Rolls-Royce has continued its line of strong earnings, with an underlying profit of £3.5bn ($4.35bn) for 2025 – marking a significant £1bn ($1.24bn) increase from the year prior.
The company’s shares climbed over 4.5% today (February 26) after reporting the strong results.
Operating margin was 17.3%, up from 13.8% in 2024. The company generated a free cash flow of £3.3bn ($4.10bn), up from £2.4bn ($2.98bn) in 2024. Return on capital was 18.9%.
Pre-tax profits jumped from £2.3bn ($2.86bn) in 2024 to £3.4bn ($4.23bn) in 2025. Earnings totalled £29.55 ($36.7) per share, up from £20.29 ($25.2) per share in 2024.
On the back of its successful full-year results, the company has announced a £7-9bn ($8.71–$11.2bn) share buyback programme across 2026-2028, which follows the completion of its £1bn ($1.24bn) share buyback in 2025. This is the first multi-year buyback in the company’s history. Rolls-Royce CEO Tufan Erginbilgic said this signals its “confidence” in cash flow growth in the midterm and beyond.
Additionally, the company has updated its mid-term guidance, with it expecting underlying profit of £4.9 to £5.2bn ($6.09–$6.47bn) by 2028. The mid-term guidance also projects an operating margin of 18-20%, £5bn to £5.3bn ($6.22–$6.59bn) free cash flow, and 23%-26% return on capital.
The company has declared a final dividend of 5 pence per share, taking the total dividend for 2025 to 9.5 pence per share, which is a 32% payout ratio of underlying profit after tax.
For 2026, the company has guided an underlying operating profit of £4bn to £4.2bn ($4.97–$5.21bn), as well as a free cash flow of £3.6bn to £3.8bn ($4.47–$4.72bn).
The free cash flow guidance includes a £150-200 million ($186–$248m) cash impact related to supply chain constraints, similar to last year. The company noted that parts availability is improving but still constrained.
Erginbilgic said the company is in discussions with multiple potential partners to re-enter the narrowbody engine market. He said the company is not ruling out potentially entering the narrowbody space alone, but that Rolls-Royce’s “strong preference” is to pursue partnerships.
“We are talking to partners and – more importantly – they want to talk to us,” he said. “Airbus and Boeing are actually keen that we participate in the narrowbody market.”
While he did not comment on these partnerships, the company is “not waiting for partnerships” and is continuing to develop its demonstrator.
“We have a good capability, engineering capability, and on top of that… given the developments we made with UltraFan — we already spent more than £1bn ($1.24bn) on UltraFan — that positions us really well for narrowbody,” he said.
The executive also addressed recent reports of UK government support for the narrowbody programme. Given its strong financial position, Erginbilgic was quick to make clear that the company is “not asking for any loan from anybody – not to mention government loans”.
However, he said that public support for research and development would be welcome. He noted that competitors receive “two to three times what we do” in backing. He said narrowbody entry is a “once in a generation opportunity for the UK”.
Civil aerospace will see engine flight hours (EFH) grow 115-120% of 2019 levels, with 550-600 engine deliveries and 1,480-1,550 total shops visits during 2026 – supporting the free cash flow guidance.
The company is continuing to improve its engines’ time-on-wing. The company said improvements for the XWB-97 engine remains on track to be completed by the end of next year. The company has also implemented enhancements with the Trent 900 engine that will improve time-on-wing by up to 30%.
“This all means that we expect shop visits to peak in 2026 before falling to 13-14,000 in the mid-term,” said Erginbilgic.
The company is also supporting MRO capacity expansion, which saw 50% increase in large engine shop visits over the past three years. By mid-term, the company will increase its capacity by an additional 20%.
By the end of 2027, the company is targeting over 100% increase in durability across its in-production Trent engines.
Erginbilgic said civil aerospace will see the largest step-up over the mid-term, with the segment projected to meet operating margins of 21-23%.
Civil aerospace revenues totalled £10.4bn ($12.9bn), up 15%. Gross profits were up 34% to £2.7bn ($3.35bn). Gross margins were 25.8%, while operating margin was 20.5%. During the year, the company made 483 OE deliveries, down 9% on 2024, and 259 large engine deliveries, down 7%. The profits were supported by higher large engine aftermarket profit, as well as greater profitability from spare engines.