Planet Labs PBC (Planet Labs (PL)) had a bit of a wild ride on Friday, as investors digested the company's latest earnings report. The satellite imagery company delivered a solid beat on both the top and bottom lines, but the stock still slipped. Let's break down what happened.
For the second quarter, Planet Labs reported non-GAAP earnings of 2 cents per share. That might not sound like much, but it's a big deal because analysts were expecting a loss of 2 cents per share. Revenue came in at $116.05 million, a 58% jump year over year and well above the $104.12 million that Wall Street had penciled in.
Needham analyst Ryan Koontz noted that the revenue boost was partly due to earlier-than-expected recognition tied to Sweden's first sovereign satellite. Even when you combine the actual Q2 revenue with the company's Q3 guidance, the growth rate still clocks in at a healthy 42% year over year.
Looking at the pipeline, remaining performance obligations rose 9% to about $753 million, while backlog increased 11% to roughly $815 million. Here's a fun stat: based on its existing backlog alone, Planet Labs could recognize more than $400 million in revenue over the next four quarters. That's a nice chunk of change.
Planet Labs Earnings Snapshot
Adjusted gross margin dipped to 59% from 61% a year earlier, mainly due to investments in satellite services contracts and AI-enabled partner solutions. Adjusted EBITDA reached $13.9 million, helped by stronger revenue and higher gross margins.
Cash flow is looking pretty good too. Year to date, Planet Labs generated about $68 million in operating cash flow. Free cash flow totaled $21 million, while adjusted free cash flow hit $29 million. The company ended the quarter with about $865 million in cash, cash equivalents, and short-term investments. It also raised about $120 million through its at-the-market stock offering at an average net price of $31.95 per share.
Defense Demand Drives Growth
The big story here is defense. Defense and intelligence revenue surged more than 90% year over year, while commercial revenue grew more than 15% and civil government revenue increased more than 5%. Geographically, revenue jumped more than 130% in Europe, the Middle East, and Africa. North American revenue rose about 25%, Asia-Pacific increased more than 15%, and Latin America grew about 3%.
Planet Labs also snagged some notable contracts. It secured an $8 million deal with the National Geospatial-Intelligence Agency for its Global Monitoring Service. On top of that, the company landed a seven-figure European defense deal and a German government satellite-services tender worth up to 25 million euros over five years. All told, Planet Labs has identified more than $4 billion in satellite-services opportunities. That's a lot of potential upside.
Planet Labs Outlook
Now for the part that might be giving investors pause. For the third quarter, Planet Labs expects revenue of $101 million to $105 million, which is below the $114.33 million consensus estimate. That's a pretty big miss, and it likely explains the stock's volatility.
For the full fiscal 2027, the company raised the low end of its revenue outlook to $430 million from $425 million, while keeping the high end at $441 million. Analysts are currently expecting $435.67 million, so the midpoint of guidance is roughly in line.
Planet Labs also reiterated its goal of achieving the Rule of 40 in fiscal 2027, which means revenue growth plus adjusted EBITDA margin should hit 40% or better. That's an ambitious target, but the defense tailwinds could help.
Capital expenditures for the full year are expected to be between about $100 million and $115 million, mainly for manufacturing facilities and next-generation satellites. That's a significant investment, but it's necessary to keep the pipeline full.
At the time of publication Friday, Planet Labs shares were down 1.25% at $18.12. The market seems to be weighing the strong quarter and backlog against the softer Q3 guidance. It's a classic case of 'good news, but not good enough' — at least for the near term.
