Rolls-Royce raised its full-year underlying operating profit forecast to £4.7 billion-£4.9 billion, up from the previous guidance of £4 billion-£4.2 billion, citing strong demand across civil aerospace, defense, and power generation sectors [1, 2, 3]. The company also increased its free cash flow forecast to between £3.8 billion and £4 billion, beating earlier expectations of £3.6 billion-£3.8 billion [1, 2, 3].
In the first half of 2026, Rolls-Royce reported an underlying operating profit of £2.5 billion, a 46% increase year on year, supported by revenue of about £11.3 billion, more than 24% higher than last year [2, 3]. The company received 254 large engine orders during the same period, including a major deal with Latam Airlines for Trent 1000 XE engines, underlining robust commercial bookings [2].
CEO Tufan Erginbilgiç, leading a three-year transformation since 2023 focused on cost cutting and project revitalization, said, "We have made significant operational and strategic progress in the first half of the year. In civil aerospace, where we continued to improve our aftermarket profitability, we have also effectively eliminated aircraft on ground, providing a significant operational benefit to our customers. In defence, we continued to establish our leading position in autonomous propulsion, with several key milestones achieved in the period" [1].
Demand growth for Rolls-Royce engines is driven by the civil aerospace sector's recovery, increased European and NATO defense spending, and rising power needs from AI data centers. Helen McCabe, Rolls-Royce CFO, noted, "Orders in the company's data center power business grew more than 50% in the first half of the year as operators increasingly sought backup and on-site power solutions amid grid constraints" [1, 2, 3]. The power generation unit benefits from these AI-related demands.
Rolls-Royce shares rose sharply on July 30, jumping between 3.6% and 6%, making it one of the top risers in the FTSE 100 index [1, 3]. However, the firm expects supply chain cash outflows up to £200 million in 2026, which it said should normalize by mid-term [2].
BAE Systems also raised its profit forecast, now anticipating earnings growth of 10%-12%, compared to an earlier expectation of 9%-11%. The company cited sustained increases in global defense budgets and demand from the US, UK export allies, and a contract to provide training for Turkey [1].
Rolls-Royce and BAE Systems announced their upgraded profit and cash flow guidance on July 30, reflecting strong first-half financial results and the impact of rising global defense spending since 2022 following Russia's invasion of Ukraine [1, 2, 3].
