USA Rare Earth Posts Strong Q1 2026 as Massive Serra Vera Deal Looms

Key Points

• USA Rare Earth is making big moves as it looks to shake up the rare earth industry outside of China
• The firm posted better-than-expected Q1 financials and provided an update on its $1.6 billion government funding proposal
• Meanwhile, the company is working to close its Serra Verde acquisition, which would provide access to one of the world's top rare-earth assets outside China

USA Rare Earth NASDAQ: USAR is looking to fill a hole in the market born out of geopolitical uncertainty. Along with mining companies like MP Materials NYSE: MP, USA Rare Earth is aiding the United States in loosening China’s chokehold on rare earth elements (REEs). China controls the majority of the world’s REE mines, and 94% of permanent magnet production—the vital end product of REEs.

This is a pressing issue, as permanent magnets are essential to building many modern-day technologies. This includes advanced weaponry, and the United States does not want to find itself in a position where China can cut off its production capabilities.

Ultimately, the goal of USA Rare Earth is to become a vertically integrated mine-to-magnet producer. Recently, USA Rare Earth delivered its latest earnings report, providing insight into how the firm is progressing toward its goal.

USA Rare Earth Posts Beats, Government Funding Deal Sees a Delay

As an early-stage company, showing operational improvements is far more important than near-term revenue or profit generation. However, that’s not to say the company’s financials don’t matter at all—investors certainly want to see it stay on budget and not burn cash unnecessarily. Luckily, in its latest quarter, the firm posted better-than-expected results.

USA Rare Earth generated revenue of $5.7 million in Q1 2026. Note that it recorded no revenue a year ago. This figure solidly beat estimates of $4.2 million. The company also exceeded expectations on its bottom line. The company’s adjusted loss per share was 12 cents, significantly less than the 16-cent loss analysts had forecasted.

However, it is important to note that loss per share can be a deceiving metric. Because USA Rare Earth issues a lot of stock, its loss per share can fall even if actual losses grow, which is exactly what happened during Q1. Adjusted loss per share improved from 14 cents a year ago, but the company’s adjusted net loss more than doubled to $24.1 million. The takeaway is that USA Rare Earth’s profitability is getting worse, not better.

However, this is fully expected for early-stage companies, and USA Rare Earth has plenty of capital to absorb losses. The firm ended the quarter with $1.75 billion in cash, as it received $1.5 billion in proceeds from a private investment offering.

Additionally, the company said it expects to complete the definitive documentation for its $1.6 billion in Department of Commerce funding in May. While a delay compared to previous expectations that this would finish up in April, ultimately getting the funding is what matters. Importantly, the firm notes that the terms of the deal have not deteriorated.

USA Rare Earth Presses Forward, Looks to Enhance Position With Serra Verde

The company also remained on course with several operational milestones. The company continues to expect to begin fulfilling sales of sintered magnets in Q2 2026.

USA Rare Earth also still expects its Stillwater magnet capacity to hit 600 metric tons per annum (MTPA) by the end of 2026. Expectations for 1,200 MTPA in Q1 2027 remain intact as well.

However, its planned $2.8 billion acquisition of Serra Verde is by far the biggest development over recent months. The company notes that Serra Verde is the first and only scaled producer of all four magnetic rare earth elements outside of Asia. These elements are neodymium (Nd), praseodymium (Pr), dysprosium (Dy), and terbium (Tb).

Garnering this asset would be a clear win for USA Rare Earth, accelerating its mine-to-magnet buildout and providing a key benefit compared to MP Materials. MP’s mines are rich in only light rare earth elements like Nd and Pr—not heavy rare earths like Dy and Tb. Notably, making advanced technologies like missile guidance systems requires adding heavy rare earths. With Serra Verde, USA Rare Earth would have access to both light and heavy REEs, a strategic advantage over MP.

The combined company is targeting an EBITDA run rate of $550 million to $650 million by the end of 2027. Additionally, USA Rare Earth notes that the cash position of the combined firm would be $3.2 billion, drastically higher than its current balance.

However, the acquisition is set to be a massively dilutive event for shareholders. USA Rare Earth plans to issue 127 million shares to fund the deal. This is huge compared to its current share count of nearly 233 million. Nonetheless, shares surged 13% on the day of this announcement, indicating that investors prioritized the strategic value of the deal over the dilution factor.

USA Rare Earth Awaits Deal Closing After Good Quarter

Overall, USA Rare Earth performed well during its latest quarter, putting up solid financials and continuing to execute on operational objectives. Meanwhile, it's possible that acquiring Serra Verde could be a game-changer—making the company an anchor in the non-China market.

Still, the deal has yet to close, with finalization expected in Q3 2025. After closing, USA Rare Earth plans to host its Investor Day. As the company provides more details around its strategy at the event, this will be a key point at which to re-evaluate USAR’s future.