Space company Rocket Lab (RKLB -3.37%) has spent the better part of a decade learning to build and launch rockets. This week, it agreed to buy a satellite business instead.
The company said it will acquire satellite operator Iridium Communications (IRDM -1.22%) in a cash-and-stock deal worth about $8 billion -- a sum equal to about 13% of Rocket Lab's own market value, and one that brings billions of dollars in new debt. Investors liked what they saw. Rocket Lab shares jumped about 16% on the news, and Iridium's soared about 25%.
The ambition isn't subtle. Rocket Lab wants to look more like SpaceX -- a company that builds rockets, launches them, and runs its own satellite network on top. The question for investors, however, is whether buying into that vision this early, and at this price, makes the stock a buy.
Image source: Getty Images.
A shortcut to a satellite business
What Rocket Lab is paying for is years of work it would otherwise have to do itself. Iridium operates 66 satellites in low-Earth orbit, plus on-orbit spares, and holds globally licensed L-band spectrum -- the airwaves its phones and devices communicate over, and a scarce asset because regulators release only so much of it. The network also comes with more than 2.5 million subscribers across government, defense, aviation, maritime, and commercial markets.
Rocket Lab framed the deal as a way around three obstacles at once: securing spectrum, the long wait to deploy a constellation before it earns anything, and the years it takes to build a paying customer base. CEO Peter Beck called it "a defining moment for the space industry."
And what turns the strategic case into something concrete is the contrast between the two companies. Iridium is profitable, and Rocket Lab is not.
Iridium generated $871.7 million in revenue and $114.4 million in net income in 2025, and about $634 million of that was service revenue -- the steady, subscription-style revenue Rocket Lab doesn't yet have. Rocket Lab, over the same year, posted $602 million in revenue and a net loss of $198.2 million. It's buying a company that takes in more money than it does, and turns a profit doing it.
NASDAQ: RKLB
Key Data Points
A steep price and a long wait
But the acquisition comes at a steep price.
Iridium shareholders will receive $54 per share -- a 24% premium to where the stock traded before the announcement -- with about half of that in cash. To cover the cash portion, Rocket Lab has lined up a $3.6 billion bridge loan from Deutsche Bank and Wells Fargo. The rest of the consideration comes in stock, which dilutes existing shareholders. Piling billions in debt onto a company that just reported an annual net loss is not a small step -- and it's a reason for investors to be skeptical.
Additionally, the payoff is a long way off. The deal isn't expected to close until mid-2027, pending approval from Iridium's shareholders and regulators. That leaves about a year of closing risk before the combined company even exists -- a stretch during which Rocket Lab is also working to launch its much larger Neutron rocket for the first time, which management expects to happen later this year.
To be fair, the growth stock has a genuinely accelerating business underneath it. Rocket Lab's first-quarter revenue rose about 64% year over year to a record $200 million, and its backlog more than doubled from a year earlier to $2.2 billion.
The momentum is there. But the trouble is that the stock already reflects it. Rocket Lab shares trade at more than 80 times sales -- an extreme valuation multiple even for a company growing this fast, and one that leaves little room if the deal or Neutron disappoints.
So, is the stock a buy?
The strategy makes sense to me. Buying spectrum, an in-orbit network, and millions of paying customers in one move is a faster, surer route to a SpaceX-style business than building each piece itself over many years. But the price gives me pause. Between the new debt, the share dilution, a close that's still more than a year out, and a valuation that already prices in near-perfect execution, I'd rather watch this one from the sidelines. Perhaps I'd warm up to it on a meaningful pullback, or once there's evidence the integration -- and Neutron -- are tracking as management hopes.
