Planet Labs Q1 2025 Update

Notes from an interesting quarter

I rarely feel inclined to share quarterly updates on an investment like Planet, but I thought yesterday’s call was interesting. Specifically, the plan to pursue a space systems model (akin to Spire), the platform and agriculture commentary, the expansion in the utilities sector, and the large government pilots are worth analyzing further.

But before we do, let’s revisit an important point: the power of Planet’s business model comes from the unique daily scan. Management emphasizes this ad nauseum for a reason — it’s what makes Planet unique. No other player provides the same dataset, and its value is what’s most misunderstood about the business.

Long duration growth is a function of layering complementary datasets on top of that core, which translates into greater customer value. Pelican is a significant upgrade to the first complement (SkySat), and Tanager is an entirely new layer capable of opening up new markets.

What’s often overlooked is Pelican is more than an order of magnitude more capable than SkySat, at half the cost. This type of performance curve is rare, and it is the fundamental driver behind the business. Expect this to continue moving forward.

All three datasets as a whole are much more valuable than the sum of the parts. The synergies from multiple constellations together is exactly what creates defensibility in the business model.

As more datasets (including other sources, hence the emphasis on partner sales) join the mix, the entire ecosystem becomes more valuable — and Planet’s position more entrenched.

The endgame is a global network of satellites collecting, combining, and transmitting data in near real-time to augment or automate traditionally manual workflows in a variety of industries. Planet’s mission is to make this vision reality.

The bet is long-term by nature — who knows what the stock market will think about the prospects for satellite data next quarter? A network takes a long time to build, but management explicitly outlined the journey they’re on in “Charting Planet’s Second Decade.”

It makes a lot of sense to me. And if the title doesn’t give it away, this is a team that thinks in decades, a rare commodity in a market that thinks by the quarter.

Space systems

Planet has previously cast aside questions related to whether it will pursue a “space systems,” “constellation-as-a-service,” or whatever-you-call-it model. The fact there’s no clean definition alone indicates the maturity of the industry.

In this call, Marshall shared a new perspective on the opportunity.

Will Marshall: The Tanager program, which is funded through our partner Carbon Mapper, represents a great example of the opportunity we see to provide customer or partner funded missions, leveraging our space systems capabilities and IP to scale the business efficiently. We view this as an attractive model we can use with our government relationships going forward.

Spire, Rocket Lab, and several others already pursue such a business model, but this idea is new to Planet. Frankly, I see two sides to the change in philosophy.

On one hand, the simplicity and focus of Planet’s mission drives the company forward; any distraction poses a risk to execution. On the other hand, Planet faces limits to scaling new constellations given demand uncertainty and capital constraints. This business / funding model addresses those issues while likely accelerating the advent of the endgame satellite network.

It’s also a great example of how Planet is iterating and learning the market alongside customers. Unanswered questions still surround what buyers want, how they want to buy it, and how Planet can deliver on those demands economically. It appears feedback has led the company to this line of thinking.

I don’t find this surprising. Elsewhere in the market, Spire has demonstrated commercial success with this model. SpaceX has entered the fray with Starshield, and Rocket Lab is working with the SDA and commercial entities such as Varda in a similar capacity.

There are nuances to the specific models pursued by each, but I see no reason why Planet can’t compete effectively with its reliable satellite data infrastructure and deep relationships with government entities.

Clearly, multiple parties see the market opportunity emerging. It will be interesting to see how this develops over the next few years.

Platform + the commercial market

The platform has been and always will be the cornerstone of building out the commercial market. The vision outlined in “Charting Planet’s Second Decade” is for a platform that enables partners to build applications easily by leveraging Planet’s data and tools alongside other data sources.

Two years in, they’ve now launched the platform (thanks to the Sinergise acquisition). The next step is progressing alongside Planetary Variables, building tools and workflows that allow it to scale to customers’ needs.

In the government market, technology alone can get you pretty far. In the commercial market, distribution and product win, with ease of use a gating factor. That’s what the platform is built to address.

Ashley Johnson: It's really about leading to a partner-first model to enable us to scale that side of the business… A big part of that is enabling partners to be able to self-serve and build solutions on top of our data, and our strategy is focused on enabling all of that through our platform.

So making it easier for partners to work with our data, test our data, giving them a sandbox environment, giving them more of a self-serve experience in working with our data to test their solutions and then enabling them to more easily scale on top of the platform, which reduces their total cost of ownership working with Planet because they don't have to then download and extract the data and try to predict where their end customers are ultimately going to need data. But rather, they can access the data and work inside a Planet environment.

The benefit to us is that it also gives us the visibility to the end customer through that motion. We can see as the partner is engaging and expanding the business, not only the revenue benefits, but the type of usage data that will enable us to provide feedback into our own product development life cycle.

Simply put, the platform speeds up the all-important customer feedback loop. If Planet can execute on this, it stands a good chance of winning the market. And in ten years, the market will be significantly larger than it is today.

It’s early days — the platform was launched two months ago — but I view it as a positive. It could very likely drive a return to growth and meaningful acceleration in the commercial market over time. It remains day one.

When Will Marshall spoke of how Planet is misunderstood at the investor day, I think this is what he means: Planet’s business model (a vertically integrated satellite data platform built on the internet) has never existed before at scale.

Scale is key here, because the reinvestment opportunities this business model unlocks are enormous — which is why Planet is spending so much. They’ve clearly laid out their investment priorities — satellites, software, and sales — and I believe those are the right areas to be focused on.

The last few years have seen a shift in that Planet is going after larger customers. The net result is sales cycles have lengthened, or in other words, customer acquisition cost is higher. But, if the future is anything like the past, lifetime value will also be much higher.

This is a business with great unit economics, a large opportunity ahead of it, and it’s spending money to build a new market and accelerate growth. These are sticky, valuable future cash flows they’re chasing — but you have to give it time.

Really it comes down to driving scale. This is the story of satellite data meets the internet, and the internet is the land of increasing returns to scale.

Agriculture

Just a quick note here. I continue to believe agriculture is one of the largest and most attractive verticals for Planet’s data to unlock value at scale. A quarter of the Earth’s landmass is cropland. Planet is the only company collecting data on every field, every day.

That information can be delivered as insights to any farmer with internet access. Establishing the necessary connections is difficult, but there are no technical limitations that prevent this from occurring over time.

In terms of the present struggles, I found Marshall’s comments useful context:

Will Marshall: Fundamentally, our data can enable improvement in crop yield and decrease in inputs, which enable real efficiency gains across that trillion-dollar sector. They are having struggles in general as a sector, facing pretty strong headwinds, but fundamentally, those facts remain true.

The problem, if there was any, is that they were using digital ag platforms that they were largely giving away, which wasn’t an aligned incentive model, and it's the kind of thing they cut when they're having hard time.

Actually, now we're finding several partnerships, some of which we've talked about, in fact, several of the big ag companies have even released videos and things showing use of our data in these ways, but they're reforming their digital ag platforms such that they align incentives.

That is, when the farmer benefits, they get the money. When they get the money, we get the money. When you align incentives like that, we can really imagine that scaling, so as Ashley was saying, we're keeping those relationships strong so they can come back up.

Again, it relates back to learning the market, just as they are in the government. Planet’s data was being used widely, but not in a way where the buyers were able to capture any excess economics. As they transition to a sustainable business model, Planet will be a natural beneficiary as the underlying enabler of this productivity.

Utilities

Planet announced Eletrobras as a new customer win in the quarter, adding a third utility to a roster that includes PG&E and another unnamed Fortune 500 utility.

Why is this important?

Eletrobras is the largest utility in Brazil, accounting for almost 40% of the transmission lines in the country. It’s a great foothold on which to scale a repeatable use case and expand to capture the other 60% of transmission lines.

PG&E, the largest utility in the US, provides the same foothold here at home, and the contract just expanded last quarter. Importantly, PG&E is driving results: they experienced a 70% reduction in fires from overgrowth.

These customer wins, and the benefit of the data in tangible use cases, give weight to the success of Planet’s solutions in future sales processes.

Planet now serves the largest utilities in both the US and Brazil. Globally, utilities are a huge opportunity. Thousands of utilities cover the world, with around 3,000 in the US alone. All could benefit from automated monitoring of encroachment.

If the size of the PG&E contract is any indication of value, the opportunity here could be measured in the billions, and it remains largely ignored by analysts.

I understand we’re talking in TAMs here — I’m a consultant — but the fundamentals underlying the opportunity are clear to see. Rest assured, if there is a scalable use case and money to be made here, someone will do it.

Who is better positioned to create, and capture, this market than Planet?

Government pilots

Last quarter, Planet mentioned it had several seven-figure pilots underway with US defense agencies. Over a million dollars for less than three months of work is not pocket change (even for the government) in this industry, and Will Marshall provided some color around the opportunity here:

Will Marshall: We're pleased to share that we successfully completed two of these seven-figure pilots and anticipate additional follow-on pilots from these programs. These pilots require broad area monitoring, detecting, and reporting and reflect a growing trend towards acquiring focused insights from our global data. We're also pursuing additional larger pilots with other government agencies and believe our unique daily scan positions us favorably to win. We believe all of these pilots have the potential to convert into very large operational contracts over time.

It’s worth reiterating: these pilots are built on top of the unique daily scan. No other provider captures a comparable dataset.

If we take Will Marshall at his word, which I do, the pilots are progressing well, and Planet is demonstrating a scalable way for these customers to extract value from its data. With potential for these to convert into significant (have to guess $10M+) operational contracts over time, this is important work.

At a high level, it appears the defense department is looking to build capabilities around Planet’s data and integrate those into its standard working ways. This is sticky and large dollar business, which could propel substantial (but chunky) revenue growth when realized.

Abraham Thomas (who I turn to for a lot of my data business understanding) says, “The more time and resources a buyer spends on a dataset, the stronger a signal it is that the buyer thinks the dataset is valuable” (emphasis his).

The US government is clearly spending a lot of time and resources on Planet’s dataset — only time will tell how truly valuable it is to them.

Governments move slowly. Everyone understands this, yet they become frustrated when that’s how it plays out. There is no doubt Planet’s growth profile hasn’t materialized as quickly as planned, but that doesn’t mean it won’t happen.

The price doesn’t ask much.

If or when it does happen, popular opinion will swing quickly, and the investment opportunity will close. Predicting when this will happen is a fool’s errand — I prefer to just wait.

I enjoy watching Planet develop and learning more about it over time. If you don’t share that perspective, I’m afraid this investment might not be for you.

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