Rolls-Royce posted its strongest financial results in years on Thursday, forecasting profits above £4 billion for 2026 and handing shareholders a £2.5 billion buyback. Shares jumped 5.8 percent in morning trading in London.
What Happened
The British aerospace and engine maker reported that underlying operating profit rose more than 40 percent in 2025, reaching £3.46 billion. That beat analyst estimates of £3.32 billion. Revenue for the year climbed 12 percent to £20.1 billion.
For 2026, the company is targeting underlying operating profit of between £4 billion and £4.2 billion, well above the £3.65 billion analysts had expected.
Who Is Behind the Turnaround
Chief Executive Tufan Erginbilgiç launched a transformation programme when he took charge in 2023. The plan focused on cutting costs, renegotiating contracts, and improving the efficiency of every division.
“Our transformation continues with pace and intensity,” Erginbilgiç said in a statement on Thursday.
He added that the company now expects to hit its medium-term profit targets two years earlier than originally planned.
How Rolls-Royce Made More Money
Three parts of the business drove the recovery.
In civil aerospace, the number of hours its large engines spent in the air has climbed back above pre-pandemic levels. Rolls-Royce earns a significant share of its revenue from long-term service agreements tied to flying hours, so more flights means more income.
In defence, rising military spending across western governments pushed up demand for propulsion systems, submarine programmes, and military aviation contracts. Geopolitical tensions kept defence budgets growing through 2025.
In power systems, demand for backup generators surged. The rapid expansion of artificial intelligence data centres and cloud computing infrastructure created new customers who need reliable, uninterrupted power, and Rolls-Royce supplies it.
Where the Money Is Going
Rolls-Royce announced a share buyback programme of up to £2.5 billion for 2026. The company has engaged Morgan Stanley and UBS to carry out the purchases on its behalf on the London Stock Exchange. Shares bought back will be cancelled, reducing the total number of shares in circulation.
This forms part of a larger multi-year buyback programme worth between £7 billion and £9 billion in total.
Why This Matters
Just a few years ago, Rolls-Royce was one of the most distressed companies on the London Stock Exchange. The pandemic grounded aircraft worldwide, gutting the flying-hour revenues the company depended on. It raised emergency funding, cut thousands of jobs, and sold assets to survive.
Thursday’s results mark a decisive break from that period. The company has moved from net debt to net cash, restored shareholder dividends and buybacks, and upgraded its long-term profit targets for 2028 to between £4.9 billion and £5.2 billion, with an operating margin of 18 to 20 percent.
What Could Still Go Wrong
Rolls-Royce flagged that supply chain disruptions remain a live concern. Parts shortages continue to slow production and servicing, and the company said these pressures are unlikely to ease quickly. A slowdown in airline travel or cuts to defence budgets could also affect future revenues.
For now, however, the numbers point firmly in one direction. Rolls-Royce shares have more than doubled over the past twelve months, and Thursday’s results gave investors little reason to expect that momentum to stop.
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