Rolls-Royce Holdings PLC

US stock indexes ended the week higher as a global rally in semiconductor stocks and renewed optimism over the artificial intelligence trade lifted investor sentiment. Out of the 158 S&P 500 companies that reported earnings this week, 132 beat EPS estimates and 123 surpassed revenue expectations. The Federal Reserve held interest rates steady for the fifth consecutive meeting, while crude oil prices pulled back toward $85 per barrel following a pause in military escalation between the US and Iran. European equities ended the week 0.7% higher, with the Eurozone seeing stronger-than-expected economic growth in the second quarter but inflation remaining above the European Central Bank's target. The Bank of England kept interest rates unchanged, and the Bank of Japan held its key short-term rate at 1.0%, the highest since September 1995. In corporate news, Porsche plans to cut around one in five jobs by 2035, Deutsche Bank announced a new €500 million stock buyback, UBS unveiled a $3 billion share repurchase program, and Rolls-Royce raised its full-year profit forecast after a 46% jump in first-half operating profit. China's business activity unexpectedly contracted across both manufacturing and non-manufacturing sectors in July 2026, while an earthquake with a preliminary magnitude of 7.1 struck Japan's southern Kumamoto Prefecture.

The London stock market closed slightly lower on Thursday after the Bank of England voted to hold interest rates at 3.75%, while corporate earnings were mixed. The FTSE 100 index closed at 10,897.27 points, down 11.14 points or 0.10%, after hitting an all-time high during the day before weakening late in the session. Rolls-Royce shares surged 6% after raising its full-year earnings forecast well above market expectations, and Mondi shares soared 10.9%, their biggest one-day gain since August 2022, following its first-half results, pushing the FTSE 350 general industrials index to its highest level since March 2025. Meanwhile, Rentokil shares tumbled 20.6% after warning that its North American business remains weak.

London's FTSE 100 Index reached new record intraday highs, touching 10,979.24 on Thursday and poised to close above the previous closing peak of 10,910.55 set on February 27. The index has recovered from initial losses triggered by the US and Israeli strikes on Iran on February 28, buoyed by strong results from energy and defence heavyweights. Rolls-Royce shares rose 6% after an earnings guidance upgrade, while BAE Systems gained 2% on a higher full-year outlook, and Shell posted better-than-expected second quarter results. Research director Kathleen Brooks of XTB noted the FTSE 100 is up 4.5% over the past month, with its mix of energy, defence, and consumer staples proving attractive amid a rotation away from global tech names. In contrast, Rentokil Initial saw its shares plunge 21% after warning of weaker North American residential demand.

Rolls-Royce Holdings raised its full-year 2026 guidance after reporting a 46% jump in first-half group operating profit to GBP2.5 billion on revenue of GBP11.3 billion, up 26% year-over-year. The group operating margin widened to 22.5% from 19.4% a year earlier, while free cash flow rose 24% to GBP2.0 billion. The company now expects underlying operating profit of GBP4.7 billion to GBP4.9 billion and free cash flow of GBP3.8 billion to GBP4.0 billion for the full year, driven by higher long-term service agreement margins, increased contract catch-ups in Civil Aerospace, stronger power generation profitability, and higher Defence aftermarket growth. Civil Aerospace operating profit climbed 31% to GBP1.6 billion with a margin of 25.3%, as large engine deliveries rose almost 30% to 157 units and flying hours reached 113% of 2019 levels. Defence operating profit surged nearly 60% to GBP522 million with a margin of 21.0%, while Power Systems operating profit jumped 72% to GBP528 million with a margin of 20.3%, fueled by data-centre demand that is expected to drive 25% annual growth in power generation original equipment revenues through 2030. The company declared an interim dividend of 6.0 pence per share and remains on track to buy back GBP2.5 billion of shares in 2026, though it flagged a GBP150 million to GBP200 million cash headwind from supply-chain cost inflation and cautioned that the elevated level of contract catch-ups in Civil Aerospace will not be sustained in the second half.

Rolls-Royce reported a 46% jump in first-half underlying operating profit to £2.5 billion and raised its full-year guidance, driven by strong demand across civil aerospace, defense, and power systems including data centers. Revenue rose 24% to £11.3 billion, while the full-year underlying operating profit target was lifted to a range of £4.7 billion to £4.9 billion, up from £4 billion to £4.2 billion, with a new free cash flow forecast of £3.8 billion to £4 billion. The defense unit delivered a 17% organic revenue gain and a 57% profit surge, and power systems, which supplies engines for data centers, grew organic revenue 28% and profits 72%. CEO Tufan Erginbilgic said the company is set to sign another major hyperscaler deal and is already taking data center orders for 2028, while CFO Helen McCabe disclosed that the data center power order book expanded by more than half in the first six months. Civil aerospace, the largest segment, grew revenue 29% and profits 31%, and Rolls-Royce stock rose as much as 6% on Thursday.

BAE Systems and Rolls-Royce have upgraded their annual profit outlooks after reporting strong half-year results, driven by higher global defence spending. Rolls-Royce now expects underlying operating profits of £4.7 billion to £4.9 billion for 2026, up from previous guidance of £4 billion to £4.2 billion, after underlying earnings surged 46% to £2.53 billion in the first half on revenues of £11.28 billion. BAE Systems hiked its 2026 underlying earnings growth forecast to 10% to 12% from 9% to 11%, with half-year underlying earnings up 11% and pre-tax profits rising to £1.28 billion. Both companies are benefiting from increased defence budgets amid global conflicts, with Rolls-Royce also seeing higher civil aerospace demand and AI data centre growth. The sector has received a further boost from the appointment of former defence secretary John Healey as Britain's new Chancellor, though BAE's chief executive recently warned that UK defence spending still falls short of what is needed.

Quantinuum, Rolls-Royce, Riverlane, and the University of Edinburgh's Edinburgh Parallel Computing Centre have agreed to explore the use of quantum computing in industrial design and simulation. The multi-year collaboration will study whether quantum computers can work alongside supercomputers to improve complex fluid simulations used in gas turbine design. Quantinuum will provide access to its quantum systems and software, while Rolls-Royce will provide industrial use cases. Riverlane will contribute expertise in correcting quantum computing errors, and EPCC will bring supercomputing expertise. The partners plan to test parts of quantum algorithms on Quantinuum's Helios computer and assess how they could be used on future systems.

The global aircraft turbofan engine market is projected to grow from USD 112.58 billion in 2025 to USD 186.19 billion by 2035, at a compound annual growth rate of 5.16%. Growth is driven by rising aircraft deliveries, fleet modernization, and demand for fuel-efficient, low-emission engines. North America led the market with a 36.54% share in 2025, while Asia Pacific is expected to be the fastest-growing region. Key players including GE Aerospace, Pratt & Whitney, Rolls-Royce, and Safran collectively hold around 90% of the market. High bypass turbofan engines dominated with a 78% share, and the commercial aviation segment accounted for 65.94% of revenue.

Bank of America predicts the United States could face a major electricity shortfall of 100 gigawatts or more by 2030, driven by surging demand from AI data centers. After decades of flat electricity demand, the rapid expansion of power-intensive data centers is straining a grid already under pressure, with energy needs in 2025 and 2026 already outpacing expectations. The crunch could benefit natural gas turbine makers like GE Vernova, Eaton, and Emerson, but those turbines are sold out through 2030, forcing companies to turn to gas reciprocating engines from Rolls-Royce, Inneo Group, and Caterpillar as behind-the-meter solutions.

Rolls-Royce Holdings has refreshed its board with new directors from major global aerospace and energy companies and agreed a partnership with Bombardier to deploy an advanced engine vibration and health monitoring unit on Pearl 15 engines. The board changes and the Bombardier collaboration focus on leadership depth and next-generation engine analytics. The company's stock has gained 23.2% year to date, trading around £14.752, with a 15.2% rise over the past month and 55.9% over the past year. These moves highlight Rolls-Royce's emphasis on governance depth and data-centric engine support, aligning with growing interest in intelligent aircraft systems and sustained UK defence spending.

The UK government has unveiled a £15 billion (approximately $20 billion) boost to its defense budget over the next four years as part of the Defence Investment Plan, lifting annual defense spending to £79.1 billion, or 2.7% of GDP, by 2029. Prime Minister Keir Starmer's announcement sent major UK defense stocks higher on July 1, with BAE Systems and Rolls-Royce seen as primary beneficiaries. BAE Systems ended 2025 with a record backlog of £83.6 billion and 10% year-over-year sales growth, while Rolls-Royce's defense arm had a £17.4 billion order backlog and 8% underlying revenue growth. The plan allocates over £5 billion to a drone transformation and a shift toward autonomous systems, AI, and cyber capabilities, with total cumulative spending under the plan reaching nearly £300 billion by the end of the decade. Three defense ETFs with exposure to UK contractors are in focus: the Global X Defense Tech ETF, the Themes Transatlantic Defense ETF, and the Tema International Defense ETF.

Bombardier and Rolls-Royce have launched an aircraft health monitoring program for the Bombardier Global 5500 and 6500 aircraft. The program combines Bombardier's Smart Link Plus data-collection system with Rolls-Royce's new engine vibration and health-monitoring unit. It provides access to thousands of engine performance parameters with high data quality, offers early warning indications to prevent flight disruptions, and monitors Line Replaceable Units. Anthony Cox, Vice President of Customer Support at Bombardier, called the service a first in business aviation, emphasizing the close collaboration between the two companies.

Rolls-Royce has signed trilateral Memorandums of Cooperation with the UK National Nuclear Laboratory and the Japan Atomic Energy Agency to accelerate high-temperature gas-cooled reactor designs and next-generation fuel. The company was also selected by Videberg Kraft, a partnership involving state-owned utility Vattenfall, to deliver three small modular reactors for Sweden's first new nuclear power plant in more than four decades. Separately, Jacobs was awarded a contract by Great British Energy – Nuclear to provide environmental baseline studies for future UK nuclear development at the Oldbury site in South Gloucestershire, working with subconsultants AtkinsRéalis and AECOM. These developments highlight how UK nuclear capabilities are converting policy support into revenue opportunities, with Rolls-Royce now holding contractual commitments across Europe and Jacobs leveraging over 60 years of nuclear lifecycle experience.

The global data center generators market is projected to grow from USD 8.57 billion in 2026 to USD 9.79 billion in 2031 at a CAGR of 2.7%, according to a new report by MarketsandMarkets. North America is expected to hold the largest market share, while the above 3 MW generator segment is forecast to grow at the highest CAGR of 5.4%. Diesel generators are estimated to account for USD 5,789.6 million in 2026, and bi-fuel generators are anticipated to see the fastest growth due to emission-reduction pressures. Key drivers include the expansion of edge computing, AI-driven data centers, and the shift toward hydrogen-ready and hybrid power solutions. Leading vendors such as Caterpillar, Cummins, Rolls-Royce, Generac Power Systems, and Kohler Energy are expanding capacity and developing next-generation technologies for hyperscale and colocation facilities.