ii view: Rolls-Royce fit enough to face global challenges
From civil and military aircraft to ships, nuclear submarines and data centres, this iconic British engineer has a global presence. We assess prospects.
26th March 2026 11:54
by Keith Bowman from interactive investor
Credit: Rolls-Royce via Flickr.
Full-year results to 31 December
- Revenue up 12% to £20.06 billion
- Underlying operating profit up 41% to £3.46 billion
- Final dividend of 5p per share
- Total 2025 dividend payment up 58% to 9.5p per share
Guidance:
- Expects full-year underlying operating profit of £4.0-4.2 billion in 2026
- Now expects full year underlying operating of £4.9-5.2 billion in 2028
- Planning share buybacks of £7-9 billion between 2026 and 2028, with £2.5 billion in 2026
Chief executive Tufan Erginbilgic said:
“Our transformation continues with pace and intensity. We are consistently achieving outcomes that were not possible before our transformation.
“With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025, all while we built the foundations for significant growth for years to come.”
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ii round-up:
Rolls-Royce Holdings (LSE:RR.) has a local presence in 48 countries and customers in over a hundred more. Civil Aerospace divisional sales include supplying large aircraft engines as well as those for business aviation.
Defence related products include engines for fighter and military transport aircraft as well as those for helicopters and nuclear submarines.
Power System customers include boat builders, industrial manufacturers, utility providers and data centre operators.
A former New Markets division seeking net zero climate change opportunities is now focused on nuclear, producing Small Modular Reactors (SMR) and hydrogen powered engines.
For a round-up of these latest results announced on 26 February, please click here.
ii view:
Founded in 1906, Rolls-Royce today employs over 40,000 people. Civil Aerospace generated most profits in 2025 at 52%, followed by Power Systems at 30% and Defence the balance of 18%. Geographically, the US accounted for most sales last year at 27%. Other major customers included the UK at 14% and China and Germany at 7% and 6% respectively.
For investors, a war in the Middle East and the cancellation of many passenger flights will potentially see engine flying hours and related airline payments to Rolls-Royce impacted. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Supply chain challenges persist, with operational issues at major civil aircraft makers Boeing Co (NYSE:BA) and Airbnb Inc Ordinary Shares - Class A (NASDAQ:ABNB) potentially slowing demand for deliveries, while public trust in nuclear safety and SMRs near to major populations has yet to be fully tested.
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To the upside, soaring jet fuel costs potentially underline the need for more fuel-efficient engines and even battery alternatives. Geopolitical tensions with Russia following its invasion of Ukraine have seen European governments increase defence spending, with a war in the Middle East adding further fuel to the trend. Demand for Power Systems is aided by growing numbers of power-hungry data centres globally, while hopes for SMRs persist with the UK government previously announcing Anglesey, Wales as the location for its first UK SMR.
On balance, exposure to the volatile airline industry continues to warrant some caution. Shares have also multiplied many times since the recovery began late in 2022, adding to questions about momentum and valuation. That said, diversified growth, long-term structural drivers and a consensus analyst fair value estimate close to £14 per share, are potentially of interest to investors over both the short and long term.
Positives:
- Investing in climate change related product innovation
- Ongoing share buyback programme
Negatives:
- Imposed Trump trade tariffs
- Supply chain challenges
The average rating of stock market analysts:
Buy
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