Rolls-Royce is expanding its presence in the artificial intelligence infrastructure market through its power systems division, with leadership indicating that significant customer agreements with major data center operators are on the horizon. Chief Executive Tufan Erginbilgic stated during an analyst call that the company anticipates internal approval for a major hyperscaler framework agreement early the following week and is already accepting orders for data center applications intended for 2028.
The company has revised its growth expectations for the power generation segment upward, now targeting 25% annual revenue growth through 2030, an increase from the previous 20% target and substantially higher than the less than 10% growth rate currently being achieved. This projection reflects changing dynamics in how data centers source electricity, as operators increasingly require continuous on-site power generation due to grid connection constraints rather than relying solely on backup systems as in traditional applications.
Rolls-Royce reported strong operational performance in the first half of the year, with underlying operating profit of £2.5 billion, representing a 46% increase compared to the prior year period, and total revenue rising 24% to £11.3 billion. The company raised its full-year underlying operating profit guidance to a range of £4.7 billion to £4.9 billion from the previous guidance of £4 billion to £4.2 billion, while also increasing free cash flow expectations to £3.8 billion to £4 billion from £3.6 billion to £3.8 billion.
Beyond its data center power initiatives, Rolls-Royce is benefiting from elevated global defense expenditures. The defense segment achieved organic revenue growth of 17% and profit growth of 57% in the first half, while the power systems unit posted 28% organic revenue growth and 72% profit growth. Its civil aerospace division, which manufactures engines for large commercial aircraft, demonstrated 29% revenue growth and 31% profit growth during the period. Share price activity reflected investor confidence, with the stock trading 5.5% higher in midday trading as the broader FTSE 100 remained flat.
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