Rocket Lab's Record $816M Contract Confirms Growth But Fails to Address Core Risks

What happened

In 2025, Rocket Lab won its largest contract ever, an $816 million award to build 18 missile defense satellites for the U.S. Space Development Agency. This represents a 58% increase over its previous $515 million defense contract from 2023, underscoring continued expansion in government space systems work. The DeepValue report notes this contract is part of the SDA Tranche 3 Tracking Layer award already embedded in Rocket Lab's over $1 billion backlog. However, the company remains deeply loss-making, with an operating loss of approximately $178 million for the first nine months of 2025 and persistent cash burn. The stock's 183% rise over the past year prices in aggressive assumptions about Neutron's success and future wins, despite unaddressed execution and policy risks.

Implication

For investors, the $816 million award supports near-term revenue growth from Rocket Lab's Space Systems segment, which now drives most sales. However, it does not alleviate the company's structural unprofitability, with negative GAAP P/E and EV/EBITDA indicating no earnings foundation for the $38 billion market cap. The dependence on cancelable U.S. government contracts exposes the business to budget volatility and policy shifts, heightened by an ongoing government shutdown. Critical execution hurdles, like the delayed Neutron rocket first flight to mid-2026 and potential cost overruns, remain unchanged by this news. Therefore, while positive, this contract should not distract from the need for progress on profitability and Neutron milestones before the stock becomes attractive at current levels.

Thesis delta

The new contract does not shift the DeepValue report's 'POTENTIAL SELL' thesis, as it was already factored into the backlog and does not address core financial or operational weaknesses. It reaffirms the growth narrative in Space Systems but leaves unaltered the risks of overvaluation, cash burn, and Neutron execution. Investors should see this as incremental confirmation rather than a catalyst for changing investment stance.