Planet Labs PL posted mixed fiscal first-quarter 2027 results, with the top line improving year over year while the bottom line declined year over year. The company witnessed improved gross margin and an increase in backlog.
While the top line beat the Zacks Consensus Estimate, the bottom line missed the same.
Shares of Planet Labs have gained 87.5% year to date, outperforming the industry, its sector, as well as the Zacks S&P 500 composite. Planet Labs is a leading provider of Earth-imaging data and geospatial analytics, operating the largest fleet of Earth-observation satellites globally.
PL vs Industry, Sector, S&P 500
Image Source: Zacks Investment Research
Shares of Rocket Lab RKLB and BlackSky Technology BKSY have gained 72% and 111.6% year to date, respectively.
Sneak Peek Into Q1 Results
Planet Labs reported record first-quarter revenues of $94.2 million, up 42% year over year, with growth broadly distributed across global markets. Backlog rose 72% year over year to more than $906 million. Defense & Intelligence (D&I) revenues increased more than 65%, driven by strong demand for data subscription solutions and satellite services. Commercial revenues grew more than 20%, supported by expansion into larger opportunities and AI-enabled offerings.
Cost of revenues increased 47.9% to $43.7 million, while R&D expenses rose 44.8% to $33.4 million. Total operating expenses climbed 43.6% to $85.3 million. Adjusted EBITDA was negative $1 million, though the company achieved the Rule of 40 for the third consecutive quarter.
It incurred a loss in the reported quarter while breaking even in the year-ago quarter.
Planet Labs ended the quarter with approximately $731 million in cash, cash equivalents, and short-term investments. Operating cash flow totaled $15.4 million, down 11% year over year, while free cash flow was an outflow of $2.5 million compared to an $8 million inflow a year ago. During the quarter, the company secured an eight-figure international contract and successfully launched three additional Pelican satellites.
Optimistic Guidance
For the second quarter of fiscal 2027, Planet Labs projects revenues of $102 million to $107 million, with a non-GAAP gross margin of 52% to 55%. Adjusted EBITDA is expected to range from breakeven to a profit of $5 million, while capital expenditures are forecast between $21 million and $27 million.
For fiscal 2027, the company expects revenues in the range of $425 million to $441 million. Non-GAAP gross margin is projected to be in the range of 52% to 54%, and adjusted EBITDA is anticipated to be between breakeven and a profit of $10 million. Capital expenditures for the year are expected to range from $80 million to $95 million.
PL Shares Are Expensive
The stock is overvalued compared with its industry. It is currently trading at a price-to-sales multiple of 31.64, higher than the industry average of 3.57.
Image Source: Zacks Investment Research
PL is relatively cheap compared to RKLB but expensive compared to BKSY.
The Case for PL Stock
Planet Labs generates most of its revenues through a mix of fixed-price subscription agreements and usage-based contracts, providing satellite imagery and data analytics via its cloud-based platform to governments and large enterprises. Growth has been supported by the expansion of its subscription business, rising government demand and a strategic focus on higher-value satellite services and advanced analytics.
The company has increasingly prioritized large government and defense contracts, which offer stronger revenue visibility and long-term stability. At the same time, management sees significant potential in the commercial market. Enhanced products and AI-driven analytics—originally developed for government customers—are expected to expand commercial applications across supply chain monitoring, surveillance, operational efficiency, insurance, finance, energy, and agriculture.
However, Planet Labs remains unprofitable, with profitability unlikely in the near term. Significant investments in satellite infrastructure, high R&D spending, and elevated operating expenses continue to put pressure on margins. After five years of losses, the company is expected to remain loss-making through fiscal 2027, while returns on equity and invested capital continue to trail industry averages.
Planet Lab’s Growth Projections
The Zacks Consensus Estimate for fiscal 2027 revenues indicates a 39.4% year-over-year increase, while that for earnings suggests flat numbers. The consensus estimate for fiscal 2028 revenues indicates a 32.2% year-over-year increase, while that for earnings suggests an increase of 266.7% year over year.
The consensus estimate for fiscal 2027 earnings witnessed no movement in the past 30 days.
Image Source: Zacks Investment Research
The consensus estimate for 2026 earnings of RKLB has moved south in the past 30 days, while that for BKSY has witnessed no movement in the same time frame.
Parting Thoughts on PL Shares
Planet Labs, a data-driven company focused on Earth-observation imagery and analytics, is poised to grow, given the rising global demand for commercial satellites.
However, current factors warrant caution. With the stock trading at a premium, returns on capital comparing unfavorably with the industry, looming near-term earnings pressure, muted analyst sentiment and a VGM Score of F, it is better to stay cautious on this Zacks Rank #3 (Hold) stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Radical New Technology Could Hand Investors Huge Gains
Quantum Computing is the next technological revolution, and it could be even more advanced than AI.
While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.
Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power .
Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.
See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Planet Labs PBC (PL): Free Stock Analysis Report
Rocket Lab Corporation (RKLB): Free Stock Analysis Report
BlackSky Technology Inc. (BKSY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).