Under the Spotlight: Rocket Lab ($RKLB)

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Space may be the final frontier, but Rocket Lab’s ($RKLB) latest results brought investors straight back to earth.

The New Zealand-founded rocket company, which now operates major launch and manufacturing facilities in the U.S., reported stronger-than-expected revenue for the December quarter. Full-year sales hit a record US$602M, up 38% from a year earlier. On paper, it was a solid result.

The market wasn’t impressed. Shares dropped more than 6% in after-hours trading after the company revealed its next-generation Neutron rocket has been pushed back again. The launch is now expected in late 2026 following a test failure. 

The timing is awkward. The space sector is suddenly back in focus after Elon Musk merged SpaceX with his artificial intelligence startup xAI in a record-breaking deal ahead of a potential IPO. 

Investors are starting to view space not just as exploration, but as the solution to AI’s growing energy problem. It’s a narrative that Rocket Lab can lean into.

Space race

The merger between Elon Musk’s space and AI ventures has lit a fire under listed space firms. It may seem counterintuitive, but the leader often lifts the whole sector. Nvidia ($NVDA) did exactly that for the AI trade. A blockbuster SpaceX IPO could do the same, drawing investor attention to smaller listed players like Rocket Lab.

That optimism has helped fuel a sharp rally in Rocket Lab’s shares over the past year. Even after the recent pullback, the stock remains up more than 200% over 12 months as demand grows for launch services and defense spending lifts.

Competition, however, is intensifying. Amazon ($AMZN) is emerging as a major force through its Project Kuiper satellite network, which aims to rival Musk’s Starlink. More than 150 satellites have already been launched, with thousands more planned. Control of Earth’s orbit is becoming a strategic battleground for connectivity, data and national security.

For now, the space race is more tailwind than threat to Rocket Lab. The firm isn’t trying to compete with Starlink or Kuiper directly. Instead, it sits further down the value chain, building rockets, satellites and components that enable these constellations to exist in the first place. Demand for that infrastructure is growing.

The company is also leaning into Musk’s latest vision to put AI data centers in space. In its most recent results, Rocket Lab announced it planned to send new solar panels into space to power satellites and future space infrastructure – like orbital data centers.

The idea is simple in theory. If AI is constrained by energy and land-based data centres, why not put them in space and run them on constant solar power? It sounds ambitious. But then again, so did reusable rockets.

Finding Neutron

For Rocket Lab bulls, it all comes back to Neutron. The medium-lift rocket is central to its long-term growth and its ability to compete with SpaceX’s Falcon 9.

Until recently, the focus was on Rocket Lab’s Electron vehicle, which specialises in smaller payloads. It impressed with a record 21 missions in 2025 and a 100% success rate. But a rocket capable of carrying greater loads can win bigger contracts and generate stronger margins. 

Neutron is designed to open the door to constellation deployments, government missions and national security work – some of the most lucrative segments of the market. That’s why the delay announced in the latest earnings report disappointed investors. A later launch pushes out the timeline to profitability.

Rocket Lab is also becoming more than just a rocket company. Today, most of its revenue comes from building satellite parts and spacecraft systems. That means less dependence on any single rocket and more stable, long-term revenue.

The numbers suggest this shift is gaining traction. The company ended the year with a record US$1.85B in contracted work, up 73% from a year earlier. It also secured its largest deal to date, a US$816M contract to design and build a constellation of defence satellites for the Space Development Agency.

Space investors

Rocket Lab is one way to gain exposure to the space economy, but it is not the only one.

The sector has broadened in recent years to include defence, satellite connectivity and communications. ETFs such as ARK Space Exploration & Innovation ETF ($ARKX) and Procure Space ETF ($UFO) offer diversified exposure. Rocket Lab is a major holding in both, which means its performance can influence flows into the broader theme.

Traditional aerospace and defence giants remain key players today. Companies such as Lockheed Martin ($LMT), L3Harris Technologies ($LHX) and Leidos ($LDOS) are embedded in government space programs. Meanwhile, emerging players like AST SpaceMobile ($ASTS) are focused on direct satellite connectivity to smartphones.

If SpaceX does list, it would quickly become one of the largest companies in the world. A trillion-dollar space firm would likely dominate sector weightings and attract institutional capital. That could lift the entire theme, but also reshape how investors allocate across space.

Valuation check

Despite the recent volatility, most analysts remain positive on Rocket Lab. The company has a track record of beating revenue expectations and continues to win new customers and contracts, which gives investors more confidence in its long-term growth.

In a recent upgrade, Morgan Stanley lifted its rating to overweight, while Bank of America reiterated a buy call with a higher price target. Goldman Sachs remains neutral but has raised its outlook.

According to LSEG data, the average price target sits at US$83.91, about 23% above the stock’s after-hours price. That suggests the market still sees meaningful upside, provided the company executes on Neutron and continues winning defence and satellite contracts.

Buy or sell?

Rocket Lab is not a traditional investment. It is a high-growth, high-risk bet on a sector that’s still emerging.

The company has proven it can execute with Electron and is building a diversified space infrastructure business. But Neutron remains the swing factor. If the rocket succeeds, Rocket Lab could move into a much larger market. If delays continue, the valuation could come under pressure.

For investors, this makes position sizing and time horizon critical. It’s unlikely to suit those seeking near-term profits or stability. But for those willing to back a long-term theme, it offers exposure to one of the most ambitious shifts in technology and defence.

This is not financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. The author of this article and other employees of Stakeshop Pty Ltd may hold positions or have financial interests in the company (or companies) discussed above. As always, do your own research and consider seeking financial, legal and taxation advice before investing.