Rocket Lab: How They Plan To Compete Against SpaceX

Rocket Lab CEO Peter Beck

Thesis

Rocket Lab (RKLB) shares have surged, up 341.59% YTD and continue to outperform the marke. This has largely driven by the space company’s key developments with its Neutron Rocket.

They have capitalized on a dual-launch complex strategy, with Launch Complex 1 in New Zealand and Launch Complex 2 in Virginia to support over 130 potential launches annually. This has also allowed Rocket Lab to secure U.S. government contracts and accelerate revenue.

Their increased launch cadence and revenue diversification through Space Systems, which brought in $83.9 million in Q3 2024, marked 55% year-over-year revenue growth.

CEO Peter Beck’s vision to scale beyond small launches, through the development of the Neutron rocket, is the core of their plan to compete with SpaceX.

The company is also moving beyond their origins as a launch provider by transitioning into an end-to-end space company. By owning 64% of the U.S. launch market outside SpaceX, it has found a niche in the small and medium satellite segments. 

While SpaceX dominates the market, their focus on large-scale launches leaves room for Rocket Lab to carve out other opportunities in specialized markets. Rocket Lab’s consistent revenue growth, including a record-setting quarter in Q3, reflects what I think is their strong execution.

Beck's vision aligns with current market trends, where diversification and end-to-end capabilities are necessary to compete in a rapidly evolving industry. This approach is crucial to Rocket Lab’s trajectory as a credible No. 2 player in the space industry. With this, I feel very optimistic about the company’s prospects.

'Two-thirds of our revenue comes from our space systems business. A lot of people see us as a rocket company. It didn't help when we named ourselves Rocket Lab. We're an end-to-end space company, providing spacecraft design and manufacturing services, along with satellite components, flight software, and other things. We're now shoulder to shoulder with the other primes.’

- CEO Peter Beck

What makes Rocket Lab unique

The company’s strategy of reducing launch costs while maintaining flexibility in their service offerings is a different approach in the industry. Historically, Rocket Lab’s Electron rocket had a per-kilogram launch cost of $25,000. With the development of their reusable Neutron rocket, they could get costs to approximately $4,230 per kilogram to make their services competitive with SpaceX's rideshare program, which charges $6,000 per kilogram​. This would be game changing. I think they are on the path to do it.

Neutron's design is geared towards mid-sized payloads and satellite constellations. Its reusable first stage and integrated payload fairing will reduce launch inefficiencies that plague larger vehicles carrying underutilized capacity. With this, small satellite operators and large-scale constellation deployments​ can use the technology efficiently.

“I think most space companies are easily defined as a launch company or a spacecraft or satellite company. What’s unique about Rocket Lab is that we’re both….what makes us even more unique is that we don’t just build the spacecraft, we build the majority of the components that go into the spacecraft. Every reaction wheel or solar panel or even solar cell from a wafer, we produce.”

-CEO Peter Beck

Rocket Lab’s integration of a vertically aligned business model with their proprietary satellite technologies will support their goal of becoming the leading end-to-end space solutions provider while achieving cost parity with SpaceX in key market segments​.

How they are competing against SpaceX 

CEO Beck aims to transition the company from being simply a launch provider into an end-to-end space company where they can introduce various space solutions, including satellite design, manufacturing and on-orbit management.

To do this, Rocket Lab introduced the Neutron as a cost-effective alternative to SpaceX’s Falcon 9 model. This model will pull down costs to approximately $50 million per launch, compared to their rival’s $60 million, which make it appropriate for medium-class payloads​.

The rocket is designed for medium-lift launches to carry payloads of up to 13,000 kilograms to low Earth orbit (LEO). Its predecessor, the Electron, which is now the world’s third-most frequently launched rocket, has a capacity of approximately only 300 kilograms. Neutron integrates new materials and manufacturing technologies for durability and reliability, while the Electron, while pioneering in its use of lightweight carbon composites and 3D-printed engines, was primarily designed for the small satellite market​​. 

CEO Beck also believes that the Neutron as the "last piece of the puzzle" in transforming Rocket Lab into an end-to-end space company to deliver both payload and satellite services over the next five to ten years. 

For Q3 2024, Rocket Lab achieved a revenue of $105 million, marking this 55% year-over-year increase I mentioned before, driven by their launch and space systems segments. Their backlog now stands at $1.05 billion, representing 80% growth compared to the previous year. 

According to CFO Adam Spice, the company expects Q4 2024 GAAP gross margin to range between 26% to 28% and non-GAAP gross margin to range between 32% to 34%. These forecasts reflect improved mix within the company’s space system segment, primarily within satellite manufacturing, and better overhead cost absorption in their launch business. The next quarter’s GAAP operating expenses is projected to range between $84 million and $86 million and non-GAAP operating expenses to range between $75 million and $77 million.

Risks

One of the risks that the company faces is their competition with SpaceX whose dominant position is strengthened by more than 100 launches in 2024 alone, compared to Rocket Lab's 12 launches. In addition, SpaceX benefits from an expansive infrastructure, including a reusable rocket fleet and huge contracts from NASA and the Department of Defense, such as exclusive crew transport to the International Space Station​​.

We think that even if Rocket Lab’s Neutron rocket achieves all their development milestones and launches successfully, they will still trail SpaceX in key metrics, including launch volume, payload capacity, and global market reach. SpaceX's Falcon and Starship rockets also maintain a cost advantage due to economies of scale and advanced reusability, challenging Rocket Lab to remain competitive in pricing​​.

However, being second in the industry is not without its merits. Rocket Lab’s strong foundation—evident in their $1.05 billion backlog and robust growth in space systems—positions them to capture additional market share, especially in specialized payloads and government contracts. Neutron’s targeted design for medium-class payloads may enable Rocket Lab to carve out a niche in 2025​.

Bottom Line

Rocket Lab has established itself as the clear No. 2 in the space industry behind SpaceX, with a strong foundation and a clear growth strategy. CEO Peter Beck’s vision to transition the company into an end-to-end space solutions provider is supported by their innovative Neutron rocket, targeting medium-class payloads and reducing costs. Despite SpaceX’s dominance, Rocket Lab’s $1.05 billion backlog and 55% year-over-year revenue growth position them well to expand market share, particularly in specialized segments to sustain their second place in the space industry behind SpaceX. 

I feel confident that Rocket Lab has the foundation of a successful company and is laying the groundwork to eventually compete with SpaceX. With this, I’m very optimistic about the next 12 months for the company.

Disclosure: At the time of this publication some members affiliated with Marksman Research own stock, options or other interest in RKLB.