Rocket Lab’s Financial Trajectory
We’re looking at Rocket Lab’s profits, revenues, and costs to see how sustainable their strategy is.
This article presents our views and analysis only and does not constitute investment advice or a recommendation.
In our previous article, we explored Rocket Lab’s products and market position. This time, we turn our attention to the company’s financials — where the story shifts from products to hard numbers.
Revenue Breakdown
Rocket Lab’s revenue comes from two core segments:
Launch Services – based on Electron and (soon) Neutron rocket launches
Space Systems – satellite components, complete spacecraft platforms, and mission services
Space Systems has become the dominant revenue contributor in recent years. However, the current backlog tells a different story, signaling shifts in Rocket Lab’s growth dynamics that are worth exploring in more detail.
Rocket Lab’s Revenue Growth Journey (2020–2024)
Rocket Lab’s revenue story shows how the company grew from a focused rocket launch provider into a full-fledged space systems player. In the early days, most of the growth came from more frequent launches and early satellite projects. Later, things really took off as Rocket Lab expanded into broader space systems. Growth then leveled out a bit as the company matured — but in recent years, it picked up again thanks to scaling, new contract wins, and a wider range of services. Here's how that journey looks in numbers and per segment:
2020–2021: Getting Off the Ground (↑77%)
Rocket Lab grew from $35M to $62M as more customers started trusting Electron for small satellite launches. Space systems started contributing revenue for the first time, showing the first signs of a more integrated business model.
2021–2022: The Big Leap (↑239%)
Revenue exploded to $211M — mostly thanks to a massive jump in satellite manufacturing. Space systems grew over 500% as Rocket Lab moved beyond launches and started delivering full-stack space solutions.
2022–2023: Steady Climb (↑16%)
Growth slowed to $245M. Launch and satellite services both kept growing, but this was a year of scaling up operations and laying the groundwork for what’s next.
2023–2024: Back in High Gear (↑78%)
Revenue surged to $436M. Both launch and space systems grew strongly, boosted by big contracts, more launch cadence, and demand for satellite constellations. Rocket Lab’s dual-engine model really started to show its strength here.
Each year shows a slight increase in the percentage of launch services, and this trend is expected to continue based on the current backlog.
Cost Efficiency: Rocket Lab's Secret Engine Isn’t Just Rockets — It’s Efficiency
Rocket Lab has been investing heavily from the start, so its costs have often outpaced revenue — and that’s still true today. That’s normal for a company still ramping up. Back then (in 2020), the cost of revenue was 134% of sales.
Fast forward to 2024, and that number has dropped to just 73%. That’s a big shift — and it shows that Rocket Lab is getting more efficient as it grows.
What’s driving this improvement?
Scaling up: More launches and satellite deliveries mean better economies of scale. Costs per unit drop when you’re producing and launching more often.
Doing it all in-house: Rocket Lab controls much of its supply chain — from components to launch pads — which helps cut costs and protect margins.
Getting better with time: More experience means smoother operations, fewer delays, and more efficient production across the board.
By 2023 and especially 2024, the company wasn’t just growing revenue — it was doing so more profitably, which we will touch on in the profitability section.
Rocket Lab’s R&D spend has grown 9x from 2020 to 2024, driven by the development of key technologies:
Neutron rocket development: The next-generation, medium-lift rocket requires heavy upfront engineering costs.
Spacecraft platforms & components: Expansion into satellite buses, propulsion systems, and mission software has required sustained innovation.
Defense & deep space tech: R&D includes work on advanced payloads, interplanetary missions, and national security projects.
Despite revenue growing significantly, R&D as a percentage of revenue has remained high (40%+ in four of five years 2020-2024), showing Rocket Lab’s long-term commitment to innovation and platform expansion.
Rocket Lab has implemented cost-saving measures such as robotic manufacturing systems and 3D printing to streamline production processes and reduce expenses. These innovations have contributed to the overall cost efficiency of the Electron rocket.
Rocket Lab depends on critical materials like carbon fiber composites, rare elements for solar cells and avionics, and specialty chemicals for propulsion. During 2024 and into 2025, prices for some materials rose moderately due to supply chain constraints and volatile energy markets, adding some cost pressure.
The company’s vertical integration of key components—such as propulsion systems, avionics, and solar arrays—helps mitigate these cost increases by controlling manufacturing internally. However, certain specialized sensors and commodity parts continue to be sourced externally.
Also, a large part of production takes place in Australia, which provides a strategic advantage by reducing exposure to tariffs and global supply chain disruptions, helping to stabilize overall costs despite market fluctuations.
Profitability: Margins Up, Profits Not Yet
Gross margins for Electron are currently in the upper 20s, but the company aims to exceed 40% as it scales cadence.
Rocket Lab's gross profit margin improved significantly between 2020 and 2024. The graph below shows gross profit beginning to rise in 2021, driven by increased sales from the space systems segment.
To zoom in a bit on the quarters, here’s how the gross profit margin increased by segment.
Quarter-over-quarter Q1 gross margin increase was driven by improved mix within our satellite manufacturing business, partially offset by decreased launch margin due to a lower launch ASP in the quarter.
Rocket Lab has not yet reached profitability. In the long term, its first profitable years are expected to fall around 2027–2028, contingent on the successful rollout of the Neutron launch vehicle and a reduction in R&D spending.
Looking at absolute figures, all profit lines have trended downward over the past five years - an outcome that reflects the growing scale and complexity of operations as the company invests heavily in infrastructure, talent, and technology.
When it comes to profitability, Rocket Lab is clearly in transformation mode. One thing worth zooming in on: R&D spending. For space-tech companies, R&D is the engine — and it burns a lot of fuel. These companies have to pour huge amounts of capital into research long before they see returns. That’s exactly what’s happening here: R&D costs have climbed significantly in 2023 and 2024, especially as a percentage of sales.
Back in 2020, Rocket Lab was running with a negative EBITDA margin of –130% — no surprise for a young space company dealing with early-stage inefficiencies and steep production costs. Fast-forward to 2022–2024, and the margins are steadily improving. That’s a strong signal of growing operational discipline and leverage — especially as their higher-margin Space Systems segment starts to take center stage. It’s not profit yet, but the trajectory looks a lot more orbital than grounded.
Launch: From Burning Cash to Building Margins
Over this longer period, revenue per launch has shown a generally upward trend, starting around 6.6 and reaching peaks of 8.5, with some fluctuation. At the same time, cost per launch started higher than revenue—around 7.3–7.5—but gradually declined, dropping to as low as 5.0–5.2 in some quarters. There's a noticeable cost spike to 10.5, likely an outlier due to a special or low-volume mission.
The key shift occurs mid-series: while early quarters saw costs exceed revenue, the trend eventually reversed, indicating improving unit economics and possibly better economies of scale or more efficient operations. From that point on, the company maintained a healthy positive gross margin per launch.
Q1 2025 – Scaling Up, Margin Mix, and Cadence is King
The Q1 2025 update highlighted one key principle: cadence is everything. Launch frequency directly impacts overall efficiency, particularly due to the high fixed costs associated with the New Zealand launch site. When launch activity slows, those fixed costs weigh on margins. Conversely, increasing cadence spreads costs more effectively, improves average selling prices (ASPs), and strengthens the launch business’s financial health.
Sales jumped 32% in Q1 2025 compared to last year, mostly fueled by a stellar 45% boost in space systems as can be seen in below chart.
Launch margins softened somewhat this quarter as seen in the above chart in the profitability section, primarily driven by a lower launch rate and a slightly less favorable ASP mix. Some volume launch contracts are offered at more aggressive pricing, designed to build long-term partnerships and create steady, repeatable launch operations—an approach expected to pay dividends over time.
Looking ahead, expectations are for improved launch margins in the second half of 2025, fueled by higher launch cadence and an improved pricing mix.
On the Space Systems side, margins showed improvement in Q1, a trend anticipated to continue as this segment gains traction with increasing sales of higher-margin components.
While total backlog remained relatively stable over the past year, launch backlog saw significant growth, increasing 98% year-over-year in Q1 2025 and rising by 18.8 percentage points as a share of the total backlog.
Backlog and future opportunities were also addressed, with confidence in the pipeline and a watchful eye on market opportunities, including distressed assets.
Discussion around Mynaric revealed a company with a strong product and substantial capital but challenges in scaling production. The ability to efficiently ramp manufacturing aligns well with existing component strategies and offers potential to enhance overall margins.
Free cash flow is expected to remain negative until the first Neutron launch, anticipated by the end of 2025. However, signs are emerging of a cohesive strategy: increased launches, improving margins, and a clearer trajectory toward profitability.
In summary, the financial picture highlights a company in the midst of scaling and transformation. While profitability remains on the horizon, improving margins, growing launch cadence, and strategic investments in space systems signal strong momentum. The focus on operational efficiency and expanding backlog provides a solid foundation as the company prepares for the Neutron launch and the next phase of growth. As always, ongoing execution will be key to turning these promising trends into sustained profitability.