Rolls-Royce Shares Soar on Buyback Announcement and Upbeat Outlook

Rolls-Royce (LON: RR.) shares surged approximately 7% Thursday following the release of its 2025 full-year results.

The report detailed significant financial progress, prompting the company to announce a multi-year share buyback program and upgraded mid-term financial targets.

Rolls-Royce shares opened at a new intraday high of 1,420p before pulling back.

The aerospace and engineering giant reported underlying operating profit of £3.5 billion, achieving a margin of 17.3%. Free cash flow reached £3.3 billion, bolstering the company's net cash balance to £1.9 billion as of December 31, 2025.

Looking ahead, Rolls-Royce anticipates an underlying operating profit between £4.0 billion and £4.2 billion and free cash flow of £3.6 billion to £3.8 billion for 2026. The company has also raised its mid-term targets for 2028, projecting underlying operating profit of £4.9 billion to £5.2 billion, an operating margin of 18% to 20%, free cash flow of £5.0 billion to £5.3 billion, and a return on capital of 23% to 26%.

Rolls-Royce is rewarding shareholders with a final dividend of 5.0p per share, bringing the total dividend for 2025 to 9.5p, representing a 32% payout ratio of underlying profit after tax.

Furthermore, the company has announced a substantial £7 billion to £9 billion multi-year share buyback program spanning 2026-2028, following the completion of a £1 billion share buyback in 2025. This buyback underscores management's confidence in the company's future prospects.

Tufan Erginbilgic, CEO, stated, “Our transformation continues with pace and intensity… With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025, all while we built the foundations for significant growth for years to come.”