Are Rolls-Royce shares a ticking time bomb after a 95% gain in 2025?

Up 95% year to date and 860% over five years, it seems Rolls-Royce Holdings (LSE: RR.) shares can do no wrong.

But nothing can keep growing at this breakneck pace for ever. Some investors thought the run would come to an end in 2024, and they were wrong. They’ve been wrong again in 2025. But with the Rolls share price around 1,100p by mid-December, the cracks just might be starting to show.

Slipping back

Since a 52-week high in September, Rolls-Royce shares have declined nearly 8%. That’s not exactly a panic. And profit taking will almost certainly have played a part. But it lends support to those who think the rapid growth spell really is coming to an end.

Reasons for the optimism shown in 2025 seem clear. All three of Rolls-Royce’s main businesses look like they have a strong outlook for the next few years.

Civil aviation has been booming, relatively, compared to the Covid slowdown. Global conflict has driven up defence spending around the world. And Rolls’ power systems could have the timing just right with those small nuclear reactors as multiple countries show interest.

What’s in a valuation?

The thing is, there’s no secret in any of that. Everyone has a fair idea of how strong the future for the company could be. And investors have been pushing the price up in that knowledge. In short, much of the future potential is surely already built into today’s valuation.

While the company keeps beating expectations with each set of results, I can see the Rolls-Royce share price still enjoying solid support.

And the 2025 year is looking good so far. With November’s Q3 trading update, CEO Tufan Erginbilgic said the company is on track to meet its full-year targets. They include operating profit between Â£3.1bn and Â£3.2bn, and free cash flow between Â£3.0bn and Â£3.1bn. But he did talk of “continued supply chain challenges.” I think we can add US import tariffs to the list of things to keep an eye on.

Expecting more

Under Erginbilgic’s management, Rolls has consistently underpromised and overdelivered. That suggests great management. But it can also set things up for a fall… if the overdelivery fails to materialise one day.

I fear Rolls-Royce needs to keep performing at its absolute best to maintain its attraction for growth investors. And that really doesn’t leave much room for even a single disappointing quarter — even if it only misses by a fraction.

All companies will have tougher periods, and Rolls-Royce is no exception. It might not happen in 2026, or even for a few years. But I’m not seeing the safety margin I need to cope with any less-than-stellar future performance updates.

Long-term growth

Rolls-Royce is still a strong long-term growth candidate in my books. But investors might want to consider holding off for any possible dips in 2026. I reckon the chance is higher than it’s been for a few years.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.