Planet Labs (PL)

Earth imaging satellite company Planet Labs (NYSE:PL) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 9.6% year on year to $66.27 million. Guidance for next quarter’s revenue was better than expected at $66 million at the midpoint, 0.7% above analysts’ estimates. Its non-GAAP loss of $0 per share was significantly above analysts’ consensus estimates.

Company Overview

Pioneering the concept of "agile aerospace" with hundreds of small but powerful satellites, Planet Labs (NYSE:PL) operates the world's largest fleet of Earth observation satellites, capturing daily images of our planet to provide insights on deforestation, agriculture, and climate change.

A combination of increasing reliance on data and analytics across various industries and the desire for cost efficiency through outsourcing could mean that companies in this space gain. As functions such as payroll, HR, and credit risk assessment rely on more digitization, key players in the data & business process services industry could be increased demand. On the other hand, the sector faces headwinds from growing regulatory scrutiny on data privacy and security, with laws like GDPR and evolving U.S. regulations potentially limiting data collection and monetization strategies. Additionally, rising cyber threats pose risks to firms handling sensitive personal and financial information, creating outsized headline risk when things go wrong in this area.

Planet Labs competes with other satellite imagery providers including Maxar Technologies (NYSE:MAXR), BlackSky Technology (NYSE:BKSY), and Airbus's Intelligence business unit. The company also faces competition from drone-based imaging services and public satellite programs like NASA/USGS Landsat and the European Space Agency's Copernicus program.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $250.2 million in revenue over the past 12 months, Planet Labs is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels. On the bright side, it can grow faster because it has more room to expand.

As you can see below, Planet Labs’s 21.3% annualized revenue growth over the last five years was incredible. This is a great starting point for our analysis because it shows Planet Labs’s demand was higher than many business services companies.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Planet Labs’s annualized revenue growth of 10.8% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

This quarter, Planet Labs reported year-on-year revenue growth of 9.6%, and its $66.27 million of revenue exceeded Wall Street’s estimates by 6.5%. Company management is currently guiding for a 8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 14.1% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and suggests its newer products and services will catalyze better top-line performance.

Planet Labs’s high expenses have contributed to an average operating margin of negative 72.5% over the last five years. Unprofitable business services companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Planet Labs’s operating margin rose by 32.1 percentage points over the last five years, as its sales growth gave it operating leverage. Still, it will take much more for the company to reach long-term profitability.

This quarter, Planet Labs generated a negative 34.4% operating margin.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Planet Labs’s full-year earnings are still negative, it reduced its losses and improved its EPS by 41.5% annually over the last three years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.

In Q1, Planet Labs reported EPS at $0, up from negative $0.05 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Planet Labs’s full-year EPS of negative $0.16 will reach break even.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While Planet Labs posted positive free cash flow this quarter, the broader story hasn’t been so clean. Planet Labs’s demanding reinvestments have drained its resources over the last five years, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 32.4%, meaning it lit $32.40 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Planet Labs’s margin expanded by 7.5 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.

Planet Labs’s free cash flow clocked in at $8.00 million in Q1, equivalent to a 12.1% margin. Its cash flow turned positive after being negative in the same quarter last year, marking a potential inflection point.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Planet Labs has shown solid business quality lately, it struggled to grow profitably in the past. Its five-year average ROIC was negative 77.1%, meaning management lost money while trying to expand the business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Planet Labs’s ROIC has increased. This is a good sign, but we recognize its lack of profitable growth during the COVID era was the primary reason for the change.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Planet Labs is a well-capitalized company with $226.1 million of cash and $19.62 million of debt on its balance sheet. This $206.5 million net cash position is 17.7% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Planet Labs blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also excited it lifted its full-year revenue guidance. Zooming out, we think this quarter featured some important positives. The stock traded up 14% to $4.57 immediately following the results.

Updated: June 22, 2025 at 11:18 PM EDT

Before investing in or passing on Planet Labs, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Planet Labs possesses a number of positive attributes. First off, its revenue growth was exceptional over the last five years. And while its relatively low ROIC suggests management has struggled to find compelling investment opportunities, its rising cash profitability gives it more optionality. On top of that, its expanding adjusted operating margin shows the business has become more efficient.

Planet Labs’s forward price-to-sales ratio is 5.3x. Looking at the business services landscape right now, Planet Labs trades at a pretty interesting price. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $6.27 on the company (compared to the current share price of $5.05), implying they see 24.2% upside in buying Planet Labs in the short term.