Rocket Lab (RKLB): Q1 2025 Earnings Review

Yesterday, Rocket Lab (RKLB) released its Q1 2025 results.

In this article, I’ll break down everything you need to know about the Earnings Report.

Financial Highlights

• Revenue of $122.6M vs. $121.4M est. (up 32.1%)

Launch services revenue increased by 8.8% YoY
Space Systems revenue increased by 44.8% YoY

• Gross margin of 28.8% vs. 26.1% YoY (above the company’s guidance of 25-27%)

Launch services gross margin declined from 25.7% to 20.3% YoY this quarter, but this was more than offset by the increase from 26.1% to 28.8% in the Space Systems segment, which accounts for over 70% of revenue. The decrease in launch services gross margin was due to a slight step-down in the average selling price (ASP) of Electron, but it is expected to start reverting next quarter, with a material improvement expected throughout the year. Importantly, the main factor driving launch margins is cadence, which is expected to increase significantly in the second half of the year.

“We expect to continually expand our gross margins for the business as we progress through 2025. This will likely be more pronounced on the launch side than on the space systems side.”

“Our current backlog for Electron and HASTE continues to support an increasing ASP, with some variability quarterly tied to volume purchase commitments, launch location, and mission assurance requirements. Although variable QoQ, we expect ASP for the calendar year 2025 to materially expand compared to 2024, with continued gross margin expansion.”

Importantly, Electron’s target gross margins are in the 40s, which should be achieved as the company reaches a cadence of 2 launches per month (or 6 per quarter). With expectations for 20+ launches this year, Rocket Lab is getting closer to that goal.

• Non-GAAP EPS of $(0.12) vs. $(0.09) est.

• Adj. EBITDA of $(30M) vs. $(33.6M) est.

• Total Backlog of $1.067B, up 5.1% YoY and flat QoQ

“While overall backlog growth has been modest, launch backlog nearly doubled YoY with strong underlying trends as we convert a very strong pipeline of Neutron, Electron, and HASTE opportunities. Space systems bookings remain lumpy, given the timing of increasingly larger, needle-moving customer program opportunities, but remain at a healthy level despite the step-up in revenue run rate over the last few quarters. We continue to cultivate a healthy pipeline, including multi-launch deals and large satellite manufacturing contracts, which, as mentioned earlier, can create lumpiness in backlog growth due to the size and complexity of the opportunities. Relatedly, in Pete's earlier comments, he referenced ramping up to some very large and strategic procurement programs, including the significant NSSL program and several multibillion-dollar hypersonic programs domestically and abroad, which now set the stage for exciting backlog-expanding task order bidding. Getting ramped up was the required milestone to unlock this potential, so we’re very excited about what’s to come.”

Guidance:

• Q2 2025 Revenue of $130-140M vs. $137.5M est.

• Q2 2025 GAAP Gross margin of 30-32%, up from 28.8% QoQ

• Q2 2025 Adj. EBITDA of $(28-30M) vs. $(20.5M) est.

Starting June 1, the parent company of Rocket Lab will be named Rocket Lab Corporation, while Rocket Lab USA will become a subsidiary.

The newly formed Rocket Lab Corporation will replace Rocket Lab USA Inc. as the listed entity on NASDAQ, with no change to the ticker symbol or shareholder rights. This structural shift is designed to enhance operational efficiency, particularly around sensitive national security contracts, and follows the company’s entry into Europe via the recently announced acquisition of Mynaric.

Investment Thesis Summarized

Before diving more deeply into the company’s quarter, let me make one thing clear.

If you're worried about Rocket Lab’s quarterly results, you don’t fully understand the investment thesis. It’s crucial to understand the current context, which is explored in my Deep Dive on the company.

Here’s a brief overview:

Rocket Lab is in the process of finalizing its end-to-end space ecosystem, with the ultimate goal of developing and operating its own constellations (which will provide high-margin services from orbit, similar to what SpaceX is doing with Starlink). Neutron is the last piece of the puzzle. Rocket Lab is already the undisputed leader in small launches and has capabilities across almost every part of the space systems supply chain — from simple components like reaction wheels and solar panels to spacecraft development, including the software needed to operate them from Earth. Importantly, the company is fully vertically integrated. The only thing left for Rocket Lab to begin building its constellations at cost and without the delays that other companies face is a medium launch vehicle (Neutron), which is now closer than ever to its first test flight.

The current financials are skewed by R&D spending, but those costs will significantly decrease as the company gets closer to the launch. Operating expenses are increasing due to Neutron’s development, but also because the company is already purchasing some of the components it will need to scale Neutron’s cadence after the test flights are completed. Additionally, investments are being made in rocket reusability (e.g., in the ocean landing platform). This shows the long-term mindset of Rocket Lab’s management, which doesn’t mind missing quarterly estimates if it means preparing for future growth (some of these components could take 12 months to arrive, which is why Rocket Lab is purchasing them now rather than later).

This isn’t anything new. If you’re a shareholder, you should already be aware of this. It’s also important to note that these elevated levels of cash burn will continue throughout the year as the company gets closer to Neutron’s first flight. After that, things will moderate, and the financials will quickly shift to healthier levels.

Rocket Lab is laying the groundwork to build very high-margin business segments for the future, so drawing conclusions from its current financials doesn’t make sense. Investors who don’t understand the context may miss the bigger picture. The most important factor the market is focused on right now is Neutron's development, as it will unlock the company's true potential.

“Keep in mind how every milestone and every mission brings us closer to that lucrative piece of the space value chain.”

The company ended Q1 2025 with $517M in liquidity. The sequential increase in cash and cash equivalents is due to the ATM equity offering announced earlier in the quarter, which generated $92.8M in gross proceeds by quarter-end. These funds are intended to fuel growth, including future acquisitions like Mynaric, along with general corporate purposes.

Let’s now look at updates in each part of the ecosystem.

Electron & HASTE

Rocket Lab’s Electron continues to reinforce its dominance as the world’s leading small launch vehicle, completing five missions in just six and a half weeks during the quarter and booking eight new Electron and HASTE missions. This cadence not only showcases operational maturity but also highlights Rocket Lab’s ability to meet customer timelines with precision. Looking ahead, the company is set to launch a mission for IQPS next weekend — marking the start of six back-to-back Electron launches from Launch Complex 1.

Electron’s reliability may seem routine today, but management emphasized that it is the result of a decade of disciplined execution, smart capital deployment, and technical excellence. As the most frequently flown American small launch vehicle, Electron has become the go-to platform for commercial small satellite operators, solidifying Rocket Lab’s leadership in the segment. The company commands the majority share of U.S. commercial small launches, setting a strong foundation as it prepares to scale into medium-lift with Neutron.

Rocket Lab is also expanding the Electron platform through HASTE (Hypersonic Accelerator Suborbital Test Electron), a suborbital variant tailored for defense customers. Demand for hypersonic testing is growing rapidly, and HASTE has emerged as a key enabler. The vehicle has now been selected for seven missions under the Department of Defense’s MACH-TB program via Kratos, making Rocket Lab one of the most prolific commercial providers supporting U.S. hypersonics. International traction is also building: both the U.S. and U.K. governments have selected HASTE to support sovereign hypersonic development through multibillion-dollar defense initiatives. This marks HASTE’s first international deployment and is a strategic milestone as Rocket Lab expands its presence in defense-oriented launch services.

Together, Electron and HASTE exemplify Rocket Lab’s ability to scale a reliable launch system across both commercial and national security domains.

Neutron

Momentum is clearly building for Rocket Lab’s Neutron vehicle, as the company reported key technical and commercial milestones that reinforce its emergence as a serious contender in the medium-lift market. Most notably, Neutron was selected for the U.S. Department of Defense’s prestigious National Security Space Launch (NSSL) program — a major milestone for Rocket Lab. As the only publicly traded company ever onboarded to NSSL, Rocket Lab now joins an elite group of providers capable of flying the Pentagon’s most critical national security payloads. The company has already received a $5M task order tied to a mission assurance showcase and has held kickoff meetings with key U.S. government stakeholders.

With NSSL Phase 3 Lane 1 offering up to $5.6B in task orders through 2029, Rocket Lab is now positioned to compete directly with legacy aerospace players — exactly the kind of disruptive competition defense agencies have called for. Neutron’s design — optimized for reusability, high launch cadence, and point-to-point cargo delivery — is also gaining traction beyond NSSL.

Recently, Rocket Lab secured a new contract with the U.S. Air Force Research Lab (AFRL) to fly a multi-manifest return-to-Earth mission supporting rapid logistics — a strong endorsement of Neutron’s reusability and versatility.

This development is VERY important. While building Neutron is a major technical feat in itself, its reusability is what could turn it into a highly profitable long-term investment. The new AFRL contract signals that Rocket Lab could demonstrate Neutron’s reusability by as early as 2026 — a pivotal capability that would allow the company to scale its cadence not only for customers, but also for its own satellite constellation deployments.

On the technical front, Rocket Lab successfully qualified Neutron’s second stage, completing a rigorous campaign that included full software integration, hardware testing, and structural proofing to 125% of design limits. Over 1.3M pounds of force were applied across its carbon composite structure — which passed testing "with flying colours" — and the stage is now in final assembly ahead of engine testing.

Progress on Stage 1 is also moving forward. The upper module — housing complex systems such as canards, interstage, actuators, and avionics — has completed major subsystem integration and passed preliminary testing. Hardware shipments from Baltimore to Launch Complex 3 in Virginia are underway, aided by helicopters thanks to the composite structure’s lightweight properties.

It was also confirmed that Neutron’s launch site is nearing completion. In response to a recent short report alleging a water shortage at the Wallops launch pad — and suggesting further delays — Peter Beck playfully posted a video showing abundant water at the site, captioned simply: “We have water.”

Meanwhile, at Rocket Lab’s Mississippi engine test site, development of the Archimedes engine is progressing rapidly. The team is now firing engines with integrated avionics and software, and has brought a second test cell online to double throughput. Every major Neutron subsystem is being developed in parallel.

While the path to first flight remains aggressive, management reiterated confidence in a maiden launch during the second half of 2025.

Space Systems

Rocket Lab’s Space Systems segment continues to deepen its strategic relevance, delivering innovation across satellite components, software, and full-mission support — while laying the groundwork for long-term growth through vertical integration and global expansion.

The headline this quarter was the announced intent to acquire Mynaric, a German leader in laser-based satellite communications. This acquisition — pending regulatory approval — would mark Rocket Lab’s first European footprint. Mynaric brings world-class inter-satellite optical terminals, as well as facilities, intellectual property, inventory, and a backlog of constellation contracts. Strategically, the deal opens access to Europe’s highly protected government space programs, particularly those under the European Space Agency (ESA), which often require local presence. With this entry point, Rocket Lab can offer a broader suite of space systems solutions to European customers — meaningfully expanding its addressable market.

Mynaric’s technology is already featured in a $500M Space Development Agency program, making the acquisition highly synergistic. Rocket Lab intends to scale Mynaric’s production — as it has successfully done with past acquisitions — while also evaluating internal use of the terminals in potential future constellations (e.g., integrating laser communications into Flatellite). Margins from this business line are expected to align with those of the broader components segment. The move underscores Rocket Lab’s ambition to serve both commercial and defense markets with vertically integrated, end-to-end satellite infrastructure — further reinforced by a pipeline of six additional M&A deals currently in progress.

On the operational front, Rocket Lab continues to deliver on key milestones through its Pioneer-class spacecraft, which support Varda Space Industries’ in-space manufacturing missions. The third Varda capsule is now being prepared for re-entry over Australia, with Rocket Lab’s bus providing power, propulsion, communications, and control. Integration of the fourth and final spacecraft under the contract is nearing completion at Rocket Lab’s Long Beach facility.

Product innovation across Rocket Lab’s component and software portfolio remains strong. The newly introduced STARRAY modular solar array line provides plug-and-play, customizable power solutions for small satellite operators and is already under contract for upcoming constellations. The Frontier line of radios has been enhanced to support a wider range of global ground station networks. Meanwhile, the company’s Max software suite continues to gain traction as a mission control platform, having supported high-profile missions such as NASA’s CAPSTONE, DARPA’s Blackjack, and a recent commercial lunar landing.

Beyond components, Rocket Lab is increasingly positioned to deliver entire constellation builds, actively pursuing several large-scale government and commercial contracts. These projects would leverage the full depth of the company’s vertically integrated supply chain — from design and component manufacturing to spacecraft integration and launch. These opportunities represent potentially transformational scale for the business and further reflect the comprehensive, end-to-end space company Peter Beck has set out to build.

Other Relevant Updates from the Earnings Call

Impact from Tariffs

"Our deep vertical integration is one of our competitive advantages, and this quarter it served us well in the context of dynamic international trade environments, ensuring that our supply chain remains secure and predominantly U.S.-based."

Rocket Lab appears well-insulated from current and potential tariff volatility, thanks to its vertical integration and the strategic geographic distribution of its manufacturing operations. CFO Adam Spice highlighted that Electron’s production and launch activities are primarily conducted in New Zealand, limiting exposure to jurisdictions where tariffs may present near-term risks. The few launches that occur outside New Zealand do not materially alter this dynamic.

On the Space Systems side, the company similarly benefits from a high degree of domestic sourcing. Most hardware is manufactured in the United States, and even international components — such as reaction wheels from Toronto — include significant U.S. content in materials and subcomponents. This high U.S. value-add likely helps Rocket Lab avoid the more punitive aspects of tariff policy.

While the global trade environment remains uncertain, Rocket Lab believes it is better positioned than many peers to navigate potential disruptions, though management remains cautious given the unpredictability of future policy changes.

Golden Dome

"We intend to be a significant player in the Golden Dome."

Golden Dome is a newly proposed, large-scale U.S. Department of Defense initiative focused on building a resilient, multi-layered space-based missile defense architecture. Though still in early stages, the program envisions a dramatic expansion of space-based assets for sensing, tracking, and potentially intercepting missile threats from orbit.

Rocket Lab has declared its intent to be a major contributor. With vertically integrated Space Systems and responsive Launch capabilities, the company is well-equipped to support various elements of the initiative — from developing specialized satellite hardware to deploying full constellations.

Moreover, Rocket Lab’s recent restructuring into Rocket Lab Corporation was specifically designed to enhance eligibility for classified national security programs like Golden Dome. If the initiative receives full funding and proceeds as envisioned, it could represent a multibillion-dollar opportunity across both launch services and satellite manufacturing — with Rocket Lab uniquely positioned to benefit from it.

Backlog Recognition Dynamics

Rocket Lab’s backlog is becoming increasingly short-cycle, with a growing share expected to convert into revenue within the next 12 months. While this might seem counterintuitive amid the rise of multiyear contracts, the company clarified that large programs such as SDA and Globalstar follow a compressed revenue recognition model.

Under the Estimate at Completion (EAC) method, the bulk of contract revenue is recognized when the company begins material procurement and enters full-scale production — typically within 18–24 months of award. For instance, the SDA contract awarded in Q4 2023 is now entering its revenue-intensive phase, with the next four quarters expected to capture most of the revenue.

This explains the near-term strength in revenue visibility and reinforces the company’s focus on landing follow-on SDA tranches, additional government awards, and upcoming Neutron opportunities — all of which are critical to sustaining and expanding the backlog.

From Smaller Projects to Large Constellations

Rocket Lab finds itself in the enviable position of being able to strategically select which constellation programs to pursue — both in government and commercial sectors. With the maturity of its vertically integrated platform and proven performance as a prime contractor on national security missions, the company is no longer limited to small satellite builds.

Peter Beck noted that most executive and business development attention is now directed at “needle-moving” large-scale constellation opportunities. While government programs such as the SDA transport layer remain central, Rocket Lab is also actively pursuing commercial constellation contracts. Its ability to deliver components at scale and execute complex integration efforts makes it highly competitive in this area.

The company has effectively “moved up a flight of stairs”, entering a phase where its infrastructure, execution capabilities, and reputation make it a serious contender for full-constellation builds — not just individual spacecraft.

Post-Neutron Revenue Mix

As Rocket Lab nears the debut of its medium-lift Neutron rocket, the company’s revenue mix between Launch and Space Systems could shift significantly. CFO Adam Spice explained that while Space Systems has recently dominated the topline due to large constellation programs, Neutron introduces the potential for major rebalancing.

With a target average selling price of $50–55M per Neutron launch, even a modest cadence of wins can quickly swing the revenue mix toward launch services — especially compared to Electron’s smaller $8–9M range. That said, any large-scale constellation award on the Space Systems side could just as easily tilt the balance back.

Adam Spice emphasized the volatility of this mix going forward, noting that "one large constellation win" or "a bulk Neutron deal" could dramatically reshape the outlook. Rather than attempt to forecast a smooth trajectory, Rocket Lab is focused on maintaining optionality and positioning both business segments to capture billion-dollar-plus opportunities — a situation the company views as a “great problem to have.”

Final Thoughts (What Am I Doing With My Position?)

As of May 1, I’ve started placing part of my content behind a paywall.

If you’ve enjoyed my insights so far, I encourage you to support my work — especially as I’m also launching a private Discord server this week to further enhance the value of the subscription.