Rolls-Royce Power Systems
The 116-year-old engine maker on Lake Constance that became one of the biggest industrial winners of the AI boom.
Every large data center needs a way to keep running when the grid fails. A hyperscale facility training AI models cannot afford even a brief outage, so it sits on rows of diesel and gas generators that can take over within seconds. Many of those generators, both in the United States and elsewhere, are built by a company in Friedrichshafen, a town of 63,000 people on the German shore of Lake Constance. The company is Rolls-Royce Power Systems, and it sells its engines under the brand mtu.
The name causes confusion, so it is worth clearing up immediately. This is not MTU Aero Engines, the Munich jet-engine company (which I covered a few weeks back). It is not Rolls-Royce cars, which belong to BMW. It is not the Rolls-Royce civil aerospace business in Britain that makes turbines for wide-body aircraft. Rolls-Royce Power Systems is a wholly owned subsidiary of the British Rolls-Royce group, based in Germany, and it makes large diesel and gas engines up to around 10,000 kilowatts, complete propulsion systems for ships, and backup power systems for buildings and data centers.
The company had a record year in 2025. Revenue rose 19% to €5.72 billion, operating profit reached €995 million, and the order intake climbed to €7.14 billion. It employs more than 10,000 people, about 5,000 of them in Friedrichshafen. Two markets are driving the growth: data centers and defence.
The first is the data center boom. Operators are building data centers as quickly as power infrastructure allows, and every one requires backup generation sized to the entire load. mtu is one of the three largest suppliers of this equipment in the world, with more than 10 gigawatts of its generators installed, and it says its systems back up more than a quarter of US data centers. Backup power for data centers grew 46% in 2024. In the first half of 2025, data center orders rose 85% against the same period a year earlier. The company is investing around €100 million to expand two US plants and build a new assembly facility in Friedrichshafen for the next generation of its Series 4000 engine, scheduled to enter production in 2028.
The second force is European rearmament. mtu makes the engine for the Leopard 2 tank, a 1,500-horsepower diesel, and engines for infantry fighting vehicles, naval corvettes, frigates and submarines. In December 2025 it received an order from the tank maker KNDS for more than 300 Leopard 2 engines, destined for Germany, Lithuania, Sweden, the Netherlands and the Czech Republic. Government business made up about a quarter of the division’s revenue in 2024. The engine that powers a Leopard 2 tank and the generator that keeps a data center online are built on closely related engineering.
The company’s origins lie in one of Germany’s oldest industrial clusters. It was founded in 1909 by Wilhelm and Karl Maybach to build engines for Count Zeppelin’s airships, in the same town where the Zeppelins were designed and flown. The Maybach works later built luxury cars and, in wartime, tank engines. The Zeppelin Foundation still controls ZF Friedrichshafen, the giant automotive-parts maker that is the region’s largest employer, and the same industrial ecosystem produced Dornier aircraft, now part of Airbus. Friedrichshafen is one of the densest concentrations of engineering in Germany, and much of it grew out of the Zeppelin industry.
The harder question for the company is what happens to a maker of combustion engines as the world tries to stop burning fuel. Its strategy is to separate the engine from the fuel it runs on. Many of its engines are already certified to run on HVO, a diesel substitute made from waste fats and oils that cuts carbon emissions by up to 90%. It is developing engines that run on hydrogen and on methanol, and it ran a large high-speed marine engine on pure methanol for the first time in October 2025. Its stated target is to cut greenhouse-gas emissions 35% by 2030 against a 2019 baseline. Whether combustion survives the transition in this form, or gives way to batteries and fuel cells the company also sells, is unresolved. For now the diesel business is growing faster than the alternatives to it.
The demand for AI computing is usually described in terms of chips and software, but the binding physical constraint increasingly sits upstream, in electricity and the equipment that delivers it reliably. A data center is only as available as its backup power. The AI boom has quietly become a boom in large industrial engines.
The first engines left the factory for Zeppelin airships. The newest leave it for hyperscale data centers.
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