Rocket Lab Shares Soar on Defense Contracts and Strategic Shift

Rocket Lab USA's equity surged to a record high of $91.80 on Tuesday, a move driven by a fundamental reassessment of the company's strategic position rather than transient news. A pivotal $816 million contract from the U.S. Department of Defense and a high-profile visit from Defense Secretary Pete Hegseth have effectively propelled the aerospace firm into the upper echelon of strategic U.S. defense partners.

The company's business model is undergoing a significant shift that has captured investor attention. For the third quarter of 2025, the Space Systems division generated $114.2 million in revenue, accounting for approximately 74 percent of total company sales. The total backlog now exceeds $1.1 billion, split between Space Systems (53 percent) and Launch Services (47 percent).

Overall quarterly results were solid: total revenue reached $155.08 million, surpassing expectations of $152.45 million and representing 48 percent year-over-year growth. The company reported a loss per share of -$0.03, an improvement over the anticipated -$0.05.

Securing a Place Among Defense Giants

In December, Rocket Lab secured the largest contract in its history—an $816 million award from the Space Development Agency for 18 missile-tracking satellites. Crucially, the selection placed Rocket Lab alongside established defense industry leaders L3Harris, Lockheed Martin, and Northrop Grumman. This partnership signals the company's evolution from a startup to a full-fledged contractor for national security missions.

The total contract value with the Space Development Agency now surpasses $1.3 billion, sending a clear signal to institutional investors about Rocket Lab's emergence as a serious player in the defense sector.

Should investors sell immediately? Or is it worth buying Rocket Lab USA?

The Neutron Catalyst on the Horizon

Management has announced plans to launch its Neutron rocket in the first quarter of 2026. This reusable medium-lift launch vehicle, designed to carry roughly 15 tons of payload to low-Earth orbit, will position Rocket Lab in direct competition with SpaceX's Falcon 9. The Neutron program is expected to unlock the market for large satellite constellations and further defense-related contracts.

Analyst sentiment, however, lags the recent share price performance. In late December, Needham raised its price target from $63 to $90, while KeyCorp maintains a $75 target with an "Overweight" rating. The average analyst price target sits near $73, notably below the current trading level. Of eleven current ratings, eight are positive, three are neutral, and none are negative.

Insider Sales Follow Pre-Arranged Plans

Over the past 90 days, corporate insiders sold approximately 4.2 million shares worth about $262 million. Notably, CFO Adam Spice divested 1.365 million shares for around $103 million on January 5. These transactions were executed under Rule 10b5-1 automated trading plans, established months in advance. Spice's plan was initiated on September 19, 2025, well before the recent contract announcements.

A Vote of Confidence from the Pentagon

On January 9, Defense Secretary Pete Hegseth visited Rocket Lab's headquarters as part of his "Arsenal of Freedom" tour. The itinerary featured only three companies: Lockheed Martin, SpaceX, and Rocket Lab—a notable endorsement of the firm's strategic importance.

The stock's performance has been remarkable, gaining nearly 247 percent since January 2025, with a 65.5 percent advance in December alone.