Rolls Royce Share Price Rises After Profits Jump Nearly 40% and Major Buyback Plan
The aerospace and power engineering group posted a near-40% increase in profits for 2025 and laid out a multi-year buyback that pushed the Rolls Royce Share Price higher, underscoring renewed investor appetite for defence and aerospace names. The combination of stronger earnings, upgraded guidance and a £7bn-£9bn repurchase programme has immediate market impact and reshaped the company’s near-term capital return profile.
Rolls Royce Share Price Reaction to Results and Buyback
Shares rose about 6% on the morning of the announcement and the stock has climbed roughly 120% over the past year. Market commentary singled out the share buyback—£7bn-£9bn to be executed from 2026 through 2028, with £2. 5bn targeted for completion this year—as a key catalyst for the rally.
Tufan Erginbilgic Frames 'Transformation' as Growth Driver
Chief executive Tufan Erginbilgic described the company’s evolution as a transformation delivering outcomes “not possible before, ” saying the business had navigated supply-chain and tariff challenges while building foundations for further growth. Management said the transformation and new capabilities helped it move faster toward its mid-term targets, and it expects to hit the prior mid-term operating profit range two years earlier than planned.
2025 Financials: Profit, Revenue and Cash Flow
Rolls-Royce reported underlying operating profit of £3. 46bn for 2025, a 38% increase year-on-year on an organic basis. Basic earnings per share rose 46% to 29. 55p. Revenue for the year totaled £20. 06bn, up 14% on 2024, with the civil aerospace division contributing £10. 38bn—a 15% increase. Defence revenue was £4. 77bn, up 8%, and power systems delivered £4. 89bn, up 19%.
Free cash flow reached £3. 27bn, an improvement of £845m from the prior year. Management set a near-term target for 2026 underlying operating profit of £4. 0bn-£4. 2bn and free cash flow of £3. 6bn-£3. 8bn.
£7bn-£9bn Share Buyback and Dividend Details
Alongside upgraded performance targets, Rolls-Royce announced a £7bn-£9bn buyback programme for 2026–2028, with £2. 5bn scheduled for completion this year. The company declared a final dividend of 5p per share, taking total dividends for the year to 9. 5p—a 58% increase on 2024—and said the dividend will be paid on 3 June 2026 to ordinary shareholders on the register on 24 April 2026. In addition to the cash payment, shareholders will be offered a dividend reinvestment plan.
The 2025 results include a £277m credit to underlying profit after tax in respect of deferred tax assets on UK tax losses; that credit has been adjusted in the calculation of earnings per share, the proposed dividend payout ratio, and return on capital. The company published reconciliations of alternative performance measures to their statutory equivalents on pages 52 to 55; note 5 on page 33 addresses the deferred tax asset credit, adjusted return on capital is defined on page 55, and dividend details appear in note 7 on page 34.
Market Context: Defence Spending, BAE Systems and Investor Reaction
Investor appetite for defence-related stocks has been growing. Market analysts compared the share-price bounce to other high-profile rallies, with one chief market analyst at IG noting the buyback as a decisive factor in the stock’s move. Broader sector dynamics include renewed demand for defence spending in Europe and anticipated increases in US outlays.
NATO members have committed to increasing defence-related spending to 5% of GDP by 2035, and UK prime minister Keir Starmer said earlier in February that Britain needed to “go faster” on defence spending. Those policy signals have helped channel investor interest into UK-listed defence industrials such as Rolls-Royce, BAE Systems and Babcock International.
BAE Systems released preliminary annual results in the week before Rolls-Royce’s update: sales rose 10% to £30. 67bn and underlying EPS increased 12% to 75. 2p. BAE said it expects sales to rise 7%–9% on this year’s figure and forecast 9%–11% growth in underlying EPS. Details on Babcock International’s results are unclear in the provided context.
Company Positioning, Strategy and Supplemental Notes
Rolls-Royce described its mission as developing and delivering complex power and propulsion solutions for safety-critical applications in the air, at sea and on land, noting more than 100 years at the forefront of innovation. its products and service packages enable customers to connect people, societies, cultures and economies. Its strategic framework is built on four pillars, with explicit reference to progressing advantaged businesses and strategic initiatives alongside lower-carbon and digitally enabled businesses; management said significant further progress is expected in 2026.
What makes this notable is the convergence of stronger operational cash generation, upgraded mid-term targets—now £4. 9bn–£5. 2bn in underlying operating profit and £5. 0bn–£5. 3bn in free cash flow—and an aggressive buyback plan, creating a clear channel for shareholders to benefit from the company’s improved performance and capital allocation choices.
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