Rolls-Royce said Thursday it expects profits of over £4 billion ($5.42 billion) this year as the aero engine and power systems maker promised another year of robust growth.
The aerospace giant is targeting underlying operating profit of between £4 billion and £4.2 billion in 2026, above the midpoint of £3.65 billion as expected by analysts polled by FactSet. It expects free cash flow of between £3.6 billion and £3.8 billion this year, also above expectations.
It also announced that £2.5 billion of share buybacks would be completed this year as part of a multi-year buyback program of between £7 billion and £9 billion ($12 billion) for 2026 to 2028, above what earlier media reports had suggested.
Shares rose as much as 7% in early trading on Thursday. The stock last traded up 4.5% and was on track for a record high after already reaching new highs multiple times this year.
Based on the bullish outlook, the company now expects to deliver profits within the prior mid-term guidance range two years earlier than planned, CEO Tufan Erginbilgic said.
“Our transformation continues with pace and intensity,” he said in a statement.
The British company upgraded its 2028 targets to £4.9 billion to £5.2 billion in underlying operating profit, an operating margin in the range of 18% to 20%, and free cash flow of £5 billion to £5.3 billion. Beyond the mid-term, Erginbilgic said he expected his company to benefit from AI, the energy transition, and increased defense spending.
Rolls-Royce shares have been on a tear over the past few years amid growth in all three of its businesses: civil aerospace, defense, and power systems. Over the past 12 months, the stock has more than doubled as the company has thrived amid a transformation plan launched by Erginbilgic, which has boosted investor confidence. The plan includes cutting costs and prioritizing its core businesses.
Rolls-Royce shares are up more than 100% over the past year.
In 2025, underlying operating profits jumped over 40% to a record £3.46 billion, beating FactSet estimates of £3.32 billion. Underlying revenue in the year rose 12% to £20.1 billion.
It was the company’s fourth straight year of beating earnings expectations.
The beat-and-raise quarterly report was described as a “high quality release” by Jefferies analyst Chloe Lemarie, who noted that profits were driven by the power systems business.
The unit, which is benefitting from the mass build-out of data centers that rely on Rolls-Royce’s power generation system, generated £4.89 billion in revenue in 2025, reflecting an organic growth of 19% year-on-year.
Its civil aerospace business — its biggest revenue and profit driver — which sells engines to Boeing and Airbus among others, grew 15% compared to last year. Its defense unit grew 8%.
Rolls-Royce is one of four leading aero engine manufacturers globally, alongside RTX subsidiary Pratt & Whitney, CFM International, and GE Aerospace.
CEO Erginbilgic highlighted on Thursday the possibility of the company returning to supplying narrow-body aircraft with engines. Rolls-Royce currently makes engines for wide-body planes such as Boeing’s Boeing 787 Dreamliner and Airbus’ A330 neo jets.
It comes amid an engine squeeze for aircraft makers who are struggling to secure enough engines to meet delivery targets.
“We have an unsatisfactory situation with less engines than what we would need,” Airbus CEO Guillaume Faury told CNBC last week, referring to a clash with its key engine supplier Pratt & Whitney about 2026 engine deliveries.