Britain's Rolls-Royce has today posted a 40% rise in annual profit after a strong performance by its aero-engines unit and on rising power demand for data centres, enabling it to upgrade targets and significantly lift shareholder returns.
The company, whose engines power Airbus A350 widebody jets and Boeing 787s, said today it would launch a share buyback of between £7 billion and £9 billion over 2026 to 2028, in addition to a relaunched dividend for 2025 of 9.5 pence.
A transformation plan launched by chief executive Tufan Erginbilgic three years ago has gone from strength to strength, leading to repeated upgrades and helping its shares more than double over the last 12 months.
"With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025," the CEO said in a statement.
The company said its power systems business benefited from the rapid build out of data centres, while its aero-engines business grew as airlines flew its engines more and Rolls improved their durability.
These trends meant that in the mid-term, it guided to underlying operating profit of between £4.9 billion and £5.2 billion and an operating margin of 18-20%.
Since joining in 2023, Erginbilgic has targeted higher margins, and at those levels he is bringing Rolls into line with the margins made by GE Aerospace, its main competitor in the widebody aero-engine market.
"Rolls-Royce reported 2025 results, beating expectations and more importantly releasing very strong 2026 and 2028 targets, which should trigger significant earnings upgrades," Bernstein analysts said in a note.
For 2025, the company reported underlying operating profit of £3.46 billion, with a margin of 17.3%, beating a consensus of £3.27 billion, while its guidance for 2026 of between £4 billion and £4.2 billion, is at least 8% ahead of the current analyst forecast.
