney Revenue: $9.5B (39.2% of total)
  • Collins Aerospace Systems Revenue: $7.7B (31.9% of total)
  • Other: $7.0B
  • Growth is powered by strong demand in commercial engines (Pratt & Whitney +25.5% YoY) and steady Collins Aerospace performance (+2.6% YoY), alongside defense backlog execution.

Gross Profit and Margins

• Gross Profit: $4.7B (19.5% gross margin)
  • Cost of Revenue: $19.5B (+12.3% YoY)
  • RTX maintains robust margins due to scalable aftermarket services, pricing power in defense contracts, and operational efficiencies in high-volume engine production.
• Most costs come from manufacturing materials, labor in engine and systems production, and supply chain for defense components.

Operating Income and Expenses

• Operating Income: $2.3B (+9.2% YoY, 9.5% margin)
• Operating Expenses: $2.4B (+14.3% YoY)
  • R&D: $789M (-2.4% YoY, 3.3% of revenue) — focused on next-generation engines, avionics, and missile defense technologies to support future military and commercial programs.
  • SG&A: $1.6B (+4.1% YoY, 6.8% of revenue) — covering sales to government clients, administrative overhead, and program management.
  • RTX continues to prioritize innovation while maintaining efficiency amid rising program costs and supply chain investments.

Net Income

• Pre-Tax Income: $2.3B (+14.3% YoY, 9.5% margin)
• Income Tax: $584M (25.4% effective tax rate)
• Net Income: $1.6B (+9.4% YoY, 6.7% net margin)
• RTX converts a significant portion of sales into profit due to scalability in aftermarket services, favorable government contract structures, and disciplined cost management.

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What Drives RTX's Money Machine?

• Commercial Engines (Pratt & Whitney): 39.2%+ of revenue, fueled by aftermarket services and large engine orders amid aviation recovery.
• Backlog and Contracts: Key metric with multi-year defense deals ensuring visibility; Q4 growth reflects execution on $200B+ backlog.
• R&D Investments: Heavy focus on hypersonics, sustainable aviation fuels, and digital twins to secure next-decade dominance.
• Future growth areas: Emerging defense tech like space systems and autonomy, though not yet profitable at scale due to early-stage development.

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) taking the largest chunk.
• Even after significant costs and other items like net interest expenses $400M, 6.7% of revenue drops to the bottom line.

Key Takeaways

• RTX's money comes overwhelmingly from Pratt & Whitney engines and Collins Aerospace systems
• High gross and net margins illustrate the power of RTX's asset-light aftermarket model
• Heavy investment in R&D, balanced by efficiency in operating costs
• Ongoing growth is driven by commercial aviation recovery and defense spending

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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 39% of its revenue from Pratt & Whitney engines. Collins Aerospace Systems contributes another 32%, with the remainder from other defense and legacy operations.

2. How profitable is RTX in Q4 2025?

RTX reported net income of $1.6B in Q4 2025, with a net margin of approximately 6.7%, reflecting strong profitability driven by gross margin expansion and revenue growth.

3. What are the largest expense categories for RTX?

The biggest expenses on RTX's income statement are operating expenses, particularly Research & Development (R&D) and Sales, General & Administrative (SG&A) costs. R&D investment reached $789M in Q4 2025, as RTX prioritizes advanced propulsion and avionics technologies.

4. Why does Other operate at a loss?

Other, despite generating $7.0B in revenue, includes legacy Raytheon segments posted an operating loss influenced by other income/expenses. This is because RTX aggressively invests in integration and restructuring, believing these will drive long-term growth—even if the division faces transitional costs today.

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

RTX's effective tax rate in Q4 2025 was 25.4%, consistent with previous years. This moderate rate is primarily due to international operations, tax credits on R&D, and standard corporate structuring.