Rolls-Royce Holdings Plc shares surged 5% after the company raised its earnings outlook and announced an expanded share-repurchase plan as the UK aerospace and power-systems manufacturer benefits from strong demand across aviation, defense, and data-center infrastructure.
The company said it expects underlying operating profit of £4 billion to £4.2 billion ($5.42 billion) in 2026, exceeding the £3.65 billion midpoint forecast by analysts surveyed by FactSet.
It also projected free cash flow of £3.6 billion to £3.8 billion this year, above market expectations.
Shares rose about 5.6% at the time of writing and reached a record high.
Chief Executive Officer Tufan Erginbilgic said the group’s turnaround plan continues to deliver results.
“Our transformation continues with pace and intensity,” he said in a statement.
He added the company now expects to achieve prior mid-term profit targets two years earlier than planned.
Buybacks and upgraded long-term targets
Rolls-Royce said it will carry out £2.5 billion of share buybacks this year as part of a multiyear repurchase program totaling £7 billion to £9 billion.
The move follows last year’s £1 billion buyback and reflects what the company described as a strong balance sheet.
The manufacturer also raised its medium-term guidance.
By 2028, Rolls-Royce now expects underlying operating profit of £4.9 billion to £5.2 billion and an operating margin between 18% and 20%.
Free cash flow is forecast to reach £5 billion to £5.3 billion.
The company said it intends to deliver profits within its previous mid-term range significantly earlier than anticipated.
The dividend was set at 5 pence per share, marking the second payout since before the pandemic.
Analysts reacted positively.
Bernstein analysts said the targets were “very strong and should trigger significant earnings upgrades,” adding the company continues to benefit from “a very strong environment across its three divisions combined with the ongoing turnaround.”
Growth across civil aerospace, defense and power systems
Rolls-Royce has seen accelerating performance across its three operating segments: civil aerospace, defense and power systems.
The civil aerospace unit, which supplies engines to Boeing and Airbus aircraft, expanded about 15% year over year, while defense revenue rose roughly 8%.
The power systems division has emerged as a key growth driver.
Revenue from the unit reached £4.89 billion in 2025, reflecting organic growth of 19%, supported by the global expansion of data centers requiring power-generation equipment.
Jefferies analyst Chloe Lemarie described the results as a “high quality release,” noting profits were driven particularly by the power systems business.
Overall underlying operating profit for 2025 climbed more than 40% to £3.46 billion, beating estimates of £3.32 billion. Underlying revenue rose 12% to £20.1 billion.
Transformation boosts investor confidence
Since Erginbilgic took over in 2023, Rolls-Royce shares have more than doubled, lifting the company’s market value to roughly £110 billion.
The turnaround program has focused on improving margins, strengthening the balance sheet, and increasing cash generation.
The company previously forecast operating profit of as much as £3.9 billion with operating margins between 15% and 17%, but the new guidance signals stronger performance supported by higher defense spending and sustained demand for power systems linked to data-center expansion.
Rolls-Royce said operating margins at its defense and power-supply divisions have already advanced by more than 14% and are expected to continue improving as government military budgets rise and electricity demand grows.
With aviation recovery, defense spending, and artificial-intelligence infrastructure investment all supporting demand, the company’s outlook suggests sustained growth momentum in the years ahead.
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