What the Planet Layoffs Say about the State of Earth Observation

In June, Earth Observation (EO) company Planet announced a 17% workforce reduction, shedding around 180 employees in the company’s second round of layoffs in just over a year. This news, combined with March and June layoffs from Satellogic, has pushed the EO industry into a fresh season of soul-searching. 

The not-so-subtle undercurrent driving these layoffs and broader U.S. EO sector behavior over the past three years is that commercial adoption of satellite imagery hasn’t materialized as envisioned. Nowhere was this felt more acutely than at Planet, which boasted the industry’s highest commercial exposure (49% of FY22 revenues) and an espoused goal of growing its commercial sales. 

Flush with a $590 million war chest from going public in 2021, Planet staffed up aggressively to capture a market it estimated was worth $75 billion by 2027.  From 2021 to 2023, Planet added 380 employees (up 48%), far more than BlackSky, Maxar and Satellogic combined. When commercial sales proved slower and smaller than anticipated, Planet was more exposed than its peers.  

Satellogic faced a similar challenge, but with an incomplete constellation, nil revenues, and a heavy capex lift, the challenge proved even more intractable. Satellogic’s headcount is down 16% since 2021.  

Maxar’s Earth Intelligence headcount is flat relative to 2021, with a 7% fluctuation in the middle years due to changes that had more to do with new private equity ownership in 2023 than the EO market.  

Only BlackSky has managed to increase its headcount without a subsequent market or ownership-induced culling. Located in Herndon, VA, just outside of Washington, BlackSky’s market is almost entirely defense and intelligence (D&I), and the company grew its workforce by 33% (~70 employees) based on growth in that market, not the commercial sector.  

What can we learn about the state of EO from the hiring and layoff activity over the past several years? The clearest message is that the commercial market for EO remains underwhelming, especially relative to SPAC presentation forecasts. Were EO companies wrong about the commercial market opportunity, or will the commercial market bloom once the industry achieves the right combination of resolution, revisit, price, and analytics?  

Regardless, the near-term result is an increased dependency on the U.S. government as the anchor customer. Planet is now headed in this direction, with management indicating on the company’s June 6 earnings call that near-term growth will come from the government. For BlackSky and, to a lesser extent, Maxar, this has already long been the case. Satellogic is headed in the same direction, having begun redomiciling in the U.S. to address the D&I market. We expect future hiring to moderate now that post-SPAC exuberance has worn off and pragmatism has become the norm.

SOURCE: https://www.satellitetoday.com/people/2024/06/28/planet-to-lay-off-17-of-its-workforce/