Rolls-Royce hikes profit outlook 46% on defense, AI data center boom

Rolls-Royce raised its full-year profit and cash flow forecasts on July 30, 2026, after reporting a sharp rise in first-half earnings. The British engineering group now expects underlying operating profit of £4.7 billion to £4.9 billion, up from its earlier guidance of £4 billion to £4.2 billion, and free cash flow of £3.8 billion to £4 billion, compared with the previous range of £3.6 billion to £3.8 billion. Shares rose as much as 6% and were last trading up 3.6%.

The upgraded outlook follows a strong performance across Rolls-Royce’s civil aerospace, defense, and power systems units. Underlying operating profit for the first six months of the year reached £2.5 billion ($3.3 billion), a 46% increase from a year earlier, while revenue climbed over 24% to £11.3 billion. The company is benefiting from two major investment trends: a surge in defense spending and the rapid buildout of AI-driven data centers.

Chief Financial Officer Helen McCabe told CNBC that orders in the data center power business grew more than 50% in the first half of the year. Operators are increasingly seeking backup and on-site power solutions because of grid constraints, according to McCabe. She also highlighted growing opportunities from higher defense expenditure, pointing to long-term commitments under the U.K.’s defense investment plan and NATO’s push for greater military investment.

Rolls-Royce is a FTSE 100 company. The results underscore how the group is becoming a beneficiary of the two investment trends reshaping global markets. The company’s power systems business supplies engines and backup power systems for data centers, while its defense arm provides engines for military aircraft and naval vessels.

The upgraded guidance signals confidence that demand will remain strong across its key markets. McCabe’s comments to CNBC indicate that the company sees sustained growth from both defense contracts and the expanding data center sector. The share price movement reflects investor optimism about the improved financial outlook.