The FTSE 100-listed company reported an underlying operating profit of £2.5 billion ($3.3 billion) for the first six months of the year, representing a 46% increase compared with the same period last year. Revenue also recorded significant growth, climbing more than 24% to £11.3 billion, underscoring strong demand across its core operations.
Buoyed by the stronger-than-expected performance, Rolls-Royce raised its full-year earnings forecast. The company now expects underlying operating profit to reach between £4.7 billion and £4.9 billion, an increase from its earlier guidance of £4 billion to £4.2 billion.
It also upgraded its free cash flow expectations, projecting between £3.8 billion and £4 billion, compared with the previous forecast of £3.6 billion to £3.8 billion.
Investors responded positively to the announcement, with Rolls-Royce shares climbing as much as 6% in early trading before settling about 3.6% higher.
The latest results highlight how Rolls-Royce is increasingly benefiting from two major global investment themes reshaping the industrial sector: rising defense expenditure and the rapid expansion of artificial intelligence infrastructure.
The growing adoption of AI has led to a surge in demand for data centers, which require reliable backup and on-site power systems to support uninterrupted operations. Rolls-Royce's power systems division has emerged as a key beneficiary of this trend, particularly as electricity grid constraints continue to challenge operators worldwide.
Speaking exclusively to CNBC following the earnings announcement, Chief Financial Officer Helen McCabe said, "orders in the company’s data center power business grew more than 50% in the first half of the year as operators increasingly sought backup and on-site power solutions amid grid constraints."
McCabe also highlighted the company's expanding opportunities in the defense sector, pointing to increased military spending by Western governments.
She said there are growing prospects driven by "long-term commitments under the U.K.’s defense investment plan and NATO’s push for greater military investment."
The improved outlook reinforces investor confidence that Rolls-Royce is well-positioned to capitalize on long-term growth opportunities across commercial aviation, defense, and the rapidly evolving AI-powered digital infrastructure market.