London, February 16, 2026, 08:16 GMT — Regular session
- Rolls-Royce shares were little changed in early London trade, hovering near recent highs
- A BBC report said the UK is weighing a faster path to 3% of GDP on defence spending
- Investors are looking ahead to Rolls-Royce’s full-year results later this month
Rolls-Royce Holdings (RR.L) shares edged up about 0.1% to 1,272 pence in early trading on Monday, keeping close to a 52-week high after fresh headlines around UK defence spending. (Investing)
The stock has become a proxy for two themes investors keep coming back to: a jump in military budgets and a still-tight market for large aircraft engines and maintenance slots.
That matters now because the defence story is not just European politics theatre; it feeds order books, hiring plans and pricing power across the supply chain. Rolls-Royce sits in the middle of it, with a defence business alongside its civil aerospace engine franchise.
Britain is considering bringing forward the date by which it would spend 3% of economic output on defence, the BBC reported, just a year after it raised its targets. Under existing plans, Britain said it would lift annual defence spending to 2.5% of GDP by 2027 and aim for 3% in the next parliament, but aides to Prime Minister Keir Starmer are now looking at proposals to hit 3% by the end of the current parliament, Reuters reported. Starmer told the Munich Security Conference on Saturday that “it is clear that we are going to have to spend more faster”. (Reuters)
Rolls-Royce makes and services engines for widebody jets and sells power and propulsion systems used by armed forces, including naval applications. Long-cycle defence programmes can be slow to show up in quarterly numbers, but they can anchor cash flows for years.
Traders will also watch whether the defence debate lifts the broader UK aerospace and defence complex, where sentiment can turn quickly on any hint of bigger budgets or faster procurement.
In the near term, focus is shifting back to the earnings calendar. BAE Systems reports on Feb. 18 and Airbus follows a day later, Hargreaves Lansdown said, two readouts that can swing the mood across defence and aerospace. Hargreaves Lansdown equity research head Derren Nathan wrote that “the defence sector has been buoyed in 2026 by US plans for sharp increases in defence spending over the coming years.” (Hargreaves Lansdown)
But there’s an obvious downside scenario: politics sets targets and then the money arrives late, or not at all. Rolls-Royce is also exposed to the stop-start reality of civil aerospace production and any renewed disputes over engine durability, shop capacity or pricing.
For Rolls-Royce holders, the next hard catalyst is its full-year results on Feb. 26, when investors will look for guidance on cash generation and shareholder returns. The company has an interim share buyback programme of up to £200 million running from Jan. 2 and expected to complete no later than Feb. 24. (Rolls Royce)
