Rolls Royce Share Price Climbs After 2025 Profits Jump and £7bn–£9bn Buyback Plan
Shares in Rolls-Royce jumped after the company delivered a strong 2025 financial performance and unveiled an extensive share buyback programme. The move matters now because the results included near-term guidance upgrades and a large capital return that together reshaped investor expectations for profit and cash generation.
Rolls Royce Share Price reaction to buyback and profit beats
The stock surged on the day the results were released, rising 6% in morning trade and pushing gains to about 120% over the prior year. The immediate market reaction followed a package of figures and corporate decisions: significantly higher profits, upgraded forward guidance and a £7bn–£9bn share buyback scheduled across 2026–2028 with £2. 5bn targeted for completion this year. That combination of earnings strength and explicit capital return was the proximate cause of the share move.
Underlying operating profit of £3. 46bn and wider 2025 results
Rolls-Royce reported underlying operating profit of £3. 46bn for 2025, up 38% year-on-year on an organic basis, and basic earnings per share of 29. 55p, an increase of 46%. Revenue for the year came in at £20. 06bn, up 14% on 2024. Free cash flow finished the year at £3. 27bn, an improvement of £845m versus the prior year.
Divisional performance showed the civil aerospace business delivering £10. 38bn of revenue, up 15%; the defence division producing £4. 77bn, up 8%; and the power systems division generating £4. 89bn, up 19%. The company declared a final dividend of 5p per share, taking the total dividend for the year to 9. 5p, 58% higher than in 2024.
Tufan Erginbilgic on transformation and mid-term targets
Chief Executive Tufan Erginbilgic said the company’s transformation continues with "pace and intensity, " noting that the business had navigated supply-chain challenges and tariffs while building foundations for future growth. Management upgraded mid-term targets to an underlying operating profit range of £4. 9bn–£5. 2bn and free cash flow of £5. 0bn–£5. 3bn, and indicated that, based on 2026 guidance, the group expects to deliver underlying operating profit within the prior mid-term guidance range two years earlier than planned.
The company set near-term 2026 guidance of underlying operating profit of £4. 0bn–£4. 2bn and free cash flow of £3. 6bn–£3. 8bn, signaling stepped improvement from 2025 results.
Buyback of £7bn–£9bn and dividend timetable for shareholders
Management announced a £7bn–£9bn share buyback programme running from 2026 to 2028, with £2. 5bn intended to be completed in the current year. The board also set a dividend timetable: the cash dividend will be paid on 3 June 2026 to ordinary shareholders on the register on 24 April 2026, and shareholders will be offered a dividend reinvestment plan.
Footnote disclosures in the full results explain that all underlying income statement commentary is provided on an organic basis and that a reconciliation of alternative performance measures to their statutory equivalents appears in the company’s published notes. The group recognised a £277m credit to underlying profit after tax in 2025 in respect of deferred tax assets on UK tax losses; that £277m was adjusted in the calculation of earnings per share, the proposed dividend payout ratio and return on capital. Adjusted return on capital is defined in the company’s notes.
Sector momentum: Chris Beauchamp, BAE Systems and defence spending
Market commentary highlighted the role of the buyback in amplifying the stock’s move. Chris Beauchamp, chief market analyst at IG, said the share buyback provided the "magic sauce" for the surge, noting investors had largely anticipated the strong earnings backdrop. Interest in defence-related stocks has been elevated, with investors piling into companies such as BAE Systems and Babcock International amid increased government defence commitments.
Recent peer results cited by markets included BAE Systems delivering preliminary annual sales of £30. 67bn, up 10%, and underlying EPS rising 12% to 75. 2p. BAE set expectations for next-year sales growth of 7%–9% and underlying EPS growth of 9%–11%.
Observers noted broader policy signals: NATO members committed last year to increase defence-related spending toward 5% of GDP by 2035, and UK political leadership urged faster progress on defence spending. Meanwhile, reference to Babcock in market coverage ended abruptly in the available material and is unclear in the provided context.
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What makes this notable is how the combination of materially stronger cash generation—free cash flow up by £845m to £3. 27bn—clear near-term guidance and an explicit, multi-year buyback changed the investment calculus for the stock, converting solid operating progress into a pronounced equity rally.
