Scottish Mortgage (LSE: SMT) delivers 27.4% NAV return as SpaceX nears IPO and AI buildout reshapes the portfolio

Scottish Mortgage Investment Trust PLC (LSE: SMT), the £16.5 billion Baillie Gifford flagship and FTSE 100 constituent, reported full-year results to 31 March 2026 showing a net asset value total return of 27.4% and a share price total return of 26.8%, comfortably ahead of the 18.0% from the FTSE All-World Index. The result was driven overwhelmingly by SpaceX, which expanded to more than 19% of assets after a sharp upward revaluation and which filed in April to go public, targeting a mid-June listing. The numbers land at a charged moment for the shares, which closed near 1,520 pence on 26 May at a fresh 52-week high, having pushed above the year-end NAV of 1,315.8 pence as the trust flipped from a multi-year buyback programme into issuing stock at a premium. For a vehicle whose five-year record still carries the scars of the 2022 growth drawdown, this is the strongest annual print in years, and it arrives with an unusually concentrated bet at its centre.

What did Scottish Mortgage actually report for the year to March 2026 and how strong was it?

The headline figures are unambiguous. Net asset value total return reached 27.4% on a fair value basis and 27.9% on a book value basis, with share price total return of 26.8%. Against the FTSE All-World Index return of 18.0%, Scottish Mortgage outperformed its reference benchmark by roughly nine percentage points in a single year, and it beat the global investment trust sector average of 16.8% by a wider margin still.

The reported financials carry the weight behind those percentages. Gains on investments came in at £3.15 billion for the year, against £1.27 billion the prior year, lifting net return after taxation to £3.10 billion from £1.22 billion. Net asset value per share rose to 1,282.0 pence at book value and 1,315.8 pence at fair value, up from 1,006.0 pence and 1,037.0 pence respectively a year earlier. The portfolio of investments held at fair value grew to £15.41 billion from £13.67 billion, and total net assets reached £13.82 billion.

The more important analytical point sits beneath the single-year number. The ten-year NAV total return of 435.2% against 233.9% for the index is the figure management wants shareholders to anchor on, precisely because the five-year return of 12.8% remains weak. That five-year figure still absorbs the brutal 2022 repricing of growth equities, and the board is explicit that performance should not be judged over twelve months. The divergence between a stellar one-year and three-year record and a mediocre five-year record tells you everything about how cyclical this strategy is, and why the manager keeps insisting on a decade-long lens.

Why has SpaceX become such a dominant position and what risk does that concentration create?

SpaceX was by far the largest contributor to returns, and at over 19% of assets it now represents a level of single-name concentration that is highly unusual even for a fund built around conviction. Management invested roughly £150 million in the company several years ago and has watched it compound into a position worth several billion pounds, an outcome the manager frames as the entire justification for the closed-end trust structure.

The strategic case has shifted well beyond rockets. Scottish Mortgage now describes SpaceX as a dual monopoly, the dominant global launch provider and an increasingly software-like connectivity utility through Starlink, which added more than 4.6 million customers in 2025 to reach nine million and expanded into thirty-five additional countries. The acquisition of EchoStar spectrum pushed the business toward direct-to-phone connectivity, a Pentagon contract for the Golden Dome missile defence programme deepened government dependence, and the acquisition of xAI added an artificial intelligence dimension the market is only starting to price. The manager goes further, arguing that orbital solar combined with reusable Starship launch could eventually position SpaceX at the intersection of launch, energy and AI compute.

The concentration cuts both ways, and the board says so plainly. A position of this size carries obvious volatility risk, and the planned mid-June listing introduces a specific near-term constraint. Existing holders including Scottish Mortgage will face a lock-up period during which shares cannot be sold, meaning the trust cannot crystallise gains at the point of listing even if the debut price spikes. The carrying value of the stake also becomes the subject of intense scrutiny once a public price exists. If SpaceX prices and trades meaningfully above its private mark, NAV rises again, but a weak debut would test the credibility of the valuation that has driven much of this year’s return. Investors are effectively underwriting a single private-to-public transition as a material swing factor for the whole portfolio.

How is the artificial intelligence buildout changing what Scottish Mortgage chooses to own?

The clearest strategic thread running through both manager reviews is positioning at the infrastructure layer of the AI buildout rather than at the application layer. The reasoning is that the major cloud platforms have more than tripled collective infrastructure spending since 2023, with the largest now committing well above $100 billion annually, and that the absolute level of investment is unlikely to fall for years even as growth rates moderate.

That thesis maps directly onto the portfolio. TSMC and ASML sit among the largest holdings as the manufacturing and lithography chokepoints through which AI demand must flow, and the trust trimmed ASML to recycle capital into NVIDIA on valuation grounds. New positions were initiated in AppLovin and MongoDB, while the private book added Anthropic, described as one of the most important AI companies in the world, alongside Chinese model developer MiniMax bought at its initial public offering. The framing matters for execution risk: management is explicitly betting on the picks and shovels of the buildout rather than trying to forecast which model or application ultimately wins, on the logic that compute demand runs through the same handful of suppliers regardless.

There is a sharp second-order consequence that the manager does not hide from. The same AI capability that lifts holdings like Shopify is compressing the valuations of traditional per-seat software, and the global software sector has shed roughly $2 trillion in market capitalisation over the past year. Scottish Mortgage argues the repricing has been indiscriminate and has skewed its own software exposure toward infrastructure names such as Databricks, Snowflake and Cloudflare that should benefit as agents generate more demand for data, security and compute, rather than human-facing applications that agents may disintermediate. Whether that distinction holds up is the central open question for a portfolio this exposed to the theme.

Which holdings dragged on performance and what does the China exposure signal about strategy?

The weakest area was China, and the manager is careful to attribute the pain to domestic competitive dynamics rather than tariffs. The starkest example was Meituan, which swung from substantial operating profit to a full-year loss after Alibaba and JD.com attacked its core food delivery business with aggressive subsidies, a war that cost the three companies collectively over $14 billion across two quarters. Management ties this to a broader phenomenon the Chinese call neijuan, or involution, in which well-capitalised firms compete margins to destruction in an economy where consumption is barely growing.

The instructive part is that Scottish Mortgage is leaning into the discomfort rather than retreating. It took one of the year’s largest new positions in battery maker CATL, added RedNote, and continues to hold ByteDance as its third-largest position, arguing the company trades in private markets at a meaningful discount to comparable US platforms despite Douyin’s dominance and the resolution of the TikTok US ownership question through the January 2026 joint venture. The fracturing of global commerce hit elsewhere too, with the trust exiting Wayfair entirely, reducing PDD over Temu’s tariff exposure, and adding to Hermès and defending Ferrari through brand-driven share price weakness.

The signal here is a deliberate willingness to own assets the market is pricing for geopolitical risk rather than business quality, on the bet that survivors of the Chinese competitive crucible emerge with cost structures that are extraordinarily hard to match. This is the same conviction-over-comfort posture that produced both the SpaceX win and the five-year drawdown. It is a feature of the strategy, not a deviation from it, and it is precisely why the experience of holding the trust remains volatile.

What do the dividend, gearing and the shift from buybacks to issuance reveal about capital discipline?

On capital management the picture is one of low cost and active balance-sheet work rather than income generation. Ongoing charges remain around 0.33% with no performance fee, and the cost of debt sits near 3.6% after refinancing actions during the year. Gearing eased from roughly 13% to about 11%, which management attributes to portfolio growth rather than debt reduction, leaving headroom against the 35% borrowing limit.

The dividend story is more about consistency than scale. Scottish Mortgage lifted the total dividend 4.3% to 4.57 pence per share, with a final dividend of 2.97 pence payable on 10 July 2026, extending its record to 43 consecutive years of increases and retaining its AIC Dividend Hero status. With revenue earnings per share of just 2.28 pence, the payout is plainly not the point of owning this trust, and the income is largely a token gesture toward a long-term holder base rather than a yield proposition.

The most telling capital signal is the discount-to-premium swing. The trust bought back 122.9 million shares during the year at a cost of £1.31 billion, yet the discount still widened modestly from around 9.0% to 9.5%, distorted by a sharp NAV jump on the final trading day. The decisive move came after the year end. With renewed investor interest pushing the shares to a premium, Scottish Mortgage reversed course and began issuing stock at a premium to NAV, reported at roughly 6.5%, placing millions of new shares in single sessions. That pivot from buybacks to issuance is the clearest market verdict in these results: demand has returned hard, and it is being driven by the SpaceX IPO anticipation rather than by the reported fundamentals alone.

What are the key takeaways from Scottish Mortgage’s full-year results for investors and the wider investment trust sector?

• Scottish Mortgage delivered a 27.4% NAV total return and 26.8% share price return for the year to March 2026, beating the FTSE All-World Index by around nine points, but the 12.8% five-year return shows the strategy remains highly cyclical and should be judged over a decade, not a year.
• SpaceX at over 19% of assets is now the defining swing factor for the entire portfolio, turning the trust into a partly leveraged bet on a single mid-June IPO, with a lock-up preventing the manager from selling into any debut spike.
• The fair value NAV of 1,315.8 pence is already below a share price near 1,520 pence, meaning new buyers at current levels are paying a premium to underlying assets in anticipation of further SpaceX revaluation, which carries clear downside if the listing disappoints.
• The reversal from a large buyback programme to issuing shares at a roughly 6.5% premium is the strongest demand signal in the results and a notable inflection for a trust that spent recent years defending a persistent discount.
• Positioning at the AI infrastructure layer through TSMC, ASML and NVIDIA is a deliberate bet on aggregate compute demand rather than on individual model or application winners, insulating the portfolio from the $2 trillion repricing hitting traditional software.
• The decision to add to Chinese assets including CATL, RedNote and ByteDance during a domestic profit war signals conviction that survivors of the neijuan dynamic will emerge with durable cost advantages, a stance that adds volatility rather than reducing it.
• Low ongoing charges near 0.33%, no performance fee and a 3.6% cost of debt keep the cost proposition competitive against both peers and private market vehicles, which remains central to the investment case.
• The 43-year dividend growth record and Dividend Hero status are reputational rather than material, given revenue earnings of just 2.28 pence per share, and income investors are not the target audience.
• For the wider sector, Scottish Mortgage’s swing from discount to premium and from buybacks to issuance suggests sentiment toward growth-heavy and private-asset trusts has turned sharply, with implications for peers still trading at wide discounts.
• The central risk for the year ahead is concentration and valuation, with the SpaceX listing acting as a binary catalyst that could either validate the carrying value and lift NAV further or expose the premium as overextended.