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    RTX
    Earnings call· Sep 2025(Q3 FY25)

    RTX Corp RTX

    Oct 21, 2025 Source

    Executive summary

    RTX Q3 FY25 — Strong Organic Growth and Raised Full-Year Outlook

    RTX delivered a very strong third quarter, driven by robust organic growth across all segments and continued strong demand in commercial aerospace and defense markets. The company raised its full-year sales and EPS outlook, while maintaining its free cash flow target, reflecting confidence in operational execution and market strength. Strategic investments in capacity and productivity, alongside ongoing supply chain improvements, are key to converting a record backlog into future growth.

    Highlights

    5

    • Organic sales grew 13% year-over-year, with double-digit growth across commercial OE, commercial aftermarket, and defense.

    • Adjusted segment operating profit increased 19% year-over-year, with margin expansion across all three segments.

    • Free cash flow was robust at $4 billion in the quarter, keeping the company on track for its full-year target.

    • Total backlog reached $251 billion, up 13% year-over-year, supported by a strong book-to-bill ratio of 1.63 in the quarter.

    • Full-year adjusted sales outlook raised to $86.5 billion-$87 billion and adjusted EPS to $6.10-$6.20.

    Concerns

    2

    • Tariff-related impacts resulted in a $220 million headwind to free cash flow in Q3, with Collins and Pratt each experiencing a $90 million headwind.

    • Higher effective tax rate expected in Q4 as a $0.12 tax benefit from Q3 will not repeat.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full-year adjusted sales
    $86.5B-$87B
    high materiality
    High
    Full-year organic sales growth
    8%-9%
    high materiality
    High
    Full-year commercial aftermarket sales growth
    mid-teens
    medium materiality
    High
    Full-year commercial OE sales growth
    around 10%
    medium materiality
    High
    Full-year defense sales growth
    mid-single digits
    medium materiality
    High
    Full-year adjusted EPS
    $6.10-$6.20
    high materiality
    High
    Full-year free cash flow
    $7B-$7.5B
    high materiality
    High
    Q4 segment profit growth
    around 10% year-over-year
    medium materiality
    High
    Collins full-year operating profit growth
    $325M-$375M
    medium materiality
    High
    Pratt & Whitney full-year sales growth
    low to mid-teens
    medium materiality
    High
    Pratt & Whitney full-year operating profit growth
    $350M-$400M
    medium materiality
    High
    Raytheon full-year operating profit growth
    $400M-$450M
    medium materiality
    High
    GTF MRO output growth
    30%
    medium materiality
    High
    GTF compensation payments
    $1.1B-$1.3B
    high materiality
    High
    Pratt GTF deliveries growth rate
    high single-digit
    medium materiality
    Medium
    Long-term free cash flow conversion
    90%-100%
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Collins
    Driven by strength across all three channels, particularly higher volume on narrow-body platforms in OE and strong aftermarket. Operating profit was up $98 million, partially offset by unfavorable commercial OE mix and a $90 million headwind from higher tariffs.
    Commercial OE sales: up 16%Commercial aftermarket sales: up 13%Mods and upgrades: up 17%Parts and repair: up 13%Provisioning: up 10%Defense sales: up 6%
    		$7.6B11% organic—$1.2B operating profit
    Pratt & Whitney
    Strong growth in commercial aftermarket and military volume, which more than offset increased large commercial OE deliveries, higher SG&A expense, and a $90 million headwind from higher tariffs. Operating profit was up $154 million.
    Commercial OE sales: up 5%Commercial aftermarket sales: up 23%Military engines sales: up 15% (F135 program, Lot 18 contract)
    		$8.4B16% organic—$751M operating profit
    Raytheon
    Driven by higher volume on land and air defense systems (international Patriot) and naval programs (classified, SM-6, ESSM). Operating profit was up $198 million, benefiting from favorable program mix, improved net productivity ($57 million YoY improvement), and higher volume.
    Bookings: $15.9BBook-to-bill: 2.27 (Q3)Record backlog: $72BInternational backlog: 44% of total (up 18% YoY)Rolling 12-month book-to-bill: 1.43
    		$7B10% organic—$859M operating profit

    Operational metrics

    30
    Organic sales growth
    13%YoY
    Q3 FY25

    Company-wide organic sales growth.

    Organic sales growth
    10%
    YTD FY25

    Company-wide organic sales growth year-to-date.

    Adjusted segment operating profit growth
    19%YoY
    Q3 FY25

    Company-wide adjusted segment operating profit growth.

    Consolidated segment margin expansion
    70
    Q3 FY25

    Company-wide consolidated segment margin expansion.

    Adjusted EPS growth
    17%YoY
    Q3 FY25

    Adjusted earnings per share growth.

    Headcount
    flat
    YTD FY25

    Headcount remained flat across the organization while achieving 10% organic sales growth.

    PW1100 MRO output growth
    9%
    Q3 FY25

    Growth in PW1100 MRO output.

    PW1100 MRO output growth
    21%
    YTD FY25

    Year-to-date growth in PW1100 MRO output.

    Isothermal forgings growth
    16%YoY
    Q3 FY25

    Growth in critical value stream material flow.

    Structural castings growth
    29%YoY
    Q3 FY25

    Growth in critical value stream material flow.

    Pratt repair network growth
    30%YoY
    Q3 FY25

    Demonstrated strong increase in repair network output.

    PW1100 MRO turnaround time
    110
    Q3 FY25

    Average turnaround time in the shop for GTF MRO completions.

    Material receipts growth
    10 consecutive quarters
    Q3 FY25

    Continued growth in material receipts at Raytheon.

    AMRAAM output growth
    more than doubled
    YTD FY25

    Output on the AMRAAM program more than doubled year-to-date through Q3, aided by digital AI tools.

    Tax benefit impact on EPS
    $0.12
    Q3 FY25

    Positive impact on adjusted EPS from tax items.

    Tax legislation headwind impact on EPS
    $0.04
    Q3 FY25

    Negative impact on adjusted EPS from tax items.

    Powder metal-related compensation
    $275M
    Q3 FY25

    Included in free cash flow for the quarter.

    Tariff-related impacts
    $220M
    Q3 FY25

    Included in free cash flow for the quarter.

    Tariff headwind
    $90M
    Q3 FY25

    Headwind from tariffs impacting Collins' operating profit.

    Tariff headwind
    $90M
    Q3 FY25

    Headwind from tariffs impacting Pratt & Whitney's operating profit.

    Debt paid down
    $2.9B
    Q3 FY25

    Amount of debt paid down in the quarter to strengthen the balance sheet.

    Collins out-of-warranty installed base
    $100B
    Q3 FY25

    Value of Collins' out-of-warranty installed base, supporting aftermarket growth.

    V2500 fleet retirement rate
    1.5%
    YTD FY25

    Retirement rate for the V2500 fleet year-to-date.

    Pratt Canada commercial aftermarket growth
    15%
    YTD FY25

    Year-to-date growth in commercial aftermarket for Pratt Canada.

    Global RPKs growth
    5%
    FY25

    Projected growth for global Revenue Passenger Kilometers this year.

    V2500 fleet average age
    15
    Q3 FY25

    Average age of the V2500 fleet.

    V2500 fleet first shop visit
    15%
    Q3 FY25

    Percentage of V2500 fleet that has not yet seen a first shop visit.

    V2500 fleet second shop visit
    40%
    Q3 FY25

    Percentage of V2500 fleet that has not yet seen a second shop visit.

    V2500 shop visits
    800
    FY25

    Expected number of V2500 shop visits for the full year, on track.

    Negative engine margin headwind
    $150M-$200M
    FY25

    Full-year negative engine margin headwind, no change to outlook, expected to land in the middle of the range.

    Industry KPIs

    6
    MetricValueDetails
    Book to bill ratio1.63
    Total company backlog$251BUSD
    Defense program awards$2.5BUSD
    Program segment backlog$72BUSD
    Aftermarket services split13%%
    Unit deliveries by program6%%

    Orderbook & backlog

    4
    Total Backlog$251BQ3 FY25

    up 13% YoY

    New Awards$37BQ3 FY25

    Includes $23B defense and $14B commercial orders.

    Commercial Orders$14BQ3 FY25
    Defense Orders$23BQ3 FY25

    Product announcements

    4
    ProductTypeDetails
    Hybrid Electric Propulsion Demonstratormilestone
    Next-Generation Braking System for A321XLRmilestone
    AMRAAM Air-to-Air Shotmilestone
    StormBreaker Ground Launch Demonstratormilestone

    Deals & partnerships

    2
    Actuation businessSale of a business unit

    Completed the sale of the actuation business during the quarter.

    Collins' Simmonds Precision Products businessSale of a business unit$765M

    Completed the sale of Collins' Simmonds Precision Products business for $765 million earlier this month (October 2025).

    Capital programs

    3
    Company-wide Capacity Expansionunderway
    Period spend: $600M

    Investing over $600 million this year in expansion projects across the company to support growth.

    Raytheon Capacity Expansionunderway
    Period spend: $300M

    Raytheon is on track to invest $300 million in capacity expansion to deliver the growing backlog.

    Redstone Missile Integration Facilityunderway

    Benefit: 50% site capacity increase

    This facility in Huntsville, Alabama, will increase site capacity by 50% and support the growing demand for naval programs, including the Standard Missile franchise.

    Risks & headwinds

    3
    Tariff impactsQ3 FY25

    $220 million impact on Q3 FCF; $90 million headwind for Collins and Pratt each in Q3

    Mitigation: Mitigation efforts include USMCA treatment, bonds, and pricing strategies.

    Higher effective tax rateQ4 FY25

    Q3 $0.12 tax benefit will not repeat

    Supply chain constraints2026 and beyond

    Need for continued acceleration across critical value streams (microelectronics, rocket motors)

    Mitigation: Continued investment in capacity, bringing new suppliers to bear, deconflicting suppliers.

    What to watch in Q4 FY25

    5

    GTF MRO Output Growth

    next quarter
    Current21% YTD
    Target30% for the full year

    Why it matters

    Achieving the 30% MRO output growth target for the full year is key to reducing AOG levels and demonstrating execution on the GTF fleet management plan.

    Exiting the third quarter, this material flow has supported a record high number of PW1100 Gate 3 starts, which is where we reassemble engines during a shop visit, putting Pratt in a position to deliver about 30% MRO output growth for the year.

    Q&A highlights

    6

    Can you elaborate on the raised aerospace OEM guidance and your confidence in delivering LEAP engines to Airbus to meet their full-year targets?

    Neil Mitchill detailed the $1.6 billion top-line increase, driven by commercial aftermarket and OE. Chris Calio expressed confidence in supporting Airbus, noting RTX production is up over 50% versus 2019 levels, while emphasizing the need to balance material allocation to support the existing fleet.

    “We're going to continue to work very closely with Airbus to make sure that they have what they need down the stretch of the year, while also continuing to balance the allocation of material as we've talked about before, because we've got to continue to support the fleet.”

    asked by Robert Stallard · answered by Christopher Calio

    2 min read5 chapters

    Detailed Narrative

    01

    Operational Execution and Productivity

    RTX emphasized its core operating system, driving productivity and efficiency across the organization. This focus resulted in 10% organic sales growth year-to-date while maintaining flat headcount, contributing to six consecutive quarters of year-over-year adjusted segment margin expansion. The Raytheon AMRAAM team, for example, deployed multiple proprietary digital AI tools to proactively identify production bottlenecks and reduce rework, which has contributed to output more than doubling year-to-date through Q3 on the program.

    02

    Supply Chain Improvements and Capacity Expansion

    The company reported continued progress in strengthening its supply chain, with isothermal forgings up 16% and structural castings up 29% year-over-year in Q3. Raytheon has achieved 10 consecutive quarters of material receipts growth. RTX is investing over $600 million this year in expansion projects across the company, including $300 million at Raytheon for capacity expansion, such as the Redstone missile integration facility in Huntsville, Alabama, which will increase site capacity by 50% to support growing naval programs.

    03

    Commercial Aerospace Demand and GTF Program Update

    Commercial aerospace markets remain robust, with passenger air travel resilient and global RPKs projected for approximately 5% growth this year. Positive OE production trends drove significant increases at Collins and 6% growth in large commercial engine deliveries at Pratt. The GTF fleet management plan remains on track, with PW1100 MRO output up 9% in Q3 and 21% year-to-date. Record high PW1100 Gate 3 starts position Pratt to deliver about 30% MRO output growth for the full year.

    04

    Defense Market Strength and Key Awards

    RTX is well-positioned to meet growing needs in the defense sector, particularly for munitions and integrated air and missile defense. Raytheon booked over $8 billion in munitions orders in Q3, including $2.5 billion for GEM-T to support international customers and $2.1 billion for AMRAAM, the largest order in that program's 30-year history. Pratt was awarded over $3 billion to support the F135 engine, including the Lot 18 production contract. The defense backlog reached a record $72 billion, with 44% international.

    05

    Capital Allocation and Balance Sheet Strengthening

    The company returned over $900 million to shareholders through dividends in Q3 and paid down $2.9 billion of debt, demonstrating a focus on balance sheet strength. RTX also completed the sale of the actuation business and Collins' Simmonds Precision Products business for $765 million. Management reiterated a long-term free cash flow conversion target of 90% to 100%, supported by the substantial backlog and strong market fundamentals.

    AI-generated summary of the company’s earnings call. Not investment advice.