Rolls-Royce Raises Profit Guidance, Says Another Major Data Center Power Deal With a Hyperscaler Is Days Away

Rolls-Royce says the AI data center boom is turning into one of its biggest growth engines, and the company just raised its financial targets to prove it.

The British engineering giant reported underlying operating profit of £2.5 billion ($3.3 billion) for the first half of the year, up 46% from a year earlier, according to CNBC. Revenue climbed more than 24% to £11.3 billion over the same period.

On the strength of that, Rolls-Royce raised its full-year profit guidance to a range of £4.7 billion to £4.9 billion, up from a prior target of £4 billion to £4.2 billion. Free cash flow guidance rose too, to between £3.8 billion and £4 billion.

Another Big Deal Coming Next Week

CEO Tufan Erginbilgic told analysts on a call Thursday that a major new customer agreement with a hyperscaler is close to done. "Early next week, in the investment committee, we are going to sign another big hyperscaler sort of deal," he said, according to CNBC. He added the company is "already taking orders for data centers for 2028."

Erginbilgic did not name the hyperscaler on the call, and Rolls-Royce has not issued a separate statement identifying the counterparty. That means the deal is not yet finalized as of Thursday, July 30, and the specific terms remain unconfirmed.

Why Data Centers Need Rolls-Royce Engines

The core shift here is about the power grid, not just AI hype. Data center operators building out AI computing capacity face a key constraint: they cannot get connected to the power grid fast enough to meet demand.

That's pushing them toward buying engines that generate power on-site, continuously, rather than relying on the grid at all. Rolls-Royce historically sold backup generators that sat idle until a blackout hit. Now hyperscalers want engines running around the clock as a primary power source.

Chief Financial Officer Helen McCabe told CNBC that orders in the company's data center power business grew more than 50% in the first half of the year, driven by operators seeking both backup and on-site power amid grid connection bottlenecks.

Rolls-Royce is now projecting that continuous power systems could make up as much as one-fifth of its entire power-generation business by 2030. The company raised its long-term revenue growth target for that division to 25% annually through 2030, up from a prior target of 20%, and up from less than 10% currently.

Two Booms at Once

Rolls-Royce isn't just riding the AI wave. It's also benefiting from higher global defense spending, giving it exposure to what CNBC described as two of the largest investment cycles in international markets right now: the defense buildup and the AI infrastructure race. The company's civil aerospace, defense, and power systems units all posted strong first-half results.

On top of engines and gas turbines, Rolls-Royce is also in active discussions with hyperscalers about small modular reactors, according to Erginbilgic, positioning the company for a longer-term bet on nuclear power for data centers beyond the current engine and turbine orders.

Market Reaction

Investors responded immediately. Rolls-Royce shares rose as much as 6% Thursday and were trading 5.5% higher by midday in London, while the broader FTSE 100 index was roughly flat and the pan-European Stoxx 600 was up 0.4%.

The stock is now up more than 1,300% over the past five years and 21% year-to-date, a run that reflects both Erginbilgic's broader turnaround of the company's core aerospace and defense businesses and the newer bet on data center power.

What's Unresolved

The hyperscaler deal Erginbilgic previewed has not been signed. It still needs to clear Rolls-Royce's internal investment committee, expected sometime in the first week of August based on his "early next week" comment. Until that happens, there's no contract value, no named customer, and no confirmed scope.

That leaves an open question for investors: how much of Rolls-Royce's raised 25% growth target for power generation depends on deals like this one actually closing on schedule, versus how much is already locked in from existing 2028 order commitments. The company has not broken out what share of its power-generation backlog comes from data centers specifically versus its traditional industrial and marine customers.