Manufacturing services provider Proto Labs (NYSE:PRLB) reported Q1 CY2025 results exceeding the market’s revenue expectations , but sales fell by 1.3% year on year to $126.2 million. The company expects next quarter’s revenue to be around $128 million, close to analysts’ estimates. Its non-GAAP profit of $0.33 per share was 13.3% above analysts’ consensus estimates.
Revenue: $126.2 million vs analyst estimates of $123.7 million (1.3% year-on-year decline, 2% beat)
Adjusted EPS: $0.33 vs analyst estimates of $0.29 (13.3% beat)
Adjusted EBITDA: $17.39 million vs analyst estimates of $16.47 million (13.8% margin, 5.6% beat)
Revenue Guidance for Q2 CY2025 is $128 million at the midpoint, roughly in line with what analysts were expecting
Adjusted EPS guidance for Q2 CY2025 is $0.34 at the midpoint, above analyst estimates of $0.33
Operating Margin: 3.6%, down from 5.3% in the same quarter last year
Free Cash Flow Margin: 13.6%, down from 14.7% in the same quarter last year
Market Capitalization: $966.3 million
StockStory’s Take
Proto Labs began 2025 with results that management attributed to growth in its production manufacturing offerings and targeted marketing investments. CEO Rob Bodor credited an increase in customers using the company’s combined prototyping and production services, noting, “Customers utilizing our combined offer grew more than 45% over the trailing 12 months and revenue per customer in Q1 increased by 3% year-over-year.” While macroeconomic headwinds continued to weigh on overall demand, the company emphasized sequential revenue improvements and a strong free cash flow contribution.
Looking ahead, Proto Labs’ leadership pointed to ongoing enhancements in its go-to-market strategy and fulfillment optimization as drivers for future growth. Management highlighted planned investments in advanced manufacturing capabilities and sustained marketing efforts to further position the company as a production manufacturer. CFO Dan Schumacher remarked that the company’s guidance for the next quarter accounts for expected margin pressures from a greater mix of network-fulfilled revenue, but added that operational efficiencies and flexible supply chains would remain key priorities.
Key Insights from Management’s Remarks
Management focused on how recent strategic shifts and customer trends shaped first quarter performance and set the tone for 2025. The following were the most impactful drivers and business updates:
Production business expansion: Proto Labs saw significant traction in its production manufacturing segment, with production revenue exceeding management’s expectations and customers increasingly transitioning from prototypes to production parts.
Marketing campaign momentum: A new marketing campaign targeting production buyers resulted in over two million views and double-digit percentage growth in online searches for Proto Labs, supporting increased customer engagement and brand recognition.
Aerospace and defense focus: The company cited notable wins in aerospace and defense, supplying flight-ready parts for organizations like Blue Origin and NASA. Management emphasized the value of its ITAR-certified and AS9100-certified manufacturing capabilities for critical applications.
Fulfillment network optimization: The closure of a German molding facility further streamlined Proto Labs’ global operations, supporting cost efficiency and better alignment with its fulfillment strategy. Management stated that its flexible manufacturing network allows rapid adaptation to shifting customer needs and supply chain disruptions.
Tariff adaptability and supply chain resilience: Proto Labs described its ability to adapt to evolving tariff and trade environments as a competitive advantage, with 90% of U.S. customer revenue already fulfilled domestically, limiting exposure to international trade risks.
Drivers of Future Performance
Management’s outlook for the next quarter and the year is shaped by a focus on production segment growth, continued marketing investment, and adaptability in response to global supply chain and tariff dynamics.
Production segment scaling: Management expects continued growth in production manufacturing, driven by expanded industry use cases and investments in advanced capabilities, supporting higher revenue per customer.
Marketing and go-to-market investments: Ongoing marketing campaigns and a reorganized sales structure are designed to increase Proto Labs’ share among production buyers, with management monitoring returns on these investments for further adjustment.
Network mix and margin headwinds: The company anticipates that a higher proportion of network-fulfilled orders will pressure overall margins, but flexible fulfillment and continuous operational improvements are expected to partially offset these effects.
Top Analyst Questions
Brian Drab (William Blair): Asked about the sustainability of gross margin improvements and whether margins could return to prior-year levels; management cited volume gains in factory operations but noted that higher network mix may limit margin expansion.
Brian Drab (William Blair): Inquired about tariff impacts on the Protolabs Network, especially regarding China-based partners; management responded that network flexibility enables real-time order shifts, mitigating tariff exposure.
Greg Palm (Craig-Hallum): Sought detail on April order trends and whether the network share is increasing; management indicated sequential order improvement and a rising share of network-fulfilled revenue.
Troy Jensen (Cantor Fitzgerald): Questioned whether production growth would be more visible in factory or network results; management emphasized that both areas contribute, with robust quality controls across all partners.
James Ricchiuti (Needham & Company): Asked about continued declines in 3D Printing revenue and alignment with production strategy; management attributed weakness to slower prototyping demand but expects growth as production applications expand.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will monitor (1) the pace of growth in production manufacturing revenue as a signal of successful strategy execution, (2) the balance between factory- and network-fulfilled orders and its impact on gross margins, and (3) customer adoption rates for expanded manufacturing capabilities, particularly in target industries such as aerospace and defense. The effectiveness of ongoing marketing investments and operational streamlining will also be key areas of focus.
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