After Last Year's 174% Surge, Rocket Lab Faces Critical Test in 2026

When Rocket Lab stock climbed 174% in 2025, it captured the imagination of growth investors seeking exposure to the commercial space economy. This remarkable run wasn’t merely speculative momentum—it reflected genuine improvements in the company’s operational performance and a broader shift in market sentiment around space infrastructure. Yet as we navigate 2026, the critical question isn’t whether Rocket Lab’s business is improving, but whether its 174% ascent has already priced in much of the good news ahead.

The Financial Foundation Behind the 174% Rally

Rocket Lab’s business expansion tells a compelling story through hard numbers. Over the first nine months of 2025, the company generated $422 million in revenue, representing 39% year-over-year growth. More impressively, gross profit nearly doubled, climbing from $79 million to $140 million in the third quarter—a trend that validates management’s operational execution.

The company’s $510 million backlog has grown 56% annually, providing visibility into future revenue streams and helping management optimize costs. These metrics demonstrate that Rocket Lab isn’t just a launch services provider; it operates across a diversified space value chain encompassing spacecraft design, component manufacturing, and specialized aerospace services.

However, the path to profitability remains unfinished. Capital-intensive manufacturing, long development cycles, and the lag between contract award and revenue recognition mean Rocket Lab still operates at a loss. The positive signal: losses are narrowing. Per-share losses improved from ($0.10) in Q3 2024 to ($0.03) in Q3 2025—proof that scale and efficiency gains are materializing.

Why Markets Suddenly Rewarded Space Stocks

The 174% jump wasn’t driven by Rocket Lab’s fundamentals alone. A critical catalyst emerged in the form of SpaceX’s valuation trajectory. During 2025, SpaceX completed a tender offer valuing the company at $400 billion (up from $350 billion at year-end 2024), followed months later by a secondary transaction pushing valuation to $800 billion.

These milestones validated the commercial space sector in the eyes of institutional investors. Rather than viewing space exploration as speculative fringe, capital began flowing toward vertically integrated players positioned across multiple segments of the aerospace value chain. Rocket Lab, occupying the intersection of launch services, satellite components, and defense contracting, attracted investor interest as a potential “next SpaceX” play.

The connection between SpaceX’s valuation boom and Rocket Lab’s 174% rise isn’t coincidental—it reflects a fundamental shift in how the market perceives space infrastructure as an essential economic driver rather than a curiosity.

The X-Factor: Will SpaceX Go Public?

Market watchers have long debated whether SpaceX will pursue an IPO in 2026. Yet recent commentary from prominent Silicon Valley investor Chamath Palihapitiya introduces an alternative scenario: SpaceX might reverse merge into Tesla rather than going public independently.

A reverse merger—where a private company merges with an existing public company—would allow Elon Musk to consolidate his portfolio (Tesla, SpaceX, and xAI) under a single holding structure. For Musk, this aligns with a long-stated vision of controlling sustainable energy, autonomous systems, AI, and space exploration under one roof.

Should this scenario materialize, Rocket Lab investors need not panic. The company’s fundamental business model remains intact. However, if SpaceX opts for a traditional IPO instead, adjacent players like Rocket Lab could experience a pullback—potentially driven by emotion rather than deteriorating fundamentals. An IPO would satisfy investor appetite for direct SpaceX exposure, potentially redirecting capital away from proxy plays.

Valuation Reality in 2026

The elephant in the room: can Rocket Lab stock sustain its 174% appreciation? After such explosive growth, reversion to market means isn’t just possible—it’s statistically likely.

The company faces a valuation challenge. While 39% revenue growth is healthy, it doesn’t justify the extreme multiples some growth stocks command in frothy markets. Rocket Lab’s path to profitability—though visible—will require patient capital and continued market expansion.

For conservative investors, the 174% rally presents a tactical problem. Buying at all-time highs after such a surge introduces significant downside risk. A pullback to more normalized levels—a 20-30% correction from recent peaks—wouldn’t be unusual given the magnitude of the prior advance.

Risk-tolerant investors with conviction in the space economy’s long-term potential might hold positions or add on weakness. For others, waiting for a more attractive entry point represents the prudent approach.

The Investment Framework for 2026

Success in 2026 depends on several variables:

Business execution: Can Rocket Lab sustain 30%+ revenue growth while narrowing losses further? Q1 2026 results will be critical.

Market psychology: Does SpaceX’s eventual outcome (IPO vs. merger) redirect capital toward or away from Rocket Lab?

Competitive landscape: Are other space infrastructure players gaining ground, or does Rocket Lab maintain its edge?

Valuation normalization: At what price-to-sales or price-to-revenue multiple does the market settle for Rocket Lab?

Rocket Lab remains a legitimate long-term opportunity in an expanding space economy. However, the 174% rally already captures much optimism. Investors should view 2026 as a year of selective opportunity rather than blanket accumulation—waiting for clearer visibility on these key variables before deploying significant capital.