Rolls-Royce: Strong Aviation, AI, And Energy Growth Make It A Buy

Rolls-Royce delivered robust H1 2026 results, with double-digit revenue growth, margin expansion, and raised full-year guidance across all divisions. 2026 operating profit guidance was lifted to £4.7-4.9 billion and free cash flow to £3.8–£4.0 billion, nearing 2028 mid-term targets. Operational improvements in civil aerospace, defense, and power systems are embedding durable growth, with strengthened contract economics and a multiyear order book. I downgrade Rolls-Royce from strong buy to buy as valuation approaches peer levels, though long-term cash flow and shareholder returns remain compelling.