Can RTX’s $236bn backlog shield it from tariff and labor headwinds in 2025?

RTX Corporation (NYSE: RTX) is relying heavily on its record $236 billion order backlog to weather increasing operational and macroeconomic challenges in 2025. The American aerospace and defense manufacturer posted second-quarter sales of $21.6 billion, up 9 percent year over year, and an 11 percent rise in adjusted earnings per share to $1.56. Yet, the headline growth was overshadowed by rising cost pressures from U.S. tariffs on aluminum and steel and a four-week labor stoppage at Pratt & Whitney, which together forced the company to revise its full-year profit guidance downward.

The key question now is whether RTX’s multi-year commercial and defense contracts can insulate its margins long enough for cost mitigation strategies to take effect. Analysts and institutional investors remain divided, balancing optimism about the company’s robust order book against concerns about sustained tariff exposure and labor-related disruptions.

How much can RTX’s record backlog in commercial and defense orders offset rising tariffs and operational disruptions in 2025?

RTX’s $236 billion backlog, which includes $144 billion in commercial aerospace orders and $92 billion in defense contracts, gives it one of the most secure revenue pipelines in the global aerospace and defense industry. Collins Aerospace continues to benefit from surging global air travel, with commercial aftermarket sales rising 13 percent in Q2. Airlines are extending fleet utilization, creating demand for spare parts and maintenance services that typically carry higher margins than original equipment. This recurring aftermarket revenue provides RTX a level of resilience, as it is less sensitive to commodity price swings and can partially absorb tariff-related cost inflation.

Pratt & Whitney, despite facing a four-week work stoppage, posted a 19 percent year-over-year jump in commercial aftermarket sales and a 15 percent rise in original equipment demand, driven by Large Commercial Engine programs and Pratt Canada’s favorable mix. However, the work stoppage delayed deliveries and contributed to the quarter’s negative free cash flow of $0.1 billion. Management still expects full-year free cash flow between $7 billion and $7.5 billion, but this assumes no further labor disruptions—a risk that institutional investors are watching closely.

On the defense side, Raytheon’s portfolio is proving more insulated from tariffs. The segment grew 8 percent year over year, supported by multi-year contracts for Patriot missile systems, NASAMS, SPY-6 radars, and the Evolved SeaSparrow Missile program. Defense contracts are less exposed to raw material price fluctuations, and governments typically allow for cost pass-through mechanisms, providing a natural hedge against tariff volatility. Analysts argue this defense backlog serves as RTX’s strongest stabilizer in 2025, cushioning margins even if commercial engine programs face additional cost headwinds.

What do analysts and investors expect if tariffs persist through 2025?

Tariffs remain a significant near-term concern. RTX estimated a $125 million hit from U.S. tariffs in Q2 alone, with the full-year impact projected to reach $500 million if no further exemptions are granted. Management has moved to secure duty drawback programs, diversify suppliers, and negotiate cost adjustments with key customers, but the results will take time to flow through.

Institutional investors are cautiously optimistic, pointing out that RTX’s scale and backlog give it leverage to manage these headwinds. Some analysts believe RTX could use backlog-driven pricing power in commercial aftermarket contracts to offset tariff expenses gradually. However, they also warn that elevated aluminum and steel costs could erode margins further if exemptions fail to materialize in the second half of the year.

Does RTX’s backlog position it for long-term growth despite near-term challenges?

Despite tariff and labor challenges, RTX’s record backlog underscores strong long-term demand. The company’s $144 billion commercial order book is supported by rising global air traffic and continued fleet modernization, while its $92 billion defense backlog benefits from growing geopolitical tensions and modernization programs among allied nations.

Analysts expect RTX’s commercial aftermarket business to maintain mid-teen growth in the second half of 2025, driven by increasing fleet utilization and new engine cycles. Defense segment stability, combined with strong execution on high-profile contracts, is projected to keep margins relatively steady even if commercial cost pressures persist.

While RTX’s lowered EPS guidance to $5.80–$5.95 triggered short-term investor caution, institutional sentiment remains constructive. The company’s diversified revenue streams, combined with its scale and long-cycle contracts, position it as a long-term beneficiary of rising air traffic and defense modernization—even if 2025 margins remain under pressure from tariffs and potential labor unrest.