Rolls-Royce Upgrades Mid-Term Profit Targets and Reinstates Dividends

The Tip Desk · March 5, 2026 · 2 min read

The company announced a multi-year share buyback programme totalling £7.0bn–£9.0bn across 2026 to 2028.

Rolls-Royce Holdings Plc (RR.) has upgraded its mid-term financial targets following a period of growth in operating profit and sustainable free cash flow. The company now expects underlying operating profit to increase to between £4.9bn and £5.2bn in the mid-term, up from £3.5bn in 2025. Underlying operating margin is expected to rise to 18%–20% from 17.3% in 2025.

According to the company, the upgraded guidance is primarily driven by stronger performance in power generation and governmental sectors within Power Systems, as well as higher time and materials profit and LTSA in Civil Aerospace.

In Civil Aerospace, underlying operating profit rose to £2,130m in 2025 from £1,505m in 2024. The division's underlying operating margin increased to 20.5% from 16.6%. Underlying revenue for the segment reached £10,382m, compared with £9,040m in the prior year. The order backlog for Civil Aerospace grew to £64.6bn from £59.9bn.

Defence reported an underlying operating profit of £689m in 2025, compared with £644m in 2024. The division's underlying operating margin was 14.4%, up from 14.2%. Excluding a one-off benefit in submarines revenue from the prior year, total revenue growth was 14% and submarines revenue grew 17%.

Power Systems recorded an underlying operating profit of £852m in 2025, up from £560m in 2024. The underlying operating margin for the segment rose to 17.4% from 13.1%.

Strengthened balance sheet positions enabled the company to reinstate shareholder distributions in 2025. This included returning £0.9bn in dividends, consisting of a 6p dividend per share for the full year 2024 and an interim dividend of 4.5p per share for the 2025 half-year. The final dividend for 2025 is 5.0p per share, bringing the total 2025 dividend to 9.5p. The company also completed a £1bn bond repayment in October and a £200m interim share buyback programme.

For 2026, the company forecasts underlying operating profit between £4.0bn and £4.2bn and free cash flow between £3.6bn and £3.8bn. This free cash flow guidance includes a cash impact of £150m–£200m related to the supply chain.