⚠ Fixed-Price DevelopmentModerate threat

RTX (RTX) — threat to the moat

Raytheon took a $0.5 billion charge in 2024 on one fixed-price development contract, the kind of deal customers increasingly demand.

Defence contracts that fix the price before the design is finished shift the risk to the contractor. RTX's risk factors describe that exposure1, and Raytheon has paid for it: in 2024 it took a $0.5 billion charge on the termination of a fixed-price development contract with a foreign customer2.

RTX net estimate-at-completion adjustments ($M)-6482023-4732024-3862025RTX Form 10-K FY2025; negative in every year, shown as magnitudes
Contract estimates still move down each year, by less each time.

The pressure to take such contracts is rising. Customers want capacity added quickly and prices held, and new entrants offer fixed prices to win. Raytheon's margin has recovered to 11.5% in 2025 from 9.0% in 20233, and a single bad contract can take a point back.

The company combined the termination with legal settlements in 2024 and paid $1.5 billion of cash for the two4.

The accounts show the risk shrinking but not gone. RTX's net estimate-at-completion adjustments were negative $648 million in 2023, $473 million in 2024 and $386 million in 20255. A net negative figure every year means contract profit estimates are, in aggregate, being revised down as work proceeds, a steady cost of taking on fixed-price work.

Watch for charges called estimate-at-completion adjustments or contract terminations in Raytheon's quarterly results. A repeat of 2024's charge, in a year when volumes are rising, would show that growth is being bought with fixed prices the segment cannot meet.

References
  1. ReportedRTX's risk factors describe that exposure, and Raytheon has paid for it: in 2024 it took a $0.5 billion charge on the termination of a fixed-price development contract with a foreign customer.
    RTX Form 10-K for fiscal 2025 - Item 1A risk factors: competition on price, delivery and technology; customers buying parts from suppliers other than the original equipment manufacturer; discounts and guarantees to win engine positions; new defence entrants; GTF durability; reputational harm; pension sensitivity to the discount rate; tariffs. — FY2025 · publ. 6 February 2026 · source ↗
  2. ReportedRTX's risk factors describe that exposure, and Raytheon has paid for it: in 2024 it took a $0.5 billion charge on the termination of a fixed-price development contract with a foreign customer.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  3. ReportedRaytheon's margin has recovered to 11.5% in 2025 from 9.0% in 2023, and a single bad contract can take a point back.
    RTX Form 10-K for fiscal 2025 - Item 7 segment review and Note 20: net sales and operating profit by segment for 2023-2025, organic sales drivers (commercial aftermarket, OEM, military), sales by customer type, products and services, segment assets, capital expenditure and research and development - Raytheon: segment sales, operating profit, organic drivers, defence bookings and customer types. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  4. ReportedThe company combined the termination with legal settlements in 2024 and paid $1.5 billion of cash for the two.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
  5. ReportedRTX's net estimate-at-completion adjustments were negative $648 million in 2023, $473 million in 2024 and $386 million in 2025.
    RTX Form 10-K for fiscal 2025 - consolidated financial statements and notes: income statement, cash flow, dividends and repurchases, long-term debt of $37,700 million, goodwill by segment, pension income, the 2024 resolution of certain legal matters, the Raytheon contract termination and the accelerated share repurchase. — FY2023-FY2025 · publ. 6 February 2026 · source ↗
Sources
Generated September 28, 2026