Rocket Lab USA, Inc. (RKLB) Earnings

Management highlights

### Contract and Backlog Highlights - Rocket Lab signed over $437 million in new launch bookings (for Electron, Haste, and Neutron) in Q2 2026 and post-quarter, including a record $266 million contract for up to 18 suborbital missions for the U.S. Space Force, the company's largest ever launch contract. - Space systems secured over $581 million in new contracts in Q2 2026 and post-quarter, including a $397 million contract to build and launch multiple Flatellite spacecraft for the Space Force's airborne moving target indicator program, and two geostationary satellite contracts totaling over $160 million (the company's first entry into the government geostationary satellite market). - Total end-of-quarter backlog reached a record $2.36 billion, with over $1 billion in new contracts signed across both segments in Q2 and post-quarter. The company expects ~45.5% of current backlog to convert to revenue within the next 12 months. ### Strategic Acquisition and Vertical Integration - Rocket Lab closed the acquisitions of Monaric and Motive in Q2, and announced a planned acquisition of Iridium Communications expected to close in mid-2027. The Iridium acquisition will add all three core space value chain verticals to Rocket Lab: access to space (launch), in-space hardware (satellite manufacturing), and space applications (recurring revenue satellite communications). Iridium brings an existing 66-satellite constellation, 2.5 million global subscribers, and $870 million in annual revenue, enabling immediate entry into the space applications market. - Rocket Lab established Rocket Lab Germany following the Monaric acquisition, creating a European regional hub for constellation manufacturing and spacecraft assembly, integration, and testing to serve European commercial, civil, and defense customers as a domestic provider, addressing regional gaps in launch and spacecraft manufacturing capacity. ### Operational Launch Program Updates - Electron and Haste achieved 100% mission success across 13 launches in 2026 year-to-date, and are on track to exceed 2025's total launch count. Post-quarter end-of-quarter launch backlog grew to over 90 launches, the highest in company history. - Rocket Lab introduced GHOST, its containerized deployable launch site technology that enables rapid establishment of launch capability in new global locations, with the first GHOST pads to be deployed in Kodiak, Alaska for Haste missile defense missions. Rocket Lab now operates 6 launch pads across 3 launch sites, providing unmatched geographic flexibility. - Neutron medium-lift launch vehicle development progressed significantly in Q2: all major vehicle systems completed substantial testing, with final assembly and checkout of flight hardware underway. Production is aligned with a target to deliver Neutron to the launch pad in Q4 2026, though the company is prioritizing scalable production and high cadence capability for 10th launch over rushing the first launch, with the end-of-2026 first launch window narrowing. The Archimedes engine completed over 400 hot fire tests, with testing now focused on durability and reusability, and full flight engine production already underway. Neutron has already secured a dedicated launch contract for the Space Force's moving target indicator program and a commercial dedicated launch for Kepler Communications, with strong early demand driven by global launch capacity constraints. ### Technical and Product Highlights - Rocket Lab completed the Victus Hayes tactically responsive space mission, launching a satellite from design to orbit in 16 hours and 42 minutes, beating the 24-hour requirement and setting a new responsive launch record. The company designed, built, launched, and operated the mission end-to-end. - Flatellite, Rocket Lab's high-performance, low-profile, rapidly producible optimized spacecraft platform for large constellations, secured its first contract with the high-priority Space Force program, with significant additional interest from commercial and government customers.

Guidance

Management provided the following Q3 2026 guidance, maintaining a trajectory of strong growth amid ongoing investment: - Revenue is expected to be between $240 million and $260 million, representing continued year-over-year growth. - GAAP gross margin is projected to range between 33% and 35%, while non-GAAP gross margin is expected between 35% and 37%, accounting for the current product mix shift toward larger satellite platform contracts. - GAAP operating expenses are expected between $143 million and $149 million, with non-GAAP operating expenses projected between $121 million and $127 million, with increased spend driven by ongoing Neutron development and first flight preparation, including a shift from R&D spending to Flight 2 inventory. - Adjusted EBITDA loss is expected between $17 million and $23 million. - Negative non-GAAP free cash flow will remain elevated in Q3, driven by ongoing investments in Neutron development and production scaling, excluding any potential financing activity impacts. - Management reaffirmed that free cash flow positivity is expected after the first successful Neutron test launch, with full cash flow positivity expected 18 to 24 months after that turning point, though the Iridium acquisition (once closed) will reset the free cash flow profile due to Iridium's existing strong positive free cash flow.

Segment performance

Rocket Lab reported total Q2 2026 revenue of $234 million, a 62% year-over-year increase and 16.8% sequential increase. 1. Space Systems: Generated $189.5 million in revenue, a 38.6% sequential increase. This growth was driven by expanded satellite manufacturing activity and initial revenue contribution from the recently closed Monaric acquisition. This segment accounted for 81% of total Q2 2026 revenue, and represented 60% of Rocket Lab's total end-of-quarter backlog. 2. Launch Services: Generated $44.6 million in revenue, a 30% sequential decrease despite completing a similar number of launches as the prior quarter. The decline was due to an atypical revenue mix: a larger share of revenue came from Haste suborbital missions, where most revenue was recognized in prior periods under overtime accounting rules, while point-in-time Electron launch revenue (recognized at launch) made up a smaller share of the quarter. This segment accounted for 19% of total Q2 2026 revenue, and represented 40% of Rocket Lab's total end-of-quarter backlog.

Risks & headwinds

- The first launch window for Neutron at the end of 2026 is narrowing, and development testing (particularly integrated stage testing at the launch pad) remains the highest risk milestone for the program. - The planned Iridium acquisition is still subject to stockholder approval and regulatory review, and is not expected to close until mid-2027, creating execution and timing uncertainty for the company's space applications expansion. - Elevated cash burn and negative free cash flow are expected to continue through the Neutron development and initial production scaling period, and cash flow positivity depends on the successful outcome of the first Neutron launch. - Newly acquired businesses (including Monaric) initially have pressured gross margins that require time to reach target levels via integration synergies and scale, creating near-term margin headwinds. - Global launch demand outpaces available supply, and Rocket Lab must balance capacity allocation between external commercial/government customers and its own internal Iridium and space applications growth, which requires careful strategic tradeoffs. - Larger competitors are targeting the broadband satellite communications market, which creates competitive pressure for any potential future expansion into that segment.

Analyst Q&A

• Q: How quickly can Rocket Lab scale Neutron to 10 launches, and what is the outlook for average selling prices (ASPs) across all launch products?

  A: Management prioritizes scaling Neutron to 10 launches quickly over rushing the first flight, and is designing the vehicle for reusability from the start to enable rapid scaling. The company's goal is to avoid re-qualifying systems after first launch to speed up cadence. For ASPs, Neutron was launched at $50-55 million with no early discounting, and current tight supply-demand dynamics mean management sees more upside than downside to ASPs across Neutron, Electron, and Haste going forward.

• Q: What are the near-term opportunities to accelerate Iridium's top-line growth, and how does the acquisition change Rocket Lab's competitive position?

  A: Rocket Lab can supercharge Iridium's existing growth initiatives, particularly in positioning, navigation, timing (PNT) and IoT, with modest constellation changes adding substantial new capability. Most importantly, the acquisition adds a proven mission-critical service capability that Rocket Lab could not offer previously, allowing the company to bid on a broader range of government and commercial contracts, creating significant new market opportunity that was previously unavailable.

• Q: What are the benefits of Rocket Lab's vertical integration in spacecraft components, and what opportunity does this create?

  A: Spacecraft components are a significant competitive moat, as large orders for components like reaction wheels or solar panels are extremely difficult to secure for new entrants. Rocket Lab has scaled its in-house component business to be one of the largest in the industry, with strong margins on merchant component sales. Beyond merchant sales, in-house components eliminate margin stacking, allowing Rocket Lab to bid more competitively on large satellite programs, which has directly enabled the company's recent large contract wins.

• Q: How should investors think about Neutron capacity allocation, and what is the current demand outlook pre-first flight?

  A: Demand for Neutron is already very high pre-first launch, with the company selling full-price slots well ahead of first flight. Management is being strategic about allocating capacity, reserving slots for government customers (given the recent expansion of the NSSL launch budget) and for Rocket Lab's own future Iridium and space applications growth, rather than selling all capacity to external customers early. Demand is expected to remain strong even after first flight, as global launch capacity will remain constrained for the foreseeable future.