The Business Model (How They Make Money)

Rocket Lab USA, Inc. (RKLB) operates in the exciting and rapidly growing space industry. Think of them as a company that helps get things into space and then helps those things work once they are there. Their core business has two main parts:

1. Launch Services: This is where Rocket Lab makes money by literally launching satellites into orbit for customers. They primarily use their smaller "Electron" rocket, which is designed for dedicated missions carrying smaller satellites. They are also developing a larger rocket called "Neutron" to carry bigger payloads and potentially humans to space. They charge customers for each launch.
2. Space Systems: This part of the business is about building the actual "stuff" that goes into space or helps manage it. This includes making components for satellites, building entire satellites themselves, and providing services to operate spacecraft once they are in orbit. Essentially, if you need a part for your satellite or a whole satellite built, Rocket Lab can do it.

In 2025, Rocket Lab generated a total revenue of $397.6 million. The majority of this revenue came from their Space Systems segment, which brought in $240.2 million, representing about 60.4% of their total revenue. Their Launch Services segment contributed $157.4 million, or approximately 39.6% of the total revenue.

The Metrics That Matter Most

For a company like Rocket Lab, which is at the forefront of space technology and still growing rapidly, certain financial numbers give us a clearer picture of its health and future potential.

1. Revenue: This is the total amount of money Rocket Lab brings in from selling its launch services and space systems. For a growth company, watching revenue is like checking the speedometer on a car – it tells you how fast the business is expanding. Since Rocket Lab is in a growing industry, consistent revenue growth shows they are capturing more market share and successfully selling their services and products. In 2025, Rocket Lab's revenue was $397.6 million.
2. R&D Expenses (Research & Development Expenses): This metric shows how much money Rocket Lab is spending on creating new technologies, improving their rockets, and developing new space systems. In a high-tech industry like space, innovation is key. High R&D spending indicates the company is investing in its future, which is crucial for staying competitive and developing next-generation products like the Neutron rocket. Rocket Lab's R&D expenses were $130.4 million in 2025.
3. CapEx (Capital Expenditures): This refers to the money Rocket Lab spends on buying, maintaining, or improving its physical assets, such as manufacturing facilities, launch pads, and rocket production equipment. Building rockets and operating launch sites is very capital-intensive. Tracking CapEx helps us understand how much the company is investing in its infrastructure to support future growth and increase its capacity for launches and space systems production. Rocket Lab reported capital expenditures of $105.7 million in 2025.
4. Operating Cash Flow: This number tells us how much cash the company's core business activities are generating before accounting for investments or financing activities. For a growing company that requires significant investment, seeing positive and growing operating cash flow is a good sign that their day-to-day operations are becoming more efficient and are starting to fund themselves, rather than relying solely on external funding. Rocket Lab's operating cash flow was -$103.7 million in 2025, indicating that their operations currently consume cash.

How to Value This Company

For a company like Rocket Lab, which is still heavily investing in growth and may not yet be consistently profitable, a good way to figure out if its stock is cheap or expensive is by looking at its EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization) ratio.

EV/EBITDA helps us compare the total value of the company (its "Enterprise Value," which includes both its stock market value and its debt, minus its cash) to its operating earnings before certain non-cash expenses like depreciation and amortization.

Here's why it's useful for Rocket Lab:

• Focuses on Core Operations: EBITDA strips out things like interest payments (which depend on how a company is financed) and taxes. It also removes depreciation and amortization, which are accounting adjustments for the wear and tear of assets. For a company like Rocket Lab with lots of physical assets (rockets, factories) that depreciate, EBITDA gives a clearer picture of the cash-generating ability of its actual business operations.
• Good for Capital-Intensive Businesses: Since Rocket Lab needs to spend a lot on equipment and facilities (high CapEx), its net income might look low due to high depreciation. EV/EBITDA helps us look past these accounting charges to see the underlying operational performance.
• Compares Apples to Apples: It allows us to compare Rocket Lab to other companies in the space industry, even if they have different debt levels or tax situations, giving a more standardized view of their operational value.

In simple terms, a lower EV/EBITDA ratio generally suggests the company might be undervalued compared to its operational earnings, while a higher ratio might suggest it's overvalued. Investors use this to see how many "years of EBITDA" it would take to buy the entire company.