RKLB Q1 Earnings Call: Product Expansion and Neutron Progress Drive Outlook

Aerospace and defense company Rocket Lab (NASDAQ:RKLB) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 32.1% year on year to $122.6 million. On the other hand, next quarter’s revenue guidance of $135 million was less impressive, coming in 1.7% below analysts’ estimates. Its non-GAAP loss of $0.07 per share was 17.9% above analysts’ consensus estimates.

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StockStory’s Take

Rocket Lab’s first-quarter performance was shaped by continued growth in its core launch and space systems businesses, as well as the company’s strategy of vertical integration. CEO Peter Beck highlighted the significance of securing new Electron and HASTE missions and the successful execution of five launches, which he said demonstrated “trusted and reliable access to space for small satellite operators.” The company emphasized the role of its vertically integrated supply chain in navigating international trade dynamics and supporting reliable manufacturing. CFO Adam Spice noted that space systems led segment growth and improvements in gross margin were attributed to better scale and product mix, particularly as satellite manufacturing operations matured. Management acknowledged that fixed costs and launch cadence continue to influence launch segment margins, pointing to the importance of operational efficiency and scale.

Looking ahead, Rocket Lab’s guidance is underpinned by anticipated momentum in the Neutron launch program, margin expansion, and contributions from new product lines and acquisitions. Management outlined the upcoming Neutron first flight as a pivotal milestone, with Beck stating, “It’s all hands to the pump internally to make sure that we hit our objective of getting that off in the second half.” The company expects higher launch cadence and average selling prices in the back half of the year to drive margin improvement, while ongoing investment in Neutron and recent moves like the intended Mynaric acquisition are expected to expand Rocket Lab’s capabilities and European market presence. Management cautioned that negative free cash flow is likely to remain elevated until Neutron’s first launch, after which they anticipate improvements in cash dynamics.

Key Insights from Management’s Remarks

Management attributed quarterly results to robust Electron launch cadence, ongoing product innovation in space systems, and strategic moves such as entering the National Security Space Launch (NSSL) program and pursuing targeted acquisitions.

• Electron mission execution: Electron completed five successful launches in the quarter and booked eight new Electron and HASTE missions, highlighting the company’s capacity for frequent and reliable small satellite deployment.
• Progress with Neutron: Rocket Lab advanced Neutron’s development and secured selection for the U.S. Department of Defense’s NSSL program, positioning Neutron as a medium-class, reusable launch vehicle for critical government missions. The company expects Neutron’s first launch later this year, supported by significant investments in infrastructure and propulsion systems.
• Space systems momentum: The space systems segment demonstrated the ability to deliver spacecraft rapidly, as seen with the quick turnaround on manufacturing and launching Varda’s third spacecraft. Management pointed to increasing demand for full-constellation builds and new product offerings in modular solar arrays and satellite radios.
• Strategic acquisition plans: The planned acquisition of Mynaric, a German laser communication terminal provider, is expected to strengthen Rocket Lab’s product suite and enable access to European government and commercial contracts. Management stated this would “add a new element to our spacecraft supply chain.”
• Expansion into international markets: Rocket Lab is establishing a European presence to pursue sovereign government programs and broaden its addressable market, noting that having operations in Europe enables participation in large-scale projects historically inaccessible to non-European providers.

Drivers of Future Performance

Rocket Lab’s forward guidance is shaped by Neutron’s launch readiness, margin expansion from improved launch mix, and strategic initiatives in product development and international expansion.

• Neutron launch as a catalyst: The impending first launch of Neutron is seen as a major inflection point, with management emphasizing that achieving operational cadence and higher average selling prices will be key to margin expansion in the second half of the year. Ongoing investments in infrastructure and long-lead items are focused on scaling post-launch.
• Product and market diversification: The company’s efforts to expand its portfolio—such as modular solar arrays, advanced satellite radios, and the Mynaric acquisition—are aimed at capturing new business in both government and commercial markets, particularly in Europe. Management believes these moves will help mitigate risks from single-market dependency and drive long-term revenue growth.
• Ongoing cash flow pressures: Management acknowledged that negative free cash flow is expected to persist until Neutron’s first launch is completed, due to significant R&D and capital expenditures. They anticipate moderation in cash outflows once the vehicle is operational and revenue-generating, but caution that program timing and market demand could introduce variability.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will monitor (1) Neutron’s first launch and the ramp-up in launch cadence and average selling prices, (2) execution and integration of the Mynaric acquisition to expand European market reach, and (3) progress on new product adoption, including modular solar arrays and satellite radios. The timing and scale of large constellation contracts and continued backlog growth will also be key indicators of sustained momentum.

Rocket Lab currently trades at a forward price-to-sales ratio of 23.9×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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