Planet Labs (PL)

Earth imaging satellite company Planet Labs (NYSE:PL) reported Q2 CY2025 results beating Wall Street’s revenue expectations, with sales up 20.1% year on year to $73.39 million. On top of that, next quarter’s revenue guidance ($72.5 million at the midpoint) was surprisingly good and 5.6% above what analysts were expecting. Its non-GAAP loss of $0.03 per share was $0.01 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 sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.

With $262.5 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 sales grew at an incredible 22.3% compounded annual growth rate over the last five years. This is an encouraging 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 12% 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 robust year-on-year revenue growth of 20.1%, and its $73.39 million of revenue topped Wall Street estimates by 11.2%. Company management is currently guiding for a 18.3% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 13.5% over the next 12 months, similar to its two-year rate. This projection is admirable and suggests its newer products and services will fuel better top-line performance.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Planet Labs’s high expenses have contributed to an average operating margin of negative 68.4% 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 39.7 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.

In Q2, Planet Labs generated a negative 24.5% 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 34.2% annually over the last two years.

In Q2, Planet Labs reported adjusted EPS of negative $0.03, up from negative $0.06 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 expects Planet Labs to perform poorly. Analysts forecast its full-year EPS of negative $0.13 will tumble to negative $0.13.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

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 25.5%, meaning it lit $25.49 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Planet Labs’s margin expanded by 41.8 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 $46.29 million in Q2, equivalent to a 63.1% 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 51.7%, 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 averaged 3.2 percentage point decreases each year. If its returns keep falling, it could suggest its profitable growth opportunities are drying up. We’ll keep a close eye.

Companies with more cash than debt have lower bankruptcy risk.

Planet Labs is a well-capitalized company with $271.5 million of cash and $17.54 million of debt on its balance sheet. This $254 million net cash position is 12.8% 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.

This was a beat and raise quarter. It was good to see Planet Labs beat analysts’ revenue and EPS expectations this quarter. We were also excited its full-year revenue guidance was lifted. Zooming out, we think this was a very good print. The stock traded up 15.3% to $7.55 immediately following the results.

Updated: December 4, 2025 at 10:15 PM EST

Before making an investment decision, investors should account for Planet Labs’s business fundamentals and valuation in addition to what happened in the latest quarter.

Planet Labs is an amazing business ranking highly on our list. First of all, the company’s 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, Planet Labs’s expanding adjusted operating margin shows the business has become more efficient.

Planet Labs’s EV-to-EBITDA ratio based on the next 12 months is 1,208.3x. You get what you pay for, and in this case, the higher valuation is warranted because Planet Labs’s fundamentals shine bright. We think the stock is attractive here.

Wall Street analysts have a consensus one-year price target of $14.55 on the company (compared to the current share price of $13.03), implying they see 11.7% upside in buying Planet Labs in the short term.