Rocket Lab’s Strategic Ascent: Defense Contracts and New Rocket Drive Growth Narrative

The evolving landscape of U.S. space and defense strategy is placing Rocket Lab USA at its forefront. A combination of high-level political endorsement and a rapidly expanding military contract portfolio is fueling market anticipation that the company could achieve a significant scale-up by 2026. Concurrently, the firm is advancing a critical technological leap with its Neutron rocket program.

Operationally, Rocket Lab is approaching several key catalysts expected to define its 2026 trajectory. The most substantial driver is the $816 million Tranche 3 award from the Space Development Agency (SDA). This contract more than doubled the backlog for its Space Systems division to approximately $1.4 billion, providing the most extensive contracted foundation in the company's history and significantly enhanced visibility.

In parallel, development of the medium-lift Neutron rocket, which marks Rocket Lab's move beyond the small launch vehicle class, continues. The inaugural launch is scheduled for mid-2026 from Wallops Island, Virginia. The first rocket is slated for shipment to the launch site in Q1 2026 for integration and static fire testing. Successful execution of this timeline would substantially broaden Rocket Lab's service offerings, a crucial element for capturing larger government and commercial missions.

A Clear Political Endorsement

The company's strategic importance received a powerful signal last week when U.S. Secretary of Defense Pete Hegseth toured Rocket Lab's engine production facility in Long Beach. He publicly labeled the enterprise an "engine of the new arsenal of freedom." This visit transcended public relations, underscoring a governmental shift toward prioritizing agile, commercial space providers for defense needs.

Hegseth explicitly linked Rocket Lab's capabilities to military success, citing space-based reconnaissance support in current U.S. operations. The administration's message is clear: preference for new space and defense projects will go to entities that can deliver quickly, scalably, and with commercial efficiency. This stance contrasts with perceived inertia and bureaucracy within traditional defense primes.

This support gains further context from a recent presidential directive restricting established defense contractors regarding dividends and share buybacks unless they demonstrably prioritize production investments. Companies like Rocket Lab, which are inherently focused on capacity and technology expansion, stand to benefit from this policy shift.

Financial Performance and Lofty Valuation

Market expectations are reflected in the stock's performance. Shares closed at $86.58 on Tuesday, trading merely 1.5% below a recent 52-week high of $87.90. The advance over the past twelve months exceeds 250%.

Should investors sell immediately? Or is it worth buying Rocket Lab USA?

This momentum is baked into an ambitious valuation. While the stock trades at a high price-to-book ratio relative to the U.S. aerospace and defense industry, the growth perspective is key. According to Zacks ranking, the "Aerospace – Defense Equipment" sector, which includes Rocket Lab, resides in the top quintile of all rated sectors, indicating overall investor optimism for the segment with a selective approach.

From a technical standpoint, the share price remains well above its 50, 100, and 200-day moving averages. A 14-day Relative Strength Index (RSI) reading above 85 signals a short-term overbought condition. Coupled with an annualized 30-day volatility near 90%, the equity remains susceptible to sharper corrections if operational expectations are not met.

Needham Conference and Upcoming Milestones

Amid this political tailwind, management is presenting this week at the Needham Growth Conference (January 13-14). The focus, according to Needham reports, will be on operational execution and business scaling, specifically:

• Progress on fulfilling Tranche 2 satellite contracts.
• Ramp-up of Tranche 3 work following the $816 million SDA award.
• The development timeline for the Neutron rocket.

Needham maintains a Buy rating, having raised its price target significantly from $63 to $90 in December after the major SDA win. The firm cites greatly improved visibility in the Space Systems business and the expectation of additional defense sector contracts.

Attention now turns to the upcoming earnings report. For the fourth quarter of 2025, scheduled for release on February 26, 2026, consensus estimates anticipate:

• Earnings Per Share (EPS): -$0.05 (a 50% year-over-year improvement)
• Revenue: $178.38 million (growth of 34.74%)
• Full-Year 2025: Revenue of $600.52 million and an EPS of -$0.20 (a 47.37% improvement)

These forecasts illustrate that while Rocket Lab is not yet profitable, the combination of robust revenue growth and shrinking losses supports the narrative of a business model on a clear path toward profitability.

Outlook: Execution is Key

Entering 2026, Rocket Lab operates with a strengthened order book, clear political backing, and the impending Neutron debut. The presentations this week at Needham and the Q4 results in late February will be critical in assessing whether management can validate its ambitious expansion plan with concrete milestones. Successful execution could further cement the company's role as a preferred partner for U.S. national security space projects and justify the market's currently elevated expectations.