RTX (RTX) Q2 2026 earnings review
Blockbuster Quarter Driven by Massive Backlog Conversion
RTX delivered exceptional Q2 2026 results, shrugging off supply chain concerns to convert its record $289 billion backlog into hard financial outperformance. With organic sales growth accelerating to 16% and adjusted EPS jumping 21% YoY, management significantly raised full-year guidance across the board. The standout narrative is the margin expansion across all three business segments, paired with a massive inflection in Free Cash Flow to $2.88 billion (up from negative $72 million a year ago). While commercial OE mix at Pratt & Whitney flashed a warning sign, the broader defense and aftermarket engines are firing on all cylinders.
🐂 Bull Case
Raytheon sales grew 18% YoY with margins expanding 100 bps to 12.6%. The geopolitical super-cycle is decisively moving from backlog growth to bottom-line profitability.
Pratt & Whitney commercial aftermarket sales surged 25%, while Collins aftermarket grew 10%. High utilization of older fleets continues to generate high-margin, durable cash flows.
🐻 Bear Case
Despite strong overall growth, Pratt & Whitney commercial OE sales fell 8% YoY due to unfavorable mix, eating into the gains from higher delivery volumes.
A $0.27 per share drag from acquisition accounting and restructuring costs continues to weigh heavily on GAAP profitability, obscuring true operational cash generation.
⚖️ Verdict: 🟢
Bullish. 16% organic top-line growth, margin expansion in every segment, and a raise in full-year guidance reflect a company operating from a position of profound strength. Backlog visibility insulates against near-term macro shocks.
Key Themes
Raytheon Defense Ramps Up Profitability
Accelerating. Raytheon is executing flawlessly on its massive order book. Sales surged 18% to $8.27B, driven by high-demand land and air defense systems like Patriot and AMRAAM. Crucially, the segment expanded its adjusted operating margin to 12.6% (up 100 bps YoY), proving that the pivot toward a higher-margin international mix and mature program efficiencies is successfully scaling.
Commercial Aftermarket Outpaces Expectations
Stable and highly lucrative. Pratt & Whitney's commercial aftermarket exploded by 25% YoY, serving as the primary buffer against OE volatility. Collins Aerospace mirrored this with a 10% gain in parts, repair, and modifications. Fleet aging dynamics and resilient global RPKs continue to provide a structural tailwind for RTX's highest-margin businesses.
Pratt & Whitney Commercial OE Mix Deterioration
Reversing. Contradicting the overwhelmingly positive narrative of P&W's 16% total segment growth, commercial OE sales actually shrank by 8% YoY. Management attributed this to an unfavorable large commercial engine mix that more than offset an absolute increase in engine delivery volumes. Selling more units for less total revenue is a significant red flag for OE pricing power and program economics.
Macro Geopolitics Translates to Firm Backlog
Accelerating. The macroeconomic environment—marked by historic defense budget increases and urgent munitions replenishment needs—drove the total company backlog to $289 billion (up 22% YoY). The defense portion sits at an immense $119 billion, providing nearly guaranteed revenue conversion pathways through the end of the decade.
Restructuring and Acquisition Accounting Drag
Stable. While adjusted EPS looks pristine at $1.89, GAAP EPS came in at $1.57. The gap is primarily composed of $0.27 in acquisition accounting adjustments and $0.05 in restructuring costs. Although these are non-cash or non-operational in nature, they consistently weigh on the statutory bottom line and depress stated return on invested capital.
Other KPIs
Reversing. An incredible recovery from the negative $72 million recorded in 25Q2 (which was heavily impacted by a Pratt & Whitney work stoppage). Operating cash flow generated $3.55 billion in the quarter against $669 million in CapEx. This cash generation power enabled RTX to comfortably raise full-year FCF guidance.
Accelerating. F135 volume ramp-up and favorable prior-year contract award timing drove a 23% spike in military revenue, completely erasing the drag from the 8% decline in commercial OE and pushing segment operating profit up 22%.
Stable. Stripping out the impact of recent divestitures, Collins generated a potent 13% organic growth rate. The segment is firing on all cylinders: Commercial OE up 26% (narrowbody and widebody ramps), Commercial Aftermarket up 10%, and Defense up 7%.
Guidance
Accelerating. Raised from the previous range of $92.5 - $93.5 billion. The new midpoint ($95.5B) implies a robust ~7.8% YoY growth over FY25's $88.6 billion, signaling immense confidence in clearing supply chain bottlenecks.
Accelerating. Raised significantly from the prior outlook of 5% - 6%. This demonstrates that the top-line beat in Q2 was not just pull-forward timing, but a structural shift in underlying throughput across the portfolio.
Accelerating. Raised from $6.70 - $6.90. The midpoint of $7.175 represents a massive ~14% jump over FY25's $6.29. This outpaces the 7.8% sales growth projection, meaning management expects meaningful drop-through from operational leverage and margin expansion in H2.
Accelerating. Raised from $8.25 - $8.75 billion. After logging $2.88 billion in Q2 alone, RTX has established a comfortable glide path to hit this target, which will comfortably fund the dividend and balance sheet deleveraging.
Key Questions
Pratt & Whitney OE Margin Deterioration
Commercial OE sales at Pratt & Whitney fell 8% despite an increase in large engine deliveries. What exactly is driving this unfavorable mix, and does it represent structural pricing pressure from airframers on newer platforms?
Raytheon Margin Sustainability
Raytheon margins hit 12.6% this quarter. How much of this was driven by one-time high-margin international completions versus systemic structural improvements, and is 12.5%+ the new baseline?
Supply Chain Bottlenecks
With organic sales growth guidance bumped to 8-9%, what explicit breakthroughs have you seen in deep-tier supply chain constraints (like solid rocket motors and microelectronics) to justify this confidence in H2 output?