Rocket Lab: SpaceX's Most Dangerous Rival?

In the field of rocket launches, Rocket Lab is currently one of the few companies capable of directly challenging SpaceX. Furthermore, Rocket Lab has accumulated industry-leading capabilities not only in rocket launches but also in satellite manufacturing and constellation deployment.

So, how has Rocket Lab accumulated the ability to challenge industry giants? Looking ahead, what is Rocket Lab's future potential, and what are the key changes to watch for? This report will break down these questions.

Detailed Analysis Below

I. What Business Does Rocket Lab Engage In?

Simply put, Rocket Lab is primarily engaged in two businesses: rocket launches and satellite manufacturing and services. However, these two businesses are not separate but closely intertwined. In other words, Rocket Lab offers a full-spectrum service from satellite manufacturing to launch and even operation.

Let's take a look at Rocket Lab's specific products:

A. In Rocketry, Electron Laid the Foundation, and Neutron Challenges SpaceX

1. First is the small rocket Electron, which competes with SpaceX's Falcon 9 through differentiation.

Timeline-wise: Rocket Lab began R&D on the Electron rocket's Rutherford engine in 2013. In 2018, after its second launch attempt, Electron successfully reached orbit, a process that took five years.

Here, we compare the Electron with SpaceX's current mainstream rocket, the Falcon 9. To put it visually, the difference is akin to that between a public bus and a taxi.

The typical advantage of the Falcon 9 is its extreme cost efficiency: for instance, the Falcon 9 can achieve first-stage recovery and launch multiple satellites at once (with a single launch capacity of 17.5 tons to low Earth orbit when recoverable), thereby reducing costs. However, a drawback is that because it launches multiple satellites at once, each satellite must accommodate the overall launch mission, lacking flexibility.

Rocket Lab's Electron rocket has a very small payload capacity, only 300kg to low Earth orbit, and can only launch one satellite at a time. Its advantage is flexibility, allowing for dedicated launch missions for small satellites.

Thus, Electron and Falcon 9 can form a differentiated competitive strategy, filling a market gap. Of course, Electron has also attempted recovery, primarily by capturing the first stage with a helicopter, but has not attempted it again after failures.

2. Rocket Lab's unique technological approach in rocket design is clearly evident in the Electron.

(1) Unlike the Falcon 9, the Rutherford engine utilizes an Electric Pump-Fed Cycle. It uses lithium batteries to drive electric motors, which in turn power the turbopumps. This is more suited for small rockets (requiring simplified structures for miniaturization and less driving energy).

(2) The main components of the Rutherford engine are entirely 3D printed. Rocket Lab's application of 3D printing is even more extensive than SpaceX's. Additionally, it extensively uses carbon fiber. For small rockets, structural weight is a higher proportion, and strength requirements are not as demanding. Applying carbon fiber fully leverages its advantages while mitigating its disadvantages.

3. Neutron directly targets Falcon 9.

Building on the success of Electron, Rocket Lab announced its new rocket, Neutron, in 2021. Neutron directly targets Electron.

This raises a question: Rocket Lab's strategy of differentiating in the small rocket market was highly effective, so why is it now choosing to directly confront SpaceX? We believe there are three reasons:

(1) The market for small rockets is still too small, and lacks cost advantages, especially for commercial customers.

(2) Through Electron and the capabilities and resources accumulated in satellite manufacturing, Rocket Lab has a solid foundation to develop medium-sized rockets.

(3) Neutron does not need to directly compete head-on with SpaceX. After all, the US military and government will not tolerate SpaceX monopolizing the rocket launch market. The Falcon 9 currently has no direct competitor. As long as Neutron can be successfully developed, customers will naturally open their doors to it.

Before launch, rockets undergo a series of tests. First are subsystem tests, primarily engine hot-fire tests, structural static/dynamic tests, and integrated electrical system tests. Then come environmental simulation tests to assess performance under vibration, acceleration, and thermal vacuum conditions. This is followed by post-assembly tests. After testing, launch rehearsals are conducted. Once all preparations are complete, the actual launch follows.

The most critical among these are engine hot-fire tests (static engine ignition), structural tests, and post-assembly tests for overall system compatibility and status. For these items, Neutron's Archimedes engine has undergone multiple hot-fire tests, structural tests have been largely completed at the material and component level, and the launch pad construction is mostly complete.

Rocket Lab previously planned its first launch for the second quarter of 2026, but a rupture during a hydrostatic test of the first-stage fuel tank in January 2026 caused a delay. This was mainly due to manufacturing defects in the supplier's manual lay-up process. The company has now decided to fully transition to Automated Fiber Placement (AFP) for lay-up.

AFP is a process Rocket Lab has widely adopted and has a mature grasp of. The latest progress indicates the first launch is expected in the fourth quarter of 2026.

Here are the progress updates for Neutron disclosed by Rocket Lab:

While Neutron is positioned to compete with Falcon 9, its technical approach still shows distinct differences:

(1) Neutron's fairing, "Hungry Hippo," is integrated with the first stage. After launch, it will release the second stage like a hippo's mouth and then return to the ground with the first stage, which improves fairing recovery efficiency and reduces recovery costs.

(2) Neutron's second stage is housed within the fairing. Unlike other rockets, it does not require a robust interstage structure, allowing for a smaller size. More weight and cost are allocated to the first stage, thereby enhancing the cost-saving effect of first-stage recovery.

4. Rocket Lab Achieves Extreme Vertical Integration.

In the rocket manufacturing sector:

(1) Self-developed and self-produced engines: The aforementioned Rutherford and Archimedes engines are all designed, manufactured, and tested independently by Rocket Lab.

(2) Self-produced main rocket body structures: Rocket Lab owns its carbon fiber material processing plant and possesses industry-leading AFP automated lay-up technology.

(3) Self-developed core components of the GNC system (Guidance, Navigation, and Control system), as well as flight control algorithms and software.

5. Simultaneously, although Rocket Lab started with rocket manufacturing, satellite-related revenue has become the dominant portion.

1. Providing standardized satellite platforms:

Rocket Lab not only produces rockets but, through industrial chain integration, also possesses mature satellite manufacturing capabilities. Based on this, it has developed the Photon satellite platform, enabling it to directly offer turnkey satellite solutions to customers.

Rocket Lab's Photon platform provides mature satellite power, propulsion, attitude control, and even thermal management modules, essentially offering everything except the mission payload.

This means the Photon is essentially a satellite with an "empty seat," ready for direct customer use. It acts as a container where customers can simply install their mission payloads, such as cameras or scientific instruments, akin to "getting on board."

The Photon can support various missions, including remote sensing, observation, IoT, and even deep space exploration.

Here, we can see that a major advantage of the Photon platform is the standardization of satellite manufacturing, enabling rapid delivery and cost-effective mass production.

(2) Self-research, self-production, and external sales of components:

Rocket Lab self-develops and self-produces core satellite subsystems and their components, and directly sells them to customers. This includes, but is not limited to, core GNC system components such as star trackers and reaction wheels, as well as communication systems, separation systems, space photovoltaic systems, and even space software.

Rocket Lab primarily achieves these integrated capabilities through acquisitions and integration. Key acquired companies include:

(3) In the satellite constellation domain, Rocket Lab has the capability to compete with SpaceX in the future. Rocket Lab released the Flatellite satellite platform in February 2025.

The characteristics of this satellite platform are:

a. Extreme standardization. It adopts a modular design with unified standard interfaces, allowing various mission payloads to be quickly integrated, further simplifying manufacturing and integration processes.

b. Extreme flatness. This allows multiple satellites to be stacked closely together like playing cards within a fairing, significantly increasing the number of satellites that can be carried per rocket launch and further reducing satellite launch costs.

For this type of stacked satellite platform, only SpaceX has achieved relative maturity in its application. Blue Origin's Project Kuiper, China's CAS Space, and the Qiansheng constellation also have plans, but they are in relatively early stages.

Combined with its satellite manufacturing platform, Rocket Lab can achieve rapid iteration and extreme cost reduction in satellite manufacturing and launches. Based on this, if it transitions to being a "satellite service provider" in the future, it will have significant advantages and will be fully capable of building its own satellite constellations to compete with SpaceX's Starlink.

II. Why is Rocket Lab So Capable?

1. Unique Qualities of Founder Peter Beck

(1) Deep intuition for technology derived from hands-on involvement:

Peter Beck was fascinated by rockets from a young age. As a teenager, he built rocket-powered bicycles and scooters. He dedicated himself to rocket research for years, foregoing college after high school to apprentice as a tool and die maker at an appliance company. He later worked on yacht projects, but continuously pursued rocket research and experiments in his spare time. Subsequently, Peter Beck worked in composite materials research at a New Zealand research institution.

After founding Rocket Lab, Peter Beck frequently visited the workshop. In the early days of the company, he personally participated in programming, testing, and even welding and other manufacturing tasks.

(2) Typical hands-on style:

Peter Beck previously rejected large rockets and recovery methods. However, after observing market demand shifts and technological advancements, he quickly pivoted and publicly admitted his previous misjudgments.

He also deeply respects commercial logic. He views spaceflight as an industrial service that can be scaled and regularized. Everything he has done since founding Rocket Lab has been aimed at this path, such as identifying and resolutely entering market gaps: namely, the need for micro, dedicated, and high-frequency launches.

Pragmatism is an important trait in manufacturing. For the space industry to become "commercial" spaceflight, it must shed its money-burning characteristic and prioritize cost, efficiency, and other factors. Rocket Lab's model is closer to traditional industrial routes, and Peter Beck understands this very clearly.

(3) Resulting decision-making informed by practice:

On the surface, Rocket Lab's rocket technology might seem unconventional. However, we believe this is largely due to its innovative capabilities born from practical experience. Manufacturing does not necessarily mean following a rigid process.

2. Implemented in Corporate Culture: Pragmatism and Efficiency

(1) Every Rocket Lab product has a clear market positioning. As mentioned above, the Electron rocket is positioned in the miniaturized niche market, pursuing extreme flexibility in its technological approach. The Neutron rocket is positioned for reusability, with its design comprehensively focused on reusability.

(2) Effective vertical integration: As discussed, Rocket Lab has achieved full vertical integration in both rockets and satellites, even selling components externally and effectively integrating acquired assets. It also operates factories and launch sites in both New Zealand and the United States.

(3) High efficiency and rapid iteration: Rocket Lab developed its first rocket, Ātea-1, with only $2 million in R&D expenses, and spent less than $100 million to develop Electron.

With the CEO's hands-on involvement, combined with its own factories, test stands, and launch sites, as well as full vertical integration, Rocket Lab can achieve autonomous control from design to testing and actual flight verification, thus drastically compressing development cycles and enabling rapid iteration.

Rapid iteration is crucial for industries like rocket launches, characterized by continuous technological innovation and where development paths are far from converged.

III. Comparison with Competitors

Rocket Lab's past achievements have already garnered significant market attention. In comparison, is Rocket Lab leading its competitors?

1. Rocket Lab possesses leading launch experience and a high success rate in rocket launches.

Here, we will first set aside SpaceX and compare Rocket Lab with other competitors.

In terms of launch experience, Rocket Lab has more extensive experience than Blue Origin, with a particularly high success rate since 2024. Blue Origin's model is more traditional and methodical. Its commercialization is just beginning. Of course, the market positioning of the two is significantly different, with Blue Origin focusing more on the heavy-lift payload market. Firefly Aerospace also has multiple launch experiences, and its product positioning is similar to Rocket Lab's, but its launch failure rate is as high as 50%.

Next, let's compare the rocket products of each company:

It can be seen that, in terms of progress rhythm, except for Blue Origin, the progress of major industry players like Firefly Aerospace, Relativity Space, and Stoke Space is slow. Among them, Relativity Space and Stoke Space have almost no successful launch experience.

However, it is also important to note that whether from the perspective of the U.S. Space Force and Department of Defense, or NASA, diversifying suppliers as much as possible has always been a key objective.

Companies like Relativity Space and Stoke Space, which lack successful launch experience, can still obtain NSSL Phase 2 and NSSL Phase 3 supply qualifications. Firefly Aerospace continues to cooperate with the U.S. Space Force on TacRS (Tactically Responsive Space) launch missions, sharing tasks with Rocket Lab, despite multiple launch failures.

2. The advantage in satellite manufacturing lies in extreme vertical integration.

The main competitors in the satellite manufacturing sector are shown in the figure below:

From the perspective of satellite manufacturing, compared to its rocket launch business, Rocket Lab finds it difficult to achieve a clear leading edge. However, it still holds several advantages over competitors:

(1) Vertical integration combined with management capability leads to advantages in delivery efficiency and cost. Both York Space Systems and Blue Canyon Technologies are at a disadvantage here, while Apex Space is not as vertically integrated as Rocket Lab.

(2) It also possesses rocket launch capabilities, which none of the other companies have. This helps to further enhance efficiency and cost advantages through a full-spectrum service from satellite manufacturing to launch and operation. Furthermore, since Rocket Lab has both a launch success record and a satellite flight record, cross-validation from both aspects gives Rocket Lab an advantage in "project experience." For some customers, credit endorsement is a key factor, which can further enhance its ability to secure orders.

IV. How to Calculate Market Space

However, the question arises: from a valuation perspective, with a market capitalization approaching $40 billion, if we simply look at Price-to-Sales (PS) ratio, it is no lower than the rumored valuation of SpaceX. From the absolute values of Price-to-Book (PB) and PS, Rocket Lab's valuation is extremely high. This indicates that, based on Rocket Lab's current business progress, the market has already given the listed company relatively optimistic market expectations.

To estimate the future market capitalization potential of the listed company, we must first look at the potential market size:

1. First, let's consider the rocket launch business.

(1) U.S. government and military business first:

Rocket Lab's current revenue is primarily from the United States, and its customers are mainly military and government entities.

NASA's fiscal year 2026 budget is $24.438 billion. According to NASA's previously disclosed budget tables, excluding NASA's own Space Launch System (SLS), space transportation-related items primarily fall under Space Operations' Space Transportation and Exploration's Commercial Moon and Mars Infrastructure and Transportation projects. These two combined account for approximately 11.4% of the total budget. Assuming the space transportation-related budget, excluding SLS, accounts for about 10% of the total budget, this corresponds to $2.4 billion.

The U.S. Space Force's fiscal year 2026 budget is $26 billion. Items related to rocket launches mainly include rocket launches under SDA's PWSA and NSSL rocket launch missions. This portion is estimated to account for about 10% of the total budget, corresponding to approximately $2.6 billion.

Of course, there will be future variables, including the incremental demand generated by the space arms race for rapid network deployment and responsive launches by the Space Force, such as the continuous expansion of military low-orbit satellite numbers under the PWSA (Proliferation Warfare Space Architecture) project. Additionally, the pace of NASA's lunar and Mars programs may also change.

Overall, the U.S. official market size is estimated to be around $5 billion per year. Assuming Rocket Lab, as a third or fourth supplier, can capture 20%/10%, this would correspond to revenue volumes of $1 billion/$500 million, respectively.

(2) Then, consider the commercial space market:

Rocket Lab's current orders are predominantly from the military and government. This is partly because Rocket Lab's main rocket, Electron, is miniaturized and better suited for certain government and military needs, as they require rapid launch capabilities and dedicated launches enhance confidentiality, making them less sensitive to cost. However, commercial projects are more cost-sensitive, and the high per-launch cost of Electron makes it relatively less competitive.

However, if Neutron is successful in the future, especially if it becomes reusable, it will not only enable Rocket Lab to undertake large payloads and deep space missions for the government and military but also enhance Rocket Lab's competitiveness in the commercial market.

Referencing SpaceX, in 2025, it will undertake 20 commercial missions, with each launch costing $62 million, resulting in revenue of approximately $1.24 billion. If Rocket Lab's Neutron rocket is successful, it should target this business volume.

2. Satellite and component sales business

NASA budget: In NASA's submitted FY2026 budget, projects related to spacecraft, including satellites, account for over 30% of the budget. Of course, a significant portion of this cost is for payloads (such as various scientific instruments) and launch-related expenses. Assuming the cost of satellite bodies/platforms accounts for 20%, this corresponds to 6% of the total budget, or approximately $400 million.

This includes the Orion crewed spacecraft, Gateway lunar orbital outpost, Human Landing System, etc. For these projects, even if Rocket Lab does not directly provide complete spacecraft, it can supply components.

U.S. Space Force budget: This primarily involves the tracking and transport layers of SDA's PWSA project. The U.S. Space Force is expected to launch approximately 120 satellites in 2026, mainly for the transport layer, with each satellite costing between $15 million and $40 million. Assuming an average of $30 million per satellite, the total amount would be $3.6 billion. Considering other projects, this would account for about 15% of the total budget, or nearly $4 billion.

Combined, these two amount to approximately $4.4 billion. Assuming Rocket Lab captures 20%, this would correspond to an annual revenue of nearly $900 million.

Of course, this only accounts for military and government revenue. In the satellite manufacturing sector, Rocket Lab can also generate revenue from commercial orders.

3. Beyond the United States, Rocket Lab's customers are located worldwide.

From a regional perspective, the U.S. consistently accounts for the largest share, but Canada and Japan also represent significant proportions.

Revenue from Canada mainly comes from the sale of components such as reaction wheels and star trackers by Sinclair Interplanetary, a Canadian company acquired by Rocket Lab. Its customers include Canadian aerospace giant MDA Space, among others.

Revenue from Japan primarily stems from orders from several Japanese constellation operators, including companies like Synspective and iQPS.

Considering the shortcomings in rocket launch capabilities in these countries and regions, Rocket Lab is expected to continue securing orders from countries outside of China and the United States.

4. Satellite constellations and operations business

Currently, Rocket Lab has not made plans in this area. However, based on the capabilities accumulated by the company, entering this field in the future will not pose significant obstacles. Referencing SpaceX, Starlink revenue currently accounts for about 60-70% of SpaceX's total revenue, suggesting that the satellite operations business could become Rocket Lab's largest revenue segment in the future.

V. Assessment of Market Value and What to Watch For in the Future

Through the market space estimations above, we can see that considering only the rocket launch and satellite businesses, and given Rocket Lab's current annual revenue of just over $600 million, its revenue volume is still very small compared to the potential market space, indicating immense growth potential.

Concurrently, as mentioned earlier, whether considering absolute values or comparing with SpaceX, Rocket Lab's current valuation appears to be quite high.

So, where does the future potential for divergence lie?

(1) The primary factor is the progress of Neutron. The success or failure of Neutron will determine whether Rocket Lab can compete at the same level as SpaceX. Currently, we believe the certainty of this is very high, it's only a matter of time.

Furthermore, compared to its peers, excluding SpaceX and Blue Origin, Rocket Lab's progress is leading other competitors, and the gap is widening. Of course, this excludes Chinese competitors, but considering geopolitical factors, Chinese competitors are unlikely to directly impact Rocket Lab.

(2) On this basis, the focus will be on Rocket Lab's ability to secure orders from the U.S. military and government, commercial clients, and overseas markets. This, of course, also depends on Neutron's progress. While the certainty is there, the main question is how much it can secure.

Moreover, there is no need to worry about profitability. As revenue scales, a clear improvement in gross margins and dilution of various expenses will be evident.

Here, we will make a time projection. SpaceX was founded in 2002. Its first commercial rocket, Falcon 1, successfully launched in 2008. Falcon 9 was successfully launched in 2010, followed by a successful recovery in 2015.

Rocket Lab was founded in 2006. Its first commercial rocket, Electron, successfully launched in 2018. This took a considerable amount of time, but it was due to Rocket Lab initially having far fewer resources than SpaceX. However, Rocket Lab now has better resources and a stronger foundation.

Let's assume, therefore, that there is a generational gap of about 10 years between Rocket Lab and SpaceX.

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Markets are subject to risks, and investments require caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at your own risk.