Rocket Lab: $5.6 Billion Defense Contract Fuels RKLB’s Future

Key Points

• Rocket Lab has been awarded a spot in the National Security Space Launch (NSSL) Phase 3 contract, allowing it to compete for U.S. Department of Defense (DoD) launch orders.
• The company recently announced the successful completion of Neutron’s Stage 2 qualification.
• Citi analysts reiterated their Buy rating on RKLB with a $33 price target, citing the company’s earlier-than-expected inclusion in the NSSL contract.

Rocket Lab USA NASDAQ: RKLB recently made headlines after landing a $5.6 billion National Security Space Launch (NSSL) Phase 3 contract, marking a significant expansion of its defense and government contract portfolio. The award also signals strong confidence in Neutron, the company’s highly anticipated medium-lift rocket, reinforcing Rocket Lab’s growing role in the national security space sector.

The news comes at a critical time for investors. Rocket Lab’s stock has struggled in 2025, down nearly 45% from its 52-week high and close to 30% year-to-date. However, despite the recent pullback, shares remain up over 300% over the past year, following an explosive rally throughout 2024. Could this latest development help reverse the stock’s decline? Let’s take a closer look.

Department of Defense Awards Major Contract to Rocket Lab

On March 27, the Department of Defense (DoD) announced that Rocket Lab National Security LLC had been awarded a multiple-award, firm-fixed-price, indefinite-delivery/indefinite-quantity (IDIQ) contract with a maximum ceiling of $5.6 billion. This contract allows Rocket Lab to compete for National Security Space (NSS) Launch Phase 3 orders, placing it alongside SpaceX, Blue Origin, and United Launch Alliance (ULA) as an eligible launch provider. At the time of the award, $10 million was obligated to Rocket Lab.

Importantly, the contract does not immediately contribute to Rocket Lab’s backlog; it simply qualifies the company to compete for task and delivery orders. Rocket Lab will be using its Neutron rocket, a vehicle still in development, for these launches. Its first test flight is expected in late 2025, and commercial launches are anticipated in 2026.

This contract expands Rocket Lab’s presence in the defense and national security space and also strengthens Rocket Lab’s standing with NASA, as Neutron is already included in the agency’s Venture-Class Acquisition of Dedicated and Rideshare contract. With two major DoD programs and a key NASA initiative, this award cements Rocket Lab’s growing importance in government-backed spaceflight.

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Rocket Lab Advances Neutron Development

Alongside the contract news, Rocket Lab recently announced on X (formerly Twitter) a significant milestone in Neutron’s development. The company successfully completed Stage 2 qualification, a crucial step toward the rocket’s first launch. According to the post, Stage 2 qualification proved the stage's design, operations, and readiness for flight.

Neutron, a fully reusable medium-lift rocket, is designed to compete in the growing commercial and government launch market. It will launch from Rocket Lab’s facility in Wallops Island, Virginia, with its maiden test flight slated for the second half of 2025. However, the project has faced some skepticism, particularly after a February 2025 short report from Bleecker Street Research suggested that infrastructure and logistical hurdles could delay its debut until 2026 or 2027.

Despite these concerns, Rocket Lab’s progress on Neutron’s second-stage testing suggests the company remains on track for its timeline. If successful, Neutron would position Rocket Lab as a formidable competitor in the medium to heavy-lift launch segment, currently dominated by SpaceX.

Citi Reaffirms Buy Rating on Rocket Lab

Following last week's news, Citi analysts reiterated their Buy rating on RKLB, maintaining a $33 price target.

This bullish stance follows Rocket Lab’s selection for NSSL Phase 3, which Citi views as a key growth catalyst.

Citi analysts were particularly encouraged by Rocket Lab’s inclusion in the DoD’s competitive launch process earlier than expected.

Initially, they anticipated that Rocket Lab would be added after Neutron’s maiden flight.

Instead, the DoD’s confidence in Rocket Lab’s future launch capability has led to its early selection, increasing its growth potential in the national security space market.

It also signals growing trust in Rocket Lab’s long-term strategic value.