The Government on Both Sides of the R&D LineNarrow moat

GE Aerospace (GE) — moat facet

Nearly half the research is paid for by a counterparty that is also the customer, the regulator and the export authority.

GE Aerospace spent $2,989 million on research and development in 2025. Of that, $1,580 million was its own money and $1,409 million was funded by customers and partners, primarily the United States Government1.

Who pays for the research, in $m1,413Customer-funded 20241,409Customer-funded 20251,286Self-funded 20241,580Self-funded 2025Customer funding is primarily from the United States Government, which also buys the product.
Nearly half the research is paid for by a counterparty that is also customer, regulator and export authority.

Nearly half of the company's research is paid for by a counterparty that is also its defence customer, its export regulator and, through the certification authorities, the arbiter of whether the resulting product may fly. That is an unusual density of roles for one relationship.

The benefit is straightforward and large. Advanced propulsion is extraordinarily expensive, and a company that has half of it funded is a company that can attempt more programmes. GE Aerospace regularly works with government customers on classified and unclassified advanced products including combat engines, hypersonics and unmanned applications2; in 2026 it completed the Assembly Readiness Review of the XA102 engine and secured a contract with the United States Air Force to mature the GE426 engine through preliminary design review3. It also completed the first ground tests of a megawatt-class hybrid-electric engine system developed through NASA's Electrified Powertrain Flight Demonstration project4.

The cost is that funded research is not owned outright. Government customers may have licences to intellectual property developed or used in performing government contracts5, and the direction of the programme is set by the funder.

There is a second dependency in the same relationship. Most Defense & Systems revenue derives from funding flowing through the Department of War budget or equivalent international budgets6, so the same counterparty funds the science and buys the product.

Watch the split itself: $1,409 million customer-funded against $1,580 million self-funded in 2025, against $1,413 million and $1,286 million in 20247. Self-funded research growing faster is the healthier direction, and in 2025 it did.

Moat trajectory: Widening

Customer-funded research was $1,409 million in 2025 against self-funded $1,580 million, and the self-funded line grew twenty-three per cent while the customer-funded line was flat. The company is paying for more of its own future, which is the healthier direction.

The number that tests this moat
Reported
Customer-funded research and development
$1,409M of $2,989M in 2025

Funded primarily by the United States Government, which is also the defence customer, the export authority and, through the certification agencies, the arbiter of whether the result may fly. Self-funded research grew 23% in 2025 while customer-funded was flat, which is the healthier direction.

Source: GE Aerospace Form 10-K, fiscal year 2025 ↗
References
  1. ReportedOf that, $1,580 million was its own money and $1,409 million was funded by customers and partners, primarily the United States Government.
    GE Aerospace Form 10-K, FY2025 - Item 1 general and Item 2 Properties — the installed base of approximately 50,000 commercial and 30,000 military engines and the statement that it supports an aftermarket representing approximately 70% of revenue, the FLIGHT DECK operating model, customers in approximately 120 countries, the facility count, human capital and employee numbers, the intellectual property discussion, the research and development table splitting company-funded from customer- and partner-funded spending, and the engine testing milestones. — FY2025 · publ. January 2026 · source ↗
  2. ReportedGE Aerospace regularly works with government customers on classified and unclassified advanced products including combat engines, hypersonics and unmanned applications; in 2026 it completed the Assembly Readiness Review of the XA102 engine and secured a contract with the United States Air Force to mature the GE426 engine through preliminary design review.
    GE Aerospace Form 10-K, FY2025 - Item 1 Business — segment descriptions for Commercial Engines & Services and Defense & Propulsion Technologies, the CFM International 50-50 non-consolidated joint venture with Safran Aircraft Engines, the commercial engine platforms (LEAP, CFM56, GEnx, GE9X, CF6, GE90), the defence platforms (F110, F404, F414, T408, T700, T901, LM2500), the Propulsion & Additive Technologies brands, the CFM RISE programme, the customer description including airframers and sole-source positions, and the segment revenue and services shares. — FY2025 · publ. January 2026 · source ↗
  3. ReportedGE Aerospace regularly works with government customers on classified and unclassified advanced products including combat engines, hypersonics and unmanned applications; in 2026 it completed the Assembly Readiness Review of the XA102 engine and secured a contract with the United States Air Force to mature the GE426 engine through preliminary design review.
    GE Aerospace second-quarter 2026 earnings release (Exhibit 99.1 to Form 8-K of July 16, 2026) — total company GAAP and non-GAAP results, segment revenue, orders and operating profit, free cash flow, the raised full-year 2026 guidance for adjusted revenue growth, operating profit, adjusted earnings per share and free cash flow, the LEAP-1B durability kit certification, the XA102 and GE426 defence programmes, the NASA hybrid-electric ground tests, and the chief executive's commentary. — Q2 2026 · publ. 16 July 2026 · source ↗
  4. ReportedIt also completed the first ground tests of a megawatt-class hybrid-electric engine system developed through NASA's Electrified Powertrain Flight Demonstration project.
    GE Aerospace second-quarter 2026 earnings release (Exhibit 99.1 to Form 8-K of July 16, 2026) — total company GAAP and non-GAAP results, segment revenue, orders and operating profit, free cash flow, the raised full-year 2026 guidance for adjusted revenue growth, operating profit, adjusted earnings per share and free cash flow, the LEAP-1B durability kit certification, the XA102 and GE426 defence programmes, the NASA hybrid-electric ground tests, and the chief executive's commentary. — Q2 2026 · publ. 16 July 2026 · source ↗
  5. ReportedGovernment customers may have licences to intellectual property developed or used in performing government contracts, and the direction of the programme is set by the funder.
    GE Aerospace Form 10-K, FY2025 - Item 1 general and Item 2 Properties — the installed base of approximately 50,000 commercial and 30,000 military engines and the statement that it supports an aftermarket representing approximately 70% of revenue, the FLIGHT DECK operating model, customers in approximately 120 countries, the facility count, human capital and employee numbers, the intellectual property discussion, the research and development table splitting company-funded from customer- and partner-funded spending, and the engine testing milestones. — FY2025 · publ. January 2026 · source ↗
  6. ReportedMost Defense & Systems revenue derives from funding flowing through the Department of War budget or equivalent international budgets, so the same counterparty funds the science and buys the product.
    GE Aerospace Form 10-K, FY2025 - Segment Operations — Defense & Propulsion Technologies: segment revenue split between Defense & Systems and Propulsion & Additive Technologies, equipment and services revenue, segment profit and margin, defence engine unit deliveries, the DPT remaining performance obligation, the US Air Force F110-GE-129 Indefinite Delivery/Indefinite Quantity contract valued up to $5 billion, the Hindustan Aeronautics F404-GE-IN20 order valued at $1.6 billion, and the government-funding discussion. — FY2025 · publ. January 2026 · source ↗
  7. ReportedWatch the split itself: $1,409 million customer-funded against $1,580 million self-funded in 2025, against $1,413 million and $1,286 million in 2024.
    GE Aerospace Form 10-K, FY2025 - Item 1 general and Item 2 Properties — the installed base of approximately 50,000 commercial and 30,000 military engines and the statement that it supports an aftermarket representing approximately 70% of revenue, the FLIGHT DECK operating model, customers in approximately 120 countries, the facility count, human capital and employee numbers, the intellectual property discussion, the research and development table splitting company-funded from customer- and partner-funded spending, and the engine testing milestones. — FY2025 · publ. January 2026 · source ↗
Sources
Generated September 23, 2026