Key points
- Rocket Lab's Neutron misses another launch target
- Peter Beck explains the Neutron tank flaw
- What Rocket Lab's slide means for Iridium shareholders
Rocket Lab (RKLB) expects Neutron's first launch to slip into 2027 after finding a manufacturing flaw in its first-stage propellant tank. The reusable medium-lift rocket had been scheduled to debut in the fourth quarter of 2026.
Shares fell 6.6% to $55.25 on October 15, recovering some ground after dropping as much as 16% during the session. Rocket Lab announced the delay after markets closed on October 14. Neutron originally targeted a 2024 debut when the company unveiled it in 2021.
Small gaps between the tank's carbon-fiber layers
Engineers found small air gaps, known as voids, between the carbon-fiber layers of the dome that caps the first-stage tank. Chief executive Peter Beck said the flaw didn't necessarily mean the dome would fail in flight, but Rocket Lab would replace it before proceeding.
"Possible success isn't our standard," Beck said in a video update. "Our practice is to proceed only when we believe the system has the appropriate margins."
Rocket Lab has changed its manufacturing process and is building a replacement dome. It's also bringing forward upgrades originally planned for later flights.
Testing will extend into the first quarter of 2027, when the company expects to assemble the first stage. Rocket Lab plans to set a launch date after that work.
How Neutron's schedule has moved
| Date | What changed |
|---|---|
| 2021 | Neutron unveiled with a 2024 first-flight target |
| November 10, 2025 | First launch moved into 2026 |
| January 2026 | A first-stage tank ruptured during hydrostatic testing |
| February 26, 2026 | First launch set for the fourth quarter of 2026 |
| August 10, 2026 | Stage 1 tank production aligned with delivering Neutron to the launch pad in the fourth quarter |
| October 14, 2026 | First launch moved into 2027 |
Beck had warned on the August 10 earnings call that "the window for an end-of-year launch is narrowing."
Why Neutron matters to Rocket Lab
Rocket Lab's launch revenue comes from its small Electron rocket and HASTE, a suborbital version of it. Neutron is designed to carry 13,000 kilograms to low Earth orbit on nine Archimedes engines, which puts it in the medium-lift market led by the Falcon 9 from SpaceX (SPCX).
Across its business, Rocket Lab reported a record $2.36 billion backlog in its second-quarter results, up 137% from a year earlier. It also had more than 90 launches under contract across its launch programs.
The release also listed a $397 million contract from the U.S. Space Force for Flatellite spacecraft that are set to launch on Neutron.
In May, Rocket Lab signed what it called its biggest launch deal yet, with an unnamed customer. It covers five dedicated Neutron launches and three Electron launches, scheduled between 2026 and 2029.
Where analyst targets stand
| Firm | Rating | New target | Old target |
|---|---|---|---|
| KeyBanc | Overweight | $100 | $135 |
| Clear Street | Buy | $105 | $129 |
| Cantor Fitzgerald | Overweight | $122 | $122 |
| TD Cowen (October 9) | Buy | $90 | $120 |
KeyBanc analyst Michael Leshock tied his cut to one fewer revenue-generating Neutron launch in 2027 and to lower valuations across fast-growing space companies. Gautam Khanna of TD Cowen lowered his target five days before the delay was announced.
Space stocks were already falling
Rocket Lab had dropped 7.9% on October 14, to $59.18, before the Neutron update came out. AST SpaceMobile (ASTS) fell 10.5% the same day after Piper Sandler cut its price target to $54, citing competition from SpaceX. SpaceX closed at $148.62 on October 15, down from $163.42 on October 12.
Over the two sessions, Rocket Lab fell 14%. Its October 15 close was its lowest since December 17, 2025. The stock is down 20.8% this year and 63% below its record close of $150.23 on May 27. Space stocks also fell together with SpaceX in late July.
What the drop means for the Iridium deal
Rocket Lab is buying Iridium Communications (IRDM) for $27 in cash plus Rocket Lab stock for each Iridium share. When Rocket Lab's measured price is $67.50 or lower, the stock portion is fixed at 0.4000 Rocket Lab shares. Below that price threshold, further declines in Rocket Lab shares reduce the stock portion's value. Rocket Lab was already trading below the threshold in September.
Using Rocket Lab's October 15 closing price and the maximum exchange ratio of 0.4000, the consideration would be worth $49.10 per Iridium share, compared with the announced $54 headline value. The actual exchange ratio depends on Rocket Lab's 10-day volume-weighted average price before closing, which both companies expect in mid-2027. Iridium closed at $44.99.
Rocket Lab has guided third-quarter revenue to between $250 million and $265 million.
