Key Points
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Rocket Lab’s expanding spacecraft business and proposed Iridium acquisition could unlock new growth.
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Planet Labs’ recurring data contracts and growing government business support its long-term potential.
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Premium valuations and capital-intensive expansion could limit shareholder returns for both stocks.
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The next phase of the space economy extends beyond rocket launches to building satellite networks and selling the information they produce.
Rocket Lab (NASDAQ: RKLB) is expanding beyond rocket launches and spacecraft manufacturing, while Planet Labs (NYSE: PL) is turning Earth-observation data into intelligence products.
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Rocket Lab is building more in the space economy
Rocket Lab’s business extends well beyond launching rockets. In the second quarter of 2026, the company’s revenue increased 62% year over year to $234 million. Its space systems segment, which manufactures satellites and components, contributed $189.5 million, or nearly 81% of total revenue. Launch services accounted for the remaining $44.6 million.
The company has been benefiting from customers building and expanding satellite networks. The company exited the second quarter with a nearly $2.4 billion billion backlog, of which around 60% was attributable to space systems. In August 2026, the company also secured a U.S. Space Force contract worth up to $397 million. The contract includes options to develop, launch, and operate satellites for tracking airborne threats.
However, growing spacecraft sales alone may not translate into significantly higher profitability. Space Systems earned nearly 96% of its second-quarter revenue from products rather than services. The segment’s gross margin of approximately 34.6% was also lower than launch services’ 42.8%.
The proposed acquisition of Iridium Communications (NASDAQ: IRDM) could change Rocket Lab’s revenue mix. Iridium generated $245.7 million in third-quarter revenue. The company’s services accounted for around 76% of the total revenue. Iridium’s nearly 2.7 million billable subscribers would give Rocket Lab an established services business alongside its manufacturing and launch operations.
However, the acquisition increases the company’s financial risk. Rocket Lab issued 29.3 million shares to raise approximately $1.94 billion toward the transaction. Additional equity dilution and Iridium’s debt could negatively impact Rocket Lab’s returns.
Rocket Lab’s larger Neutron rocket also faces execution risks. In October, the company postponed its inaugural launch to 2027. The $397 million U.S. Space Force contract, including options, involves launching satellites aboard Neutron. Hence, more delays in Neutron’s launch could complicate contract execution and postpone revenue from larger launch missions.
The stock is trading at nearly 43 times trailing-12-month revenue (as of Oct. 30), leaving little room for execution setbacks. However, its growing spacecraft business, substantial backlog, and potential expansion into satellite communications services could support long-term growth.
Hence, Rocket Lab could be an attractive space stock to own in a modest position, provided investors can tolerate volatility and wait for its expansion investments to generate stronger cash returns.
Planet Labs is focusing on monetizing satellite data
Planet Labs focuses on monetizing satellite imagery and data. The company’s satellites capture images of Earth’s landmass nearly every day, helping defense agencies, governments, and businesses monitor changes over time.
The company has also built a historical archive containing more than 3,000 images, on average, of every location on Earth’s landmass. The company can license the same imagery to multiple customers, while AI-powered analytics can help extract additional insights. This business model creates opportunities to generate additional revenue from existing imagery at relatively low incremental costs, although maintaining and upgrading its satellite fleet still requires substantial investment.
Planet Labs’ growing government business also highlights another opportunity. The company handed over a satellite to the Swedish Armed Forces under a multi-year, low-nine-figure agreement in the second quarter of fiscal 2027 (ending July 31, 2026). In September, the company also announced a German government contract offering dedicated satellite access, imagery, and analytics, with a maximum potential value of 25 million euros over five years, including options.
These agreements show that governments are increasingly paying for dedicated observation capabilities rather than just satellite images. However, satellite manufacturing costs and uneven revenue recognition could make these contracts less predictable than traditional data subscriptions.
Planet Labs’ second-quarter revenue grew 58% year over year to $116.1 million, with a gross margin of nearly 57%. The company reported that 98% of its annual contract value (ACV) was recurring at the end of the second quarter. However, the company excludes satellite-services contracts from this calculation. Hence, the 98% figure should not be confused with the percentage of total revenue that is recurring. Planet Labs’ net dollar retention reached 109%, up from 107% in the first half of 2026. This was largely because defense and intelligence customers expanded their contracts.
The earlier-than-expected handover of the Swedish satellite also shifted revenue from the third quarter into the second quarter. This partly explains why Planet Labs expects third-quarter revenue of $101 million to $105 million, down from $116.1 million in the second quarter.
Management expects $100 million to $115 million in capital expenditures in fiscal 2027. After spending approximately $47 million in the first half of fiscal 2027, the company could spend another $53 million to $68 million in the second half.
Planet Labs held approximately $865 million in cash and short-term investments at the end of the second quarter. However, the company also had $460 million in convertible notes outstanding at the end of the second quarter. Plus, the company had also established a $1.5 billion equity issuance program and raised approximately $122 million through share sales during the second quarter. These factors could affect how much of its future growth translates into returns for existing shareholders.
The shares traded at nearly 13 times trailing-12-month revenue (as of Oct. 30, 2026). While this valuation is not cheap, it is considerably less demanding than Rocket Lab’s. The company’s growing government business and potential to generate additional revenue from existing satellite imagery make it an attractive long-term growth opportunity.
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Manali Pradhan, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Planet Labs PBC and Rocket Lab. The Motley Fool has a disclosure policy.
