Rocket Lab Is Buying Iridium, and Guess What? Iridium Just Beat Earnings!

Iridium Communications (NASDAQ: IRDM) announced its Q3 2026 earnings Tuesday morning, Oct. 20. Shares of the satellite communications company are basically flat since -- they cost $44.18 Monday evening before earnings, and they cost $44.25 at Wednesday's close. Rocket Lab (NASDAQ: RKLB) stock, on the other hand, is up a healthy 4.5% since Iridium reported its earnings.

Why is that?

It's because it doesn't really matter much anymore -- or soon won't -- how well Iridium does. Rocket Lab is buying Iridium, you see (in an $8 billion deal). And for this reason, Iridium's good news is actually really Rocket Lab's good news.

Image source: Getty Images.

How Iridium beat earnings in Q3

Heading into its report Tuesday, Wall Street analysts had Iridium pegged for a $ 0.34-per-share profit on $236.3 million in sales. Iridium crushed both numbers, reporting $0.98 per share in profit (nearly three times what the Street predicted) on sales of $245.7 million.

How did Iridium do that? Largely by making an acquisition of its own, of space-based air traffic surveillance company Aireon.

Iridium reacquired Aireon in July, and Iridium management credits this acquisition with much of its 8% year-over-year revenue increase. Gains "related to the acquisition of Aireon" likewise accounted for Iridium's earnings coming in triple what Wall Street expected. Perhaps more important for Rocket Lab investors, Iridium noted that bringing Aireon in-house gave Iridium control over "the world's only space-based Automatic Dependent Surveillance-Broadcast (ADS-B) air traffic surveillance system."

And when Rocket Lab's own acquisition of Iridium takes effect mid-next-year, that will mean Rocket Lab owns the world's only space-based air traffic surveillance system, making it a key part of Rocket Lab's plan to expand into satellite-based Internet of Things (IoT), direct-to-cell communications, and "position, navigation, and timing" (PNT) markets.

What Iridium's earnings mean for Rocket Lab

Speaking of which, now that Iridium shareholders have voted to approve the merger -- and now that Iridium has reported its latest financials -- it's worth taking a second look at how this merger will affect Rocket Lab once it absorbs Iridium (and Aireon) next year.

As I've already pointed out, analysts are optimistic about Iridium. Forecasts compiled by S&P Global Market Intelligence indicate Iridium should earn more than $210 million next year, up 35.5% year over year, even if revenue doesn't grow much at all. Free cash flow is expected to grow more slowly, but still to rise a very respectable 28% to $379 million.

Assuming the analysts are doing their math right, that should be more than enough to cover Rocket Lab's expected $74 million loss next year, and make whole its $83 million in negative free cash flow as well. Thanks entirely to its prescient decision to buy Iridium, Rocket Lab should end up both profitable and free cash flow positive in 2027.

Indeed, Iridium might end up making even more money for Rocket Lab than analysts currently expect.

Consider: Current analyst estimates have Iridium earning $155 million this year, but according to the just-released Q3 earnings results, Iridium has already earned more than $138 million in just the first three quarters of 2026.

With 75% of the year over, Iridium is already 89% of the way to hitting the analysts' target for this year! And if Iridium is this far ahead of the game already in 2026, and growing faster than expected, it stands to reason that 2027's results might similarly come in stronger than what analysts have forecast.

What it means for Rocket Lab investors

At least, that's what Rocket Lab investors will be hoping. Back-of-the-napkin, it's looking now like a combined Rocket Lab-plus-Iridium might generate $300 million or so in positive free cash flow next year, which on Rocket Lab's current $45 billion market capitalization works out to a 150x forward price-to-free cash flow ratio on the stock.

That's... not exactly cheap. For Rocket Lab to be a buy at its current price, it had better hope Iridium performs even better in 2027 than it's already performing in 2026.

Rich Smith has positions in Rocket Lab. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.