Rocket Lab Shares Soar on Major Defense Contract and Launch Milestone

Rocket Lab USA, Inc. witnessed a dramatic surge in its share price last week, propelled by a landmark defense contract and a significant operational achievement. The stock reached an unprecedented peak of $70.52 on Friday, marking a single-day gain of nearly 18%. This rally was triggered by the announcement of a substantial $816 million award from the Pentagon, followed just two days later by the company setting a new annual record with its 21st successful launch of the year.

The core driver behind the investor enthusiasm is a contract awarded on December 19, 2025, by the U.S. Space Development Agency (SDA). Valued at $816 million, with an additional $10.45 million in options, the agreement tasks Rocket Lab with the development and manufacturing of 18 satellites for the Tracking Layer Tranche 3 program. This initiative is a critical component of a military space architecture designed to counter hypersonic missile threats.

This contract represents the largest single award in the company's history and signals a profound strategic evolution. By securing this prime contractor role for a national security program, Rocket Lab now operates alongside established defense giants like Lockheed Martin, Northrop Grumman, and L3Harris Technologies, which also received awards. For a company that went public via a SPAC merger in 2021, this marks a pivotal transition from being viewed primarily as a launch provider to a trusted integrated aerospace manufacturer.

The financial scale of this shift is substantial:
* The new $816 million award, combined with an existing $515 million SDA contract, brings total commitments from the agency alone to over $1.3 billion.
* Further potential revenue exists through supplying components to other prime contractors, estimated to be worth an additional $1 billion.

From Launch Services to Integrated Space Systems

The SDA deal underscores a remarkable business transformation. Originally founded as a provider of small launch vehicles—which accounted for 94% of revenue in 2020—Rocket Lab now derives nearly 75% of its income from its Space Systems business, which focuses on satellite components and platforms.

The growth metrics are stark. Revenue from the Space Systems segment has exploded from $2.1 million for the full year 2020 to $114 million in the third quarter of 2025 alone. Notably, the value of the new Pentagon contract exceeds the company's total revenue for the past twelve months, which was approximately $555 million.

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

Chief Executive Peter Beck has emphasized the company's vertically integrated model as a key competitive advantage. By designing and manufacturing everything in-house, from solar panels and propulsion systems to attitude control and payloads, Rocket Lab has positioned itself as the sole commercial provider capable of producing complete satellites and payloads for the SDA Tracking program independently.

Flawless Launch Cadence Supports Ambitions

Adding momentum to the contract news, Rocket Lab successfully completed its 21st launch of 2025 on December 21. At 6:36 p.m. local time, an Electron rocket lifted off from the Mahia Peninsula in New Zealand, deploying the QPS-SAR-15 satellite for Japanese customer iQPS. The mission continued a perfect record for the year, with zero launch failures.

This achievement cements Electron's status as the most frequently launched small-lift rocket in the United States and a global leader in its class. The company has now launched seven satellites for iQPS since 2023, with five additional missions already on the manifest for 2026.

Valuation Places Pressure on Execution

With its closing price of $70.52, Rocket Lab's equity now trades more than 330% above its 52-week low from April. The company commands a market capitalization of roughly $32 billion, which translates to approximately 64 times its annualized revenue.

This premium valuation demands flawless execution. The company is not yet profitable on a cash flow basis, reporting a free cash flow of negative $220 million over the trailing twelve months. Future success hinges on three critical factors: the timely delivery of satellites under the SDA contract, further scaling of the higher-margin Space Systems business, and the successful debut launch of the larger Neutron rocket, which is targeted for 2026.