Rocket Lab (NASDAQ: RKLB) put up another record quarter, with Q2 revenue reaching $234.1 million, up 62% year over year and slightly ahead of Wall Street’s $232.1 million estimate, while the company posted a $0.08-per-share loss against the $0.06 loss analysts expected.
The quarter had plenty going for it, including 36.1% GAAP gross margin against 33%–35% guidance, 41.5% non-GAAP gross margin against 38%-40% guidance, and an adjusted EBITDA loss of just $8.8 million versus $27.6 million a year earlier. That still wasn’t enough to keep the sellers away as RKLB closed at $80.04, down 3.37%, before dropping another 7.25% to $74.24 after hours.
Without a doubt, Rocket Lab is putting up the kind of operating numbers that should make investors more comfortable with the story, however the stock is demanding something much bigger – Neutron – before it gives the company another leg higher.
Rocket Lab Is Building A Business Bigger Than Its Launches
Rocket Lab’s $2.36 billion backlog, up 137% from a year ago, changes the way I look at the company, because the order book is now growing at more than twice the pace of reported revenue. That isn’t just a nice statistic for the earnings presentation; it tells me, quite categorically, that customers are committing to Rocket Lab’s services substantially faster than the company can recognize those contracts as revenue, which gives the business a long runway even before Neutron starts carrying its share of the load.
The composition makes the story better. Space Systems generated $189.5 million in Q2 revenue, up 38.6% sequentially, while Launch Services fell to $44.6 million, largely because of how HASTE and Electron revenue gets recognized. So while investors tend to think of Rocket Lab as the company that launches rockets, the financials are quietly making a different case: the spacecraft, components and other space infrastructure are already doing most of the heavy lifting.
And Rocket Lab isn’t struggling to find customers for either side of the business, having signed more than $1 billion in new contracts during Q2 and shortly afterward, including more than $437 million of launch contracts. As a result, the only challenge is how quickly management can convert that mountain of contracted demand into revenue, margins and eventually cash flow.
RKLB’s $80 Level Just Became A Problem
RKLB had sprinted from roughly $60 in early August to an intraday high of $86.83 before earnings, so investors were hardly approaching this report with low expectations. The earnings reaction exposed that optimism quickly: shares closed at $80.04, down 3.37%, then fell to roughly $74.24 after hours, putting the stock below the $78.05 200-day moving average after spending the session above it. The 50-day sits at $89.19, while the 20-day is down at $70.29, leaving RKLB in an awkward middle ground after a violent reversal.
I wouldn’t read that as a broken chart yet. The stock has spent the last several sessions digesting a huge run, and the after-hours decline is still sitting above the $70.29 20-day average, which is the first level I’d watch if selling continues. A hold there would give the recent breakout room to breathe; a break below it would put the roughly $60 August base back into play.
More importantly, RKLB now has to reclaim $80–$86 with conviction before I’d call the post-earnings damage repaired, because that’s the area where investors just demonstrated how quickly they can take profits when Neutron doesn’t give them a fresh reason to chase.
Plenty To Prove Before $100
I’m still constructive on Rocket Lab because the business is moving in the direction the stock needs it to move, with $234 million of quarterly revenue, a $2.36 billion backlog and Q3 revenue guidance of $250 million–$265 million providing a substantial operating runway before Neutron contributes meaningfully. The problem for shareholders is that the market already knows all of that; after the latest report, the next meaningful rerating requires evidence that Rocket Lab can turn its enormous contracted demand into sustained profitability while getting Neutron to the pad on schedule.
The Iridium acquisition makes the payoff considerably larger if management pulls it off, because Rocket Lab is attempting to move beyond selling launches and spacecraft into owning a communications business with recurring service revenue, but the transaction also raises the stakes given its roughly $8 billion enterprise value and planned financing.
The stock therefore has a pretty clear hurdle in front of it in that the $70 level needs to hold on the chart, Neutron needs to keep moving toward its Q4 target, and the backlog needs to start showing up in cash rather than remaining an impressive number on an earnings release.
If those pieces fall into place, I can see why investors would start looking beyond the $86.83 high and toward $100. If Neutron slips and the stock loses $70, however, I’d expect the market to revisit the roughly $60 area where this latest run began. For now, Rocket Lab has earned the right to remain on the watchlist; the next move higher has to be earned by execution, not another record-quarter headline.
