Earth observation satellite company Planet Labs (PL -0.95%) stock shot sharply higher Monday morning, soaring by 35% through 10:55 a.m. ET after it beat analysts' forecasts for sales and adjusted earnings.
Heading into its second-quarter fiscal 2026 report, analysts expected Planet Labs to report $0.04 per share in adjusted losses on $66.2 million in sales. In fact, its adjusted loss was only $0.03 per share, and its sales rose 20% year over year to $73.4 million. Management also offered guidance for even greater growth ahead.
Image source: Getty Images.
Planet Labs Q2 earnings
Planet Labs' pivot away from focusing on environmental work to defense, with "pivotal contracts including one in collaboration with the German government, one with NATO, and others with the U.S. Department of Defense," helped the company hit a new record for revenue in the fiscal quarter, which ended July 31.
Importantly, profitability is growing alongside revenue. Gross profit margin in the second quarter surged by 5 percentage points to 58%.
Admittedly, Planet Labs isn't yet profitable, technically. (In fact, on a generally accepted accounting principles (GAAP) basis, it actually lost $0.07 per share in the quarter -- not $0.03.) But management noted that it is free-cash-flow positive now, having generated $54.3 million in real cash profits in the first half of this fiscal year.
Is Planet Labs stock a buy?
Also admittedly, Planet Labs originally promised to generate free cash flow (FCF) by 2024, so it's a bit behind schedule on this metric -- but I'm not complaining. At its present pace, Planet Labs could conceivably end fiscal 2026 with more than $100 million in FCF.
If that happens, at its present market cap of $2.7 billion, the stock would be trading for only 27 times FCF -- a reasonable valuation for a company delivering 20% annual growth. I'd call that a buy.
