Rolls-Royce: FTSE 100 shares spike as expectations beaten
Shares in Rolls-Royce have spiked after the FTSE 100 giant revealed better-than-expected interim results.
The Derby-headquartered group confirmed its underlying pre-tax profit had jumped from £1.03bn to £1.68bn in the first six months of its financial year while its underlying operating profit grew by 50 per cent from £1.14bn to £1.73bn.
Rolls-Royce’s underlying revenue rose from £8.18bn to £9.05bn.
On a statutory basis, its revenue grew from £8.86bn to £9.49bn, its operating profit went from £1.64bn to £2.07bn and its pre-tax profit from £1.41bn to £4.84bn.
As a result of its boosted finances, the business said it was raising its guidance for 2025 and that it now expects to deliver an underlying operating profit of between £3.1bn-£3.2bn and free cash flow of between £3bn-£3.1bn.
Shares in Rolls-Royce have spiked by around 10 per cent in early trading in the aftermath of its half-year results being published.
A positive outlook for investors
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Rolls-Royce continues to soar above expectations, delivering yet another set of high-flying results and profit guidance upgrades.
“The group produces aeroplane engines for larger, long-haul planes. Revenues are being boosted by the upward trend in engine-flying hours, which are now cruising well above pre-pandemic levels. But that’s just one part of the puzzle.
“Layoffs, contract renegotiations, process changes, and increased use of data to drive efficiencies have put Rolls on a much healthier platform.
“As a result, margins have moved much higher, helping to convert the increased flying hours and revenue into profits.
“The jet engine-maker isn’t stopping there though. Looking for new flight paths to growth, Rolls-Royce recently announced it’s looking at ways to return to the market for narrow-body aircraft, hailing it as the single biggest opportunity for growth in the UK over the next 50 years.
“The group is in talks with multiple parties, and with airframers not likely to move to the next generation of aircraft before 2035, Rolls is in no rush to make any premature commitment.
“In June, Rolls-Royce’s small modular reactor (SMR) was also selected as the sole provider to build three nuclear facilities in the UK and is expected to start generating revenue and profits by the end of 2025.
“If this tech can prove viable and reliable, the potential market is huge and could provide another long runway to growth.
“With a growing track record of overdelivering and more potential catalysts ahead, there are plenty of reasons for investors to remain positive about Rolls-Royce’s future.”
Civil aerospace and power systems revenue jump
The group’s civil aerospace division posted an underlying revenue of £4.78bn, a rise of 17 per cent while it made an operating profit of £1.19bn.
In the first half of 2025, a total of 349 large engines were ordered, up from 273.
Rolls-Royce said civil aerospace’s revenue rose because of “higher shop visit volumes and commercial optimisation” while its profit jumped due to “stronger large engine aftermarket performance, with higher LTSA volumes and margins alongside increased time and materials profit, a larger contribution from contractual margin improvements, and improved spare engine profits”.
However, the vision said that gross contractual margin improvements of £402m were partially offset by £114m of additional charges associated with the impact of prolonged supply chain challenges.
The defence arm’s revenue rose by one per cent to £2.22bn and made an operating profit of £342m while power systems’ revenue surged by 20 per cent to £2.04bn and its operating profit came in at £313m.
Rolls-Royce said that defence’s operating profit was similar to the prior period, with “improved performance in transport offset by the absence of a one-off benefit in submarines and the impact of continued supply chain challenges”.
It added that power systems’ significantly improved operating profit and margins “primarily reflects profitable growth in both power generation, driven by data centres, and governmental”.
Chris Beauchamp, chief market analyst at IG, said: “Rolls-Royce’s near tenfold rally since early 2023 reflects strong execution, rising profits and growing cash returns.
“Civil aerospace is delivering, power systems is expanding fast, and defence, which IG clients continue to expect to do well, remains a steady contributor.
“With SMRs offering long-term upside and cash delivery on track, the re-rating may still have legs.”
Rolls-Royce is ‘starting to operate like the business investors always hoped it would be’
Lale Akoner, global market analyst at eToro, said: “Rolls-Royce’s latest results show a business that keeps on delivering.”
Akoner added: “Civil aerospace is driving the numbers, with margin hitting 25 per cent, a level that would’ve seemed unrealistic two years ago.
“It’s not just more planes flying, it’s better contracts, higher prices, and fewer loss-making deals. But what matters more for the long-term story is what’s happening outside aviation.
“Power systems, which supplies engines to data centres, saw nearly 90 per cent profit growth.
“That’s a clear play on AI and cloud infrastructure. With the addition of steady defence contracts and its leading role in the UK’s nuclear SMR programme, Rolls-Royce is building exposure to real-world trends with long-term funding behind them.
“For retail investors, the story has shifted and Rolls Royce is no longer a recovery trade.
“It is generating cash, expanding margins, and exposed to structurally growing markets. It’s starting to operate like the business investors always hoped it would be.”
‘Rolls-Royce is the poster child for what’s capable on the stock market’
Russ Mould, investment director at AJ Bell, said: “Rolls-Royce has solid engines in more ways than one.
“Not only is it keeping planes safely in the sky, but the business is also an engine to drive growth year after year.
“Having already delivered a stellar turnaround, Rolls-Royce is showing no signs of taking its foot off the pedal.
“Shareholders are absolutely delighted as upgraded earnings guidance helps to rev the share price even higher.
“Rolls-Royce’s share price has now increased by 1,442 per cent since October 2022, meaning investors who held that entire time have made more than 15 times their money.
“Rolls-Royce is the poster child for what’s capable on the stock market. While chancellor Rachel Reeves is keen for more people to invest and make a better return than cash, even she wouldn’t expect investors to always make Rolls-Royce kind of returns.
“But the gains from holding Rolls-Royce show that big returns aren’t simply a fantasy on the UK market.
“It’s also a welcome reminder that Britain has plenty of business champions, with Rolls-Royce the cream of the crop.”