Rolls-Royce raises guidance and plans bumper buyback as profit surge

Rolls-Royce Holdings PLC on Thursday set out bullish new mid-term financial targets and launched its first multi-year share buyback programme as it delivered annual results ahead of forecast.

Chief Executive Officer Tufan Erginbilgic said: ‘Our transformation continues with pace and intensity. We are consistently achieving outcomes that were not possible before our transformation.’

In response, shares in the London-based manufacturer of jet engines and power turbines climbed 6.0% to 1,388.50 pence each in London on Thursday, having more than doubled in the last 12 months.

In 2025, pretax profit more than trebled to £6.94 billion from £2.23 billion, with revenue up 12% to £21.21 billion from £18.91 billion.

Underlying revenue, which excludes derivative and FX adjustments, improved at the same speed, hitting £20.06 billion from £17.85 billion and beating company-compiled consensus of £19.61 billion.

Underlying pretax profit jumped 46% to £3.35 billion from £2.29 billion, and topped consensus of £3.16 billion.

Underlying operating profit surged 41% to £3.46 billion from £2.46 billion, comparing favourably to consensus of £3.27 billion.

Free cash flow shot up to £3.27 billion in 2025, from £2.43 billion in 2024.

Civil Aerospace delivered an underlying operating margin of 20.5% up from 16.6% in 2024, driven by stronger large engine aftermarket performance, contractual margin improvements and higher spare engine profitability.

Defence reported an underlying operating margin of 14.4%, up slightly from 14.2% on-year, reflecting stronger performance across transport and combat, and the absence of a one-off benefit in submarines in the prior year.

Power Systems delivered an operating margin of 17.4%, up from 13.1%, driven by power generation, ‘where we continue to capture profitable growth in data centres, and governmental.’

Across the group, ‘improved profitability was supported by our ongoing efficiency and simplification programme,’ the firm said.

CEO Erginbilgic said: ‘With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025, all while we built the foundations for significant growth for years to come.’

For 2026, Rolls-Royce expects underlying operating profit between £4.0 billion and £4.2 billion, as well as free cash flow in the range of £3.6 billion and £3.8 billion.

Based on the 2026 guidance, Erginbilgic said Rolls-Royce expects to deliver underlying operating profit within the prior mid-term guidance range two years earlier than planned.

Looking ahead to 2028, Rolls-Royce set out up upgraded mid-term targets including underlying operating profit of £4.9 billion-£5.2 billion and free cash flow of £5.0 billion-£5.3 billion.

It had previously guided to underlying operating profit of £3.6 billion-£3.9 billion and free cash flow of £4.2 billion-£4.5 billion.

Analysts at JPMorgan said the new 2028 targets were around 10% ahead of consensus.

‘Beyond the mid-term we continue to see significant growth from existing businesses as well as from new business opportunities,’ Erginbilgic added.

Rolls-Royce is targeting a mid-term margin of 21%-23% in Civil Aerospace compared to 20.5% in 2025, and a mid-term margin of 18%-20% in Power Systems compared to 17.4% in 2025. In Defence, it continues to aim for a 14%-16% margin in the mid-term compared to 14.4% in 2025.

Rolls-Royce announced a 5.0 pence final dividend, taking its full year payout to 9.5p, up from 6.0p in 2024.

In addition, the firm said its ‘strong balance sheet position, alongside our upgraded mid-term targets for operating profit and free cash flow, gives us confidence to announce our first multi-year buyback programme.’

It announced a £7 billion to £9 billion share buyback programme for 2026 through to 2028, with a £2.5 billion chunk to be completed this year.

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