Rolls-Royce is having a very good year. The British engineering company raised its full‑year profit forecast for underlying operating profit to between £4.7 billion and £4.9 billion. That is a solid jump from the £4 billion to £4.2 billion it had expected before.
The first half of the year tells the story. Underlying operating profit hit £2.5 billion, up 46% from the same period a year earlier. Revenue came in at £11.3 billion, an increase of more than 24%. Cash flow is also improving, as the company now projects between £3.8 billion and £4 billion, compared to an earlier estimate of £3.6 billion to £3.8 billion.
Almost every part of the business grew. The civil aerospace division saw revenue climb 29% and profit rise 31%. Defense revenue jumped 17% organically, while profit in that segment soared 57%. And the power systems unit turned in organic revenue growth of 28% and profit growth of 72%.
Two big trends are working in Rolls-Royce's favor. One is higher global spending on defense. Another is the explosion of demand for electricity from AI data centers.
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Data centers are having a hard time connecting to the power grid, so they are buying engines that run continuously rather than just backup generators. In just the first six months, the number of orders placed with Rolls-Royce for data center power systems increased by over half. The company is now taking orders for delivery as far out as 2028.
The CEO, Tufan Erginbilgic, put it simply: "Our transformation continues to deliver." He also said the company expects a big framework agreement with a large data center operator - the kind the industry calls a hyperscaler - to get approved soon.
That deal would cover both conventional power systems and small modular nuclear reactors. By 2030, continuous power systems could account for about one‑fifth of Rolls‑Royce's power‑generation segment, the company believes.
Over the last five years, Rolls-Royce's stock has surged by over 1,300%, and it is up 21% so far this year. Following the announcement, the stock climbed up to 6% and was trading 5.5% above the previous close by midday, with the FTSE 100 essentially unchanged.
The CFO, Helen McCabe, said Rolls-Royce has had "very positive initial conversations with the new [U.K.] government" and supports its focus on growth and defense.
The 25% annual growth target is up from a previous target of 20%, and it reflects real customer demand that is already showing up in orders. If a company that makes jet engines and nuclear reactors is raising its sights because data centers cannot get enough power, that tells you something about where the money is flowing. It is worth keeping an eye on who else benefits from that current.
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