The Rolls-Royce share price climbed more than 5% on Thursday after the British engineering group reported a 46% surge in first-half underlying operating profit and raised its full-year guidance well above market expectations. The rally came as results revealed the company was benefiting from two major global spending trends: rising defense budgets and the rapid build-out of AI data centers .

How Strong Were the Results? A "Big Beat and Raise"

The engine maker flew past expectations on all key financial metrics. For the six months ending June 28, 2026, Rolls-Royce (RR) reported underlying revenue of £11.3 billion, representing a 26% increase from the previous year, easily surpassing the £10.3 billion consensus forecast .

The standout metric was underlying operating profit, which surged 46% to £2.5 billion, significantly ahead of analyst expectations of approximately £1.8 billion . Operating margin improved by over 3 percentage points to 22.5% .

What Drove the Rolls-Royce Share Price Jump?

The shares rose as high as 6% to 1,463 pence, approaching their all-time high . The scale of the upgrade to annual guidance provides the main catalyst: Rolls-Royce now expects full-year underlying operating profit of £4.7 billion to £4.9 billion—up from a previous range of £4.0-4.2 billion . Free cash flow guidance was also raised to £3.8-4.0 billion .

The scale of the beat can be attributed to exceptional performance across all three divisions :

• Civil Aerospace (25.3% margin) delivered a 31% profit increase, driven by higher aftermarket margins and the successful elimination of "aircraft on ground" issues .

• Defence (21.0% margin) saw profits soar 57%, supported by the UK's multi-year defence investment plan .

• Power Systems (20.3% margin) became a key growth story, with profits up 72% as demand for data center power solutions surged .

Profit Surge and AI Opportunities

The Power Systems division is rapidly emerging as a significant growth area. Rolls-Royce CFO Helen McCabe disclosed to CNBC that orders in the company's data center power business grew more than 50% during the first half of the year . As securing grid access becomes harder, operators are seeking on-site power solutions—creating a lucrative market for long-term service contracts .

CEO Tufan Erginbilgic confirmed the company is in advanced discussions with major hyperscalers, adding that "early next week, in investment committee, we are going to sign another big hyperscaler sort of deal" . The company has already revised its power generation revenue growth target to 25% per year out to 2030 .

Shareholder Returns Increase

Reflecting confidence in its cash generation, Rolls-Royce announced an interim dividend of 6.0 pence per share, up 33% from the previous year . The company has also completed £1.4 billion of its planned £2.5 billion share buyback for 2026 .