Rocket Lab: Earnings Miss But Neutron Momentum Holds

Key Points

• Rocket Lab beat revenue expectations with $123 million (up 32% YOY) but reported a wider-than-expected EPS loss of $0.12, driven by rising R&D and infrastructure costs.
• The company reaffirmed its Neutron launch timeline for the second half of 2025.
• Rocket Lab holds a $1.06 billion backlog and executed five successful Electron launches in Q1, but Q2 revenue and EBITDA guidance fell short of estimates.

Rocket Lab USA NASDAQ: RKLB, a rising aerospace and defense sector player, reported its first-quarter 2025 results on May 8.

While the stock remained relatively flat following the report, it’s still down about 9% year-to-date.

However, zooming out, shares are up an impressive 465% over the past 12 months and remain firmly in an uptrend, trading above all major moving averages.

Heading into earnings, the spotlight was firmly on Neutron, Rocket Lab’s next-generation launch vehicle, and its broader financial position.

With elevated short interest and a valuation that some considered stretched, this quarter was pivotal for sustaining investor confidence.

Revenue Beats, But Earnings Disappoint

Rocket Lab posted first-quarter revenue of $123 million, a 32% increase year-over-year and slightly above the consensus estimate of $121.4 million. Launch services contributed $38 million, while its space systems segment generated $85 million.

However, the company reported a loss of $0.12 per share, wider than the expected -$0.10 and worse than Q4 2024’s -$0.10, reflecting continued cost pressures.

Costs Rise as R&D Accelerates

Rocket Lab’s widening losses can partly be attributable to increased R&D spending as it pursues Neutron. R&D expenses rose by $6.9 million compared to the previous quarter. The company ended Q1 with $517 million in cash and equivalents, giving it flexibility to continue funding its strategic initiatives despite a GAAP operating cash flow of -$54.2 million for the quarter.

Management highlighted the capital-intensive nature of developing Neutron and maintaining launch capabilities, which impacts near-term profitability. While Rocket Lab continues to scale its Electron launches and space systems, industry-wide supply chain constraints and the integration of the Mynaric acquisition have posed some challenges.

Neutron Milestones Keep Bull Case Intact

Despite mixed financials, Neutron remains central to Rocket Lab’s long-term growth story, and the company is making meaningful progress here. Rocket Lab confirmed that its inaugural Neutron launch remains on track for the second half of 2025.

Critically, the Neutron program was recently onboarded to the Department of Defense’s $5.6 billion National Security Space Launch (NSSL) Phase 3 Lane 1 initiative. Rocket Lab is now one of only five launch providers selected for this elite program.

As part of the on-ramp, the company received a $5 million task order to demonstrate its mission assurance capabilities for future NSSL missions. Rocket Lab also signed a contract with the U.S. Air Force for a Neutron launch supporting an experimental point-to-point transportation system, scheduled for no earlier than 2026.

Strong Backlog, Solid Execution

Rocket Lab reported a total backlog of $1.067 billion, with $422 million in launch services and $645 million in space systems. The company also completed five Electron launches during the quarter with a 100% success rate, reinforcing its reputation for reliability in an increasingly competitive small-satellite launch market.

Additionally, acquiring Mynaric, a specialist in laser-based satellite communications, is expected to deepen Rocket Lab’s vertical integration and expand its product offerings in the growing defense and space communications sectors.

Rocket Lab’s Long-Term Outlook Strong Despite Near-Term Volatility

Rocket Lab’s Q1 2025 results were mixed. A deeper-than-expected EPS loss offset a solid revenue beat and strong gross margins. However, the company continues to make strategic progress, especially with Neutron and its alignment with U.S. defense priorities.

Looking ahead, Rocket Lab guided for Q2 revenue between $130 million and $140 million, which falls just short of the $138 million consensus estimate. It expects gross margins of 30% to 32%, consistent with recent performance. However, adjusted EBITDA loss is projected between $28 million and $30 million, wider than the expected $21 million loss, as the company continues investing heavily in Neutron and infrastructure.

With a strong cash position, backlog, and a credible pathway to scaling launch operations, Rocket Lab remains one of the more compelling public plays on the commercialization of space. Investors should expect ongoing volatility, especially in the short term, but the long-term trajectory remains intact following its latest earnings. Of course, this significantly hinders the company's ability to continue to execute with its upcoming Neutron launch.