Rolls-Royce Has Already 10x’d, And It Still Might Be Undervalued

Rolls-Royce has evolved into a high-margin industrial leader, shifting focus from luxury cars to civil aerospace, defense, and power systems. The core business model relies on "power by the hour" maintenance contracts for jet engines, creating recurring revenue streams that scale with global travel. Defense operations provide stability through multi-decade contracts for nuclear submarine propulsion and combat engines, bolstered by rising NATO spending. Additionally, the power systems division captures growth from the surging demand for AI-driven data center infrastructure. While the company faces risks from travel volatility and high fixed costs, it is projected to generate $15 billion in free cash flow by 2028. Future upside remains tied to the development of Small Modular Reactors, which offer significant long-term potential as energy security and carbon-free baseload power become critical global priorities.