“Rolls-Royce Holdings PLC reported record underlying operating profit of £3.5 billion for full year 2025, up 40% year-over-year, driven by robust performance across Civil Aerospace, Power Systems, and Defence. Revenue climbed 14% to £20 billion, with operating margin expanding to 17.3%. Free cash flow surged to £3.3 billion, enabling a net cash position of £1.9 billion. The company upgraded its 2026 guidance and mid-term 2028 targets, while announcing a major £7-9 billion multi-year share buyback program to enhance shareholder returns.”
Rolls-Royce Holdings PLC Full Year 2025 Earnings Call Highlights: Record Profits and Strategic Growth Initiatives
Rolls-Royce Holdings PLC showcased exceptional financial performance in its full year 2025 results, marking a pivotal year in the company’s ongoing transformation. The group achieved underlying operating profit of £3.5 billion, representing a 40% increase from the prior year and reflecting successful execution of strategic initiatives focused on commercial optimization, cost efficiency, and profitable growth capture.
Underlying revenue reached £20.1 billion, a 14% rise compared to 2024, supported by strong end-market demand particularly in civil aviation recovery and expanding opportunities in power generation. The operating margin improved significantly to 17.3%, up 3.2 percentage points, as the company realized benefits from higher aftermarket activity, contractual improvements, and disciplined cost management.
Civil Aerospace remained the primary driver of profitability, delivering an underlying operating margin of 20.5%. This division benefited from elevated large engine flying hours, which approached or exceeded pre-pandemic levels in key fleets, alongside stronger aftermarket services and improved spare engine sales. Long-term service agreement (LTSA) balances continued to grow, contributing to cash generation despite persistent supply chain constraints that moderated some deliveries.
Power Systems posted impressive results with an operating margin of 17.4%, fueled by demand in data centers and governmental applications. The division captured profitable growth in power generation amid rising needs for reliable energy solutions, including those supporting AI and computing infrastructure. This segment’s performance highlighted the group’s successful diversification beyond traditional aerospace.
Defence maintained solid margins at 14.4%, bolstered by strong order intake of £5.5 billion and a book-to-bill ratio of 1.1 times. Performance across transport and combat platforms remained resilient, with the absence of certain one-off prior-year benefits offset by broader operational strength.
Free cash flow advanced to £3.3 billion, more than £800 million higher than the previous year, driven primarily by higher operating profit and LTSA balance expansion in Civil Aerospace. This robust cash generation shifted the group to a net cash position of £1.9 billion, a substantial improvement of nearly £1.5 billion year-over-year.
During the earnings call, management emphasized the completion of key transformation milestones ahead of schedule, including the early achievement of mid-term margin targets. Executives highlighted ongoing efficiency programs, simplification efforts, and investments in growth areas such as sustainable aviation technologies and nuclear small modular reactors (SMR), where the company secured preferred provider status in the UK.
Looking forward, the company provided optimistic guidance for 2026, projecting underlying operating profit between £4.0 billion and £4.2 billion, with free cash flow expected in the range of £3.6 billion to £3.8 billion. This outlook incorporates continued supply chain headwinds, anticipated to ease by the mid-term, and performance improvements across all core divisions.
Mid-term targets for 2028 were upgraded to underlying operating profit of £4.9 billion to £5.2 billion, free cash flow of £5.0 billion to £5.3 billion, and an operating margin of 18% to 20%. These revisions reflect confidence in sustained momentum from strategic actions, including enhanced aftermarket realizations, fleet utilization growth, and expansion in high-margin segments like data centers.
To reward shareholders, Rolls-Royce announced a multi-year share buyback program totaling £7 billion to £9 billion across 2026-2028, with £2.5 billion planned for 2026. This supplements the dividend, where a final payment of 5.0 pence per share brings the full-year dividend to 9.5 pence, equating to a 32% payout ratio of underlying profit after tax.
The earnings call featured discussions on various topics, including LTSA dynamics, where 2025 experience aligned closely with expectations despite elevated shop visits in certain engine programs like the Trent 1000. Management noted factors influencing LTSA, such as engine flying hours growth across widebody and business aviation fleets, higher realizations from margin improvements, and shop visit patterns approaching peak in some areas like Bombardier-related activity.
Executives addressed supply chain challenges, acknowledging ongoing impacts but pointing to gradual improvements in parts availability. They reaffirmed commitment to disciplined investment for long-term growth while maintaining focus on cash discipline and shareholder value.
Overall, the 2025 results underscore Rolls-Royce’s successful turnaround, positioning the company for continued outperformance in a recovering aviation market and emerging energy sectors.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial recommendations, or an endorsement of any security. Investors should conduct their own research and consult professional advisors before making decisions.