Rolls-Royce hikes guidance as it benefits from both the defense boom and AI data center buildout

Rolls-Royce is riding two of the biggest investment themes in global markets: the defense boom and the AI buildout.

The British engineering group on Thursday hiked its full-year profit and cash flow guidance after strong earnings for the first half of the year, benefiting from robust demand across its civil aerospace, defense and power systems businesses.

The FTSE 100 company posted underlying operating profit of £2.5 billion ($3.3 billion) for the first six months of the year, up 46% from a year earlier, while revenue rose over 24% to £11.3 billion.

Rolls-Royce said it now expects full-year underlying operating profit of between £4.7 billion and £4.9 billion, up from previous guidance for between £4 billion and £4.2 billion. It sees free cash flow of £3.8 billion to £4 billion, up from between £3.6 billion and £3.8 billion previously.

Rolls-Royce shares year-to-date The results underscore how Rolls-Royce is becoming a beneficiary of two of the biggest investment trends reshaping global markets: surging defense spending and the rapid expansion of AI-driven data centers.

Speaking exclusively to CNBC after the results, 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.

She also pointed to growing opportunities from higher defense spending, citing long-term commitments under the U.K.'s defense investment plan and NATO's push for greater military investment.

"We've had very positive initial conversations with the new [U.K.] government, and we absolutely support their focus on growth, defense, and advancing industrial manufacturing, and we look forward to supporting them in that and playing our role," McCabe said, adding that the defense investment plan provides certainty on funding plans to 2030 and beyond.

McCabe's comments highlight the company's broadening growth profile under CEO Tufan Erginbilgic's turnaround strategy.

While Rolls-Royce has traditionally been viewed as an aerospace manufacturer tied to the recovery in long-haul aviation, it is increasingly positioning itself as a supplier to both the AI infrastructure buildout through its power systems division and the global rearmament cycle.

"Our transformation continues to deliver," Erginbilgic said in a statement, adding that the company had "unlocked new growth opportunities across the Group" and built a more resilient and diversified portfolio.

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