Rocket Lab (RKLB)

Aerospace and defense company Rocket Lab (NASDAQ:RKLB) beat Wall Street’s revenue expectations in Q4 CY2025, with sales up 35.7% year on year to $179.7 million. On the other hand, next quarter’s revenue guidance of $192.5 million was less impressive, coming in 3.3% below analysts’ estimates. Its GAAP loss of $0.09 per share was in line with analysts’ consensus estimates.

Company Overview

Becoming the first private company in the Southern Hemisphere to reach space, Rocket Lab (NASDAQ:RKLB) offers rockets designed for launching small satellites.

Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.

Competitors offering similar products include Space X (private), Astra (NASDAQ:ASTR), and Virgin Orbit (NASDAQ:VORB).

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Rocket Lab’s sales grew at an incredible 76.5% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Rocket Lab’s annualized revenue growth of 56.9% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Rocket Lab reported wonderful year-on-year revenue growth of 35.7%, and its $179.7 million of revenue exceeded Wall Street’s estimates by 1.4%. Company management is currently guiding for a 57.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 50.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is admirable and suggests the market sees success for its products and services.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Rocket Lab’s high expenses have contributed to an average operating margin of negative 53.6% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Rocket Lab’s operating margin rose over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

In Q4, Rocket Lab generated a negative 28.4% operating margin.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Rocket Lab’s full-year earnings are still negative, it reduced its losses and improved its EPS by 28.5% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Rocket Lab, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q4, Rocket Lab reported EPS of negative $0.09, up from negative $0.10 in the same quarter last year. This print beat analysts’ estimates by 8.2%. Over the next 12 months, Wall Street expects Rocket Lab to improve its earnings losses. Analysts forecast its full-year EPS of negative $0.37 will advance to negative $0.24.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Rocket Lab’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 53.8%, meaning it lit $53.85 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Rocket Lab’s margin expanded during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

Rocket Lab burned through $114.2 million of cash in Q4, equivalent to a negative 63.6% margin. The company’s cash burn increased from $23.94 million of lost cash in the same quarter last year.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Rocket Lab’s four-year average ROIC was negative 46.4%, meaning management lost money while trying to expand the business. Its returns were among the worst in the industrials sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Rocket Lab’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Rocket Lab is a well-capitalized company with $1.02 billion of cash and $254 million of debt on its balance sheet. This $767.5 million net cash position is 2% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Rocket Lab blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EBITDA guidance for next quarter missed and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this print was mixed but still had some key positives. The market seemed to be hoping for more, and the stock traded down 1.5% to $71.65 immediately after reporting.

Updated: February 26, 2026 at 4:21 PM EST

Before making an investment decision, investors should account for Rocket Lab’s business fundamentals and valuation in addition to what happened in the latest quarter.

First of all, the company’s revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its rising cash profitability gives it more optionality. Additionally, Rocket Lab’s expanding operating margin shows the business has become more efficient.

Rocket Lab’s EV-to-EBITDA ratio based on the next 12 months is 2,182.5x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $83.96 on the company (compared to the current share price of $71.65).