RTX Corporation: A Strategic Bet on Military Drones and Defense Innovation

In an era of escalating global defense spending and the proliferation of drone warfare, RTX Corporation (RTX) stands at the forefront of a transformative industry. With a $92 billion defense backlog, advanced technologies like the LTAMDS radar and Coyote counter-drone systems, and a record $20.3 billion in Q1 2025 revenue, RTX is positioned to capitalize on a historic shift in military strategy. Yet its stock price fell sharply following recent earnings—a reaction to near-term tariff risks that may obscure its long-term potential.

Defense Contracts: A Pipeline of Growth

The European Union’s pledge to boost defense spending by $850 billion through 2029 has created a tailwind for RTX, whose products align precisely with modern defense priorities. Key contracts in Q1 2025 included a $750 million deal with the Netherlands to bolster air and missile defense, a $650 million classified award likely tied to drone countermeasures, and a $250 million order for Japan’s Evolved Sea Sparrow Missile (ESSM), used to neutralize drone swarms. These deals underscore RTX’s dominance in integrated air defense systems (IADS), which are critical to countering unmanned threats.

The company’s Coyote counter-unmanned aircraft system (C-UAS), designed to neutralize drone swarms with high-speed projectiles, has also gained traction. With global drone warfare expenditures projected to grow at a 10% CAGR through 2030, RTX’s focus on both defensive and offensive drone technologies positions it to capture a significant share of this market.

Financial Resilience Amid Volatility

Despite an 8.86% pre-market stock decline following Q1 earnings, RTX’s fundamentals remain robust. Its adjusted EPS of $1.47—a 10% year-over-year increase—exceeded expectations, while free cash flow of $792 million supported shareholder returns. The defense segment, which includes Raytheon’s advanced systems, grew organically by 2%, offsetting declines in legacy programs.

The stock’s underperformance reflected investor anxiety over $850 million in annual tariff-related costs, driven by RTX’s reliance on global supply chains (35% of imports are non-U.S.). However, management emphasized mitigation strategies, including price adjustments, supplier relocations, and duty drawback programs. CEO Chris Calio’s assertion—“We are built to perform in any environment”—is backed by a $217 billion backlog and a Piotroski score of 8/9, signaling strong financial health.

Risks and the Long Game

While tariffs and supply chain disruptions pose near-term headwinds, RTX’s strategic investments—such as a $60 million Tucson, Arizona, expansion to boost production of “effectors” (missiles and drone systems)—signal confidence in sustained demand. The company’s 70% U.S.-based workforce and 65% domestic supplier network further insulate it from geopolitical shocks.

Geopolitical risks, particularly in Europe and Asia, could disrupt contracts, but RTX’s diversified client base—spanning NATO allies, Japan, and emerging markets—limits exposure to any single region. Competitor pressure remains a concern, but RTX’s technological edge in systems like the GTF Advantage engine and LTAMDS radar reinforces its market leadership.

Conclusion: A Buy for the Long-Term Play

RTX Corporation is a convoluted but compelling play on the drone defense revolution. With $92 billion in defense backlog, a 120 basis point margin expansion, and $2 billion in annual U.S. manufacturing investments, its fundamentals align with a multiyear trend of global military modernization. While tariff risks and market volatility may continue to weigh on the stock, RTX’s 17.15% YoY revenue growth and strategic agility suggest it is well-equipped to navigate near-term challenges.

For investors with a horizon extending beyond the next 12–18 months, RTX offers a rare blend of defensive resilience and high-growth exposure. As the EU’s defense spending surge and the global drone arms race unfold, RTX’s position as a technology leader in both countering and deploying unmanned systems makes it a top candidate for military drone investors. The question is not whether RTX will thrive, but whether markets will look past short-term noise to recognize its long-term value.

Disclosure: This analysis is based on publicly available data and does not constitute financial advice.