Shares of Planet Labs PBC (NYSE: PL) tumbled 9.5% on Thursday, sliding to $18.095 by 15:30 EDT, after the satellite imagery firm disclosed a new defense contract that represents a relatively small slice of its total backlog. The stock traded near its session low of $17.835, with volume reaching 20.8 million shares.
Contract Details
The company announced a one-year European defense agreement prior to the market open. While the exact value remains confidential, it falls within a seven-figure range of $1 million to $9.99 million. At the upper end, that amounts to just 1.1% of Planet's most recently reported backlog of $906.1 million, as of April 30, 2026.
The contract covers Planet Mosaics and professional operational planning services, with the client undisclosed. Jon Powers, Planet's head of defense, cited "growing demand for our foundational geospatial data and expert support services" in the company's release.
Market Reaction
The modest size of the award appears to have disappointed investors, who may have expected a more substantial boost to the company's order book. The stock opened the session at $19.86 and steadily declined throughout the day, reflecting a cautious sentiment ahead of the company's fiscal second-quarter earnings report.
Earnings Preview
Planet is scheduled to release its fiscal Q2 results after the market closes on Thursday, with an earnings call at 17:00 EDT. The company previously guided for revenue between $102 million and $107 million, with adjusted EBITDA ranging from break-even to $5 million. Non-GAAP gross margin is expected to be between 52% and 55%, while capital expenditures are projected at $21 million to $27 million.
The midpoint of the revenue forecast stands at $104.5 million, representing a 10.9% increase over the first quarter. Investors are looking for evidence that a growing pipeline of smaller contracts can translate into sustained growth and positive cash flow.
Backlog and Fundamentals
In the fiscal first quarter, Planet reported revenue of $94.2 million, up 42% year-over-year, and backlog increased 72% to $906.1 million. Free cash flow was negative $2.5 million. However, backlog does not guarantee revenue; as of April 30, $90.0 million of the backlog was cancelable, and the company expects to recognize approximately 40% of total backlog over the next 12 months.
President and CFO Ashley Johnson has highlighted the backlog's "excellent visibility and predictability into our future growth," but Thursday's report will test that assertion. Analysts will compare new bookings against recognized revenue to gauge momentum.
Analyst and Risk Outlook
Berenberg initiated coverage on Wednesday with a buy rating and a $25 price target, implying a 38.2% upside from Thursday's 15:30 price. However, this is a single firm's view and not a consensus.
Key risks include potential delays or cancellations of government awards, execution challenges related to satellite launches and capital investments, and customer concentration. In the first quarter, two clients accounted for 15% and 11% of revenue, respectively. A disappointing outlook could further pressure the stock's valuation.
Planet ended April with $730.8 million in cash and short-term investments, providing a buffer against near-term funding needs. The post-market earnings report will be crucial in determining whether contract momentum is translating into financial performance.
