Rolls-Royce Profits Soar 40% Amid Booming AI Datacentre Power Demand
Rolls-Royce has reported a significant surge in profits, with underlying earnings reaching £3.5 billion for the year 2025, marking a substantial 40% increase from the previous year's £2.5 billion. This impressive growth is largely attributed to booming demand for power from datacentres, as technology companies race to build infrastructure to support artificial intelligence.
Turnaround Strategy Yields Strong Results
Under the leadership of Chief Executive Tufan Erginbilgiç, a former BP executive who took over in January 2023, Rolls-Royce has undergone a dramatic transformation. Erginbilgiç, who initially described the company as standing on a "burning platform," has implemented rigorous cost-cutting measures, renegotiated lossmaking contracts, and secured better commercial terms with airline customers. These efforts have propelled the company's profitability to new heights.
Key Drivers of Profit Growth
The company's power systems division, which manufactures generators for datacentres, saw profits jump by 60% to £852 million last year. However, the bulk of Rolls-Royce's profits still stem from its civil aerospace business, where strong demand for commercial jet engines contributed to a 41% increase in profits, reaching £2.1 billion. The company also benefits financially each time one of its engines is operational in the air.
Shareholder Returns and Future Outlook
In a move to reward investors, Rolls-Royce has announced plans to return up to £9 billion to shareholders over the next three years through share buybacks, representing its largest cash return in a decade. This includes £2.5 billion earmarked for this year alone. The company has also raised its financial forecast, now expecting an operating profit between £4.9 billion and £5.2 billion by 2028, which is approximately one-third higher than previous targets.
Navigating Challenges and Expanding Horizons
Despite facing turbulence from Donald Trump's tariff war in 2025, Rolls-Royce was eventually exempted for its engines, which power Boeing's 787 passenger jet, as part of a US-UK trade deal struck in May. Additionally, the company is venturing into new areas, having been selected last June to build the UK's first small nuclear reactors at Wylfa in north Wales, backed by £2.5 billion in government funding. Rolls-Royce is confident this business will become profitable within five years.
Market Reaction
Following the announcement, Rolls-Royce shares rose almost 7% on Thursday morning, contributing to the FTSE 100 reaching a record high of 10,825 points, up 18 points or 0.15%. This positive market response underscores investor confidence in the company's ongoing turnaround and future prospects.
