Rolls-Royce shares hit record level as aero-engine demand overtakes tariff fears

The FTSE 100 engineering giant said the results showed continued success in the long-term transformation plan first laid out by the group in 2023, with its recent success helping to offset supply chain challenges and trade tariffs.

The firm, which has a key engineering base in Renfrewshire, revealed that underlying operating profits jumped by 50 per cent to £1.7 billion for the first half of 2025. Rolls-Royce raised its financial forecasts for the full year as a result, predicting underlying operating profits of between £3.1bn and £3.2bn this year. That represents a significant upgrade after previously pointing towards profits in the range of £2.7bn to £2.9bn.

The group, which makes engines used in Boeing and Airbus aircraft, said it was supported by a “strong” performance in its large engines business, as well as margin improvements on contracts.

It noted that underlying revenues in its civil aerospace arm grew by 17 per cent, with growth of 20 per cent in its power systems division. Bosses cheered the solid performance in the face of “an uncertain external environment, including continued supply chain challenges and tariffs”.

Rolls-Royce is expecting to fully offset the impact of announced US tariffs through mitigating actions and is also monitoring the potential indirect impact of weaker economic growth and trade tensions.

The firm also highlighted “some improvement” in its supply chain, resulting in improved availability for finished parts.

Chief executive Tufan Erginbilgic told investors: “Our multi-year transformation continues to deliver. Our actions led to strong first half-year results, despite the challenges of the supply chain and tariffs.

“We are continuing to expand the earnings and cash potential of Rolls-Royce. A strong start to the year gives us confidence to raise our guidance for 2025.”

Shares were about 9 per cent up at 1,079.5p each in late morning trading on Thursday.

Aarin Chiekrie, equity analyst at investment platform Hargreaves Lansdown, noted: “Rolls-Royce continues to soar above expectations, delivering yet another set of high-flying results and profit guidance upgrades. Revenues are being boosted by the upward trend in engine-flying hours, which are now cruising well above pre-pandemic levels.

“But that’s just one part of the puzzle. Layoffs, contract renegotiations, process changes and increased use of data to drive efficiencies have put Rolls on a much healthier platform. As a result, margins have moved much higher, helping to convert the increased flying hours and revenue into profits.”

Lale Akoner, global market analyst at eToro, added: “Rolls Royce’s latest results show a business that keeps on delivering.

“Civil aerospace is driving the numbers, with margin hitting 25 per cent, a level that would’ve seemed unrealistic two years ago. It’s not just more planes flying, it’s better contracts, higher prices, and fewer loss-making deals.

“But what matters more for the long-term story is what's happening outside aviation. Power systems, which supplies engines to data centres, saw nearly 90 per cent profit growth.”

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