- Record Revenue - Proto Labs reported $135.1 million in Q2 2025 revenue, a 6.5% year-over-year increase in constant currencies.
- CNC Machining Growth - CNC machining revenue grew 20% year-over-year, driven by strong demand from Aerospace and Defense customers.
- Revenue Channel Growth - Revenue through Proto Labs Network grew 16%, while digital factories revenue grew 4% year-over-year in constant currencies.
- Gross Margin Performance - Non-GAAP gross margin was 44.8%, down 90 basis points year-over-year due to higher network revenue and lower U.S. network margin.
- EPS and Cash Flow - Non-GAAP EPS was $0.41, up $0.03 year-over-year, with $10.6 million in cash from operations and $3.1 million returned to shareholders.
Operational Performance
The company's operational performance was strong, with $10.6 million generated in cash from operations and $3.1 million returned to shareholders through share repurchases. The new CEO, Suresh Krishna, highlighted his focus on sharpening execution, particularly on customer and employee experiences, to drive growth. He stated that the company has a strong foundation and a commitment to innovation and customer service, and that he is energized by the opportunity to lead the organization and help reaccelerate the business towards sustainable strong growth.
Segment-wise Performance
In Q2, the company's gross margin was impacted by tariffs, specifically on aluminum and steel, which had a 30-day lag effect due to the network's longer lead times. This resulted in a gross margin pressure, but the company adjusted pricing and fulfillment to offset the impact. The network business margin was 29% in the quarter. The company saw an 11% increase in revenue per customer contact and a 44% year-over-year growth in customers fulfilling orders through both the factory and network.
Guidance and Outlook
Management expects normal seasonality in Q3, with a midpoint guidance provided. For Q3 2025, the company expects revenue between $130 million and $138 million, implying 6% growth year-over-year in constant currencies, and Non-GAAP Earnings Per Share between $0.35 and $0.43. For Q4, typical seasonality is expected, with a slight decrease from Q3 due to holiday periods.
Valuation
Proto Labs' valuation multiples are relatively high, with a P/E Ratio of 69.93 and an EV/EBITDA of 19.31. However, the company's growth prospects and strong operational performance may justify these multiples. The stock's Free Cash Flow Yield is 7.51%, which may be attractive to income-seeking investors. According to CFO, "We believe our strong cash flow generation and balance sheet position us well to invest in growth initiatives and return capital to shareholders." The actual EPS came out at $0.41, beating estimates of $0.33, which may indicate that the company's growth momentum is strong.