To The Moon

Earnings Review: Rocket Lab Narrows Losses Unexpectedly and Shows Clear Revenue Visibility

$Rocket Lab USA, Inc.(RKLB)$   unveiled its financial outcomes for the third quarter following the market's close on monday. The company surprisingly announced a narrowing of losses, as higher revenue levels diluted costs.

Core Financial Indicators

Q3 Financial Outcomes: Revenue was $155 million, up 48% year over year. GAAP gross margin was 37%, and non-GAAP gross margin reached an all-time high of 41.9%. The company ended the quarter with a $1.1 billion backlog after Q3 additions and more than $1 billion in cash, cash equivalents, and other liquid resources following the ATM offering.

Business Segment Breakdown

Rocket Lab has two major business segments.

Launch Services:

- Electron rocket launches: Electron continued to perform strongly, with four launches in Q3—all successful—bringing 2025 year-to-date to 16 successful missions. The company booked 17 new dedicated launch contracts in the quarter, lifting the total launch backlog to 49, and it aims to surpass its annual launch record by the end of 2025.

- Neutron rocket launches: Neutron is Rocket Lab's next-generation large rocket under development, with a payload class of 13 tons. For Neutron, system validation is ongoing, with pre-launch testing at the launch site planned for the first quarter of 2026. Launch Complex 3 in Virginia has been activated and is undergoing final commissioning, and full-system testing is progressing across propulsion, structures, avionics, and related subsystems.

Space Systems:

- Satellite component manufacturing: Provides various components needed for satellite manufacturing, including solar power solutions, reaction wheels, avionics, composite structures, star trackers, and separation systems.

- The company completed the acquisition of Geost in August, expanding payload capabilities, and finished the restructuring of Mynaric, with that acquisition pending regulatory approval. The NASA ESCAPADE Mars spacecraft is ready to launch within days, and the SDA T2TL constellation has entered mass production. Space Systems accounted for 47% of the total backlog at the end of Q3.

Key Highlights

Positive signals in the financial report

The company's two segments both achieved record high gross profits. The overall adjusted gross margin also reached a new high.

Additionally, the company's order backlog rebounded, reversing the decline of the previous quarter.

Earnings Guidance

For the fourth quarter of 2025, Rocket Lab expects revenue between $170 million and $180 million, GAAP gross margins of 37% to 39%, non-GAAP gross margins of 43% to 45%, GAAP operating expenses of $122 million to $128 million, non-GAAP operating expenses of $107 million to $113 million, net interest income of $3.5 million, and an adjusted EBITDA loss of $23 million to $29 million.

Summary

Overall, the earnings report exceeded expectations. The company's net loss narrowed despite soaring research and development expenses for the Neutron rocket.

The variables that need to be focused on subsequently are Neutron rocket launches progress next year. The stock price increased by more than 7% after the earnings release.

Valuation:

Due to still being in a loss-making phase, Rocket Lab does not have a PE valuation. Its price-to-sales ratio is more than 45, which is at the 95th percentile over the past five years.

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