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Rolls-Royce is deepening its exposure to the AI infrastructure boom, with the British engineering group forecasting that continuous power systems could account for as much as one-fifth of its power-generation business by 2030 as data centers struggle to secure grid connections. CEO Tufan Erginbilgic said Thursday the company is already discussing power systems and small modular reactors with hyperscaler data center operators, and expects to seek internal approval for a major customer framework agreement. "Early next week, in [the] investment committee, we are going to sign another big hyperscaler sort of deal," Erginbilgic said in a call with analysts. "We are already taking orders for data centers for [2028]." Rolls-Royce is simultaneously benefiting from higher global defense spending, giving the company exposure to two of the largest investment cycles in international markets: the defense boom and the AI buildout. In power generation, Rolls-Royce is seeing increasing demand for both backup engines and gas engines for use as a prime power source for data centers.
As a result, it now expects 25% annual growth in power generation revenue to 2030, up from a target of 20% previously, and up from less than 10% today. Traditionally, Rolls-Royce sold mostly backup generators that sat idle until the electricity failed. Now, AI data centers increasingly want engines that generate electricity around the clock because they can't get connected to the grid. For Rolls-Royce, that means not only more engine sales but years of additional, high-margin maintenance work.
Beat-and-raise quarter
The company also hiked its full-year profit and cash flow guidance after strong earnings for the first half of the year, benefiting from robust demand across its civil aerospace, defense and power systems businesses. The FTSE 100 company posted underlying operating profit of £2.5 billion ($3.3 billion) for the first six months of the year, up 46% from a year earlier, while revenue rose over 24% to £11.3 billion. Rolls-Royce said it now expects full-year underlying operating profit of between £4.7 billion and £4.9 billion, up from previous guidance for between £4 billion and £4.2 billion. It sees free cash flow of £3.8 billion to £4 billion, up from between £3.6 billion and £3.8 billion previously.
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