Rolls-Royce will report back on the latest steps in its impressive turnaround on Thursday as a boom in defence spending has helped propel the stock to record highs in 2025.
The group, which has Ƶ bases in Derby and Filton near Bristol, hiked its earnings outlook in July after seeing strong demand for engines offset supply chain challenges and tariff woes.
Half-year underlying operating profits jumped by 50% to £1.7bn for the first half of 2025, helping it raise its full-year forecast to between £3.1bn and £3.2bn.
It marked a significant upgrade after previously pointing towards profits between £2.7bn and £2.9bn.
The aerospace giant, which makes engines used in large Boeing and Airbus planes, said it was supported by a strong performance in its large engines business, as well as margin improvements on contracts.
Its performance is set against a backdrop of higher global defence spending because of the uncertain geopolitical environment, as well as a revival in international travel since the pandemic.
While its second-half profit performance is not expected to be quite as strong as the first, Thursday’s update is likely to show continued success in the long-term transformation plan first laid out by the company in 2023.
Victoria Scholar, head of investment at interactive investor, said Rolls-Royce has been a “standout stock market winner, rallying around 100% so far this year”.
She said: “Despite supply chain and Trump tariffs headwinds facing the sector, Rolls-Royce shares continue to fly.
“Chief executive Tufan Erginbilgic, who took to the helm in January 2023, has spearheaded nothing short of a miraculous recovery at the previously unloved company.
“The former longstanding BP executive has defied the odds, bringing about this remarkable corporate transformation, by cutting unnecessary costs, investing heavily in improving engines and embracing a digital transformation.”
Alongside the financials, focus will rest on plans for the firm’s small modular reactor business after speculation over the summer that Rolls was planning to spin off the division, which it quickly denied.
Rolls said instead there had been talks with investment banks about future funding plans for that part of the business, which is set to be profitable by 2030 and start generating revenues by the end of 2025.
Michael Hewson at MCH Market Insights said a stock market spin-off of SMR would “be a strange decision to make unless Rolls-Royce were able to retain a good chunk of the business”.
He said Rolls now had an enviable free cash flow, having once been labelled by boss Mr Erginbilgic as a “burning platform” when he first took on the job.
“He’s not only lit a fire under it, he’s also turbocharged the business into a cash machine,” said Mr Hewson.
Last month it appraised the planned Cardiff Parkway train station and integrated business park project as having all the right credentials for potential significant investment.
The confirmation came as its submarine division, Rolls-Royce Submarines, officially launched its satellite office near to the proposed development in the St Mellons area of Cardiff, which will employ 120 high-skilled workers (currently 40). The division is expanding on the back of its Ministry of Defence contracts and the Ƶ’s role in the trilateral AƵUS programme, which also includes the US, that will deliver a new generation of nuclear submarines for the Australian Government.
Over the next 30 years the contract will be worth £175bn.he proposed Cardiff Parkway project, which has been driven by the Roberts family and financial services firm Investec, secured planning consent from the Welsh Government earlier this year, nearly three years since it was first given the green light by Cardiff Council before being called in by the Cardiff Bay administration.
While not reflecting any current position of the Welsh and Ƶ governments and Rolls-Royce, what would give added momentum is if the parties entered into a memorandum of understanding over the Parkway site.
For the First Minister this would be a significant boost ahead of her international investment summit at the ICC Wales in December.
President of Rolls-Royce Submarines, Steve Carlier, said its new satellite office was very much a “flag in the ground” and the Parkway site ticked all the right boxes in terms of potential follow-on investment, although he said he could not at this stage give any specifics on where in the Rolls-Royce portfolio, from aerospace to small modular reactors, it could possibly come from.
