Rolls-Royce Shares Surge as Hydrogen Engine Test and Nuclear Contracts Bolster Strong Start to 2026

Rolls-Royce hits 52-week high as civil aerospace rebounds, defence orders surge, Power Systems backlog hits record £7.3B, and hydrogen engine test marks aviation milestone.

Rolls-Royce has delivered a multi-pronged assault on the year's targets, combining a record order book, a landmark hydrogen engine test, and fresh nuclear contracts that have sent its shares racing toward a 52-week high. The stock jumped more than 9% in a single session to €15.21, extending a twelve-month gain of nearly 65% and underscoring investor confidence in the group's operational momentum.

The civil aerospace division, the engine of Rolls-Royce's earnings, saw large engine flying hours — the critical metric for aftermarket revenue — climb 5% in the first quarter, reaching 115% of pre-pandemic 2019 levels. New large engine deliveries rose 18% over the same period. Despite flight cancellations in the Middle East, including those affecting Lufthansa, management does not expect any lasting damage to the bottom line, pointing to compensating demand from other regions.

Defence and Power Systems Drive Record Backlog

The defence business is firing on all cylinders, with equipment deliveries up more than 20% in the first quarter. A string of recent contract wins underscores the division's strength: EJ200 engines for 20 Turkish Eurofighter Typhoons, MT30 gas turbines for 11 Australian frigates, 350 mtu engines for Boxer vehicles, and 200 PowerPacks for Puma platforms. The group also opened a metallic 3D-printing facility in Bristol, backed by the UK Ministry of Defence and geared toward the GCAP combat aircraft programme.

Even more striking is the performance of the Power Systems unit, which is riding the wave of insatiable demand from data centres. Orders for gas and diesel generators surged roughly 50% year-on-year, pushing the division's order backlog to a record £7.3 billion. The group's overall guidance for 2026 remains unchanged: operating profit between £4.0 billion and £4.2 billion, with free cash flow rising to £3.6-£3.8 billion from £3.3 billion last year.

Hydrogen Milestone and Nuclear Progress

On the technology front, Rolls-Royce and easyJet have completed a full-load ground test of a modified Pearl 15 engine running on 100% hydrogen — a significant step toward decarbonising aviation. The test marks a tangible breakthrough in the industry's search for zero-emission propulsion.

In the nuclear arena, the company has secured a contract with Great British Energy to begin design work for three small modular reactor (SMR) units at Wylfa in North Wales. Rolls-Royce claims to be the only European supplier with multiple contractual commitments for SMRs, including three units in Wales and six in the Czech Republic. However, management cautions that meaningful revenue from this segment is unlikely before 2030.

Shareholder Returns Accelerate

The group's cash pile is increasingly flowing back to shareholders. Under the current buyback programme, management has already repurchased more than £750 million worth of shares this year. A final dividend of 5.0 pence per share for the past financial year is up for approval at the annual general meeting, with payment scheduled for June. For 2026, analysts expect a dividend of 10 pence per share.

The stock's latest surge to €15.21 has brought it within striking distance of its February high of around €15.92. Technical analysts identify support at roughly 1,093 pence and the next resistance level at 1,322 pence. The consensus from 19 analyst ratings points to an average price target of approximately 1,399 pence. The next major catalyst will be the half-year results due in July 2026, which will test whether the group can indeed offset geopolitical disruptions as confidently as it has signalled.