Proto Labs (PRLB 0.44%), a digital manufacturing specialist providing custom parts for engineers and designers, reported its second quarter 2025 results on July 31, 2025. Revenue (GAAP) reached $135.1 million, setting a new high beating the analyst consensus GAAP estimate of $128.0 million. Non-GAAP earnings per share came in at $0.41, above the $0.35 estimate. Despite these top-line gains, margin pressures remained, with net income essentially flat compared to Q2 2024, and GAAP net income was largely flat compared to the previous year. The quarter reflected robust demand, especially for CNC Machining, but also revealed signs of softness in other areas such as Injection Molding and slowing customer acquisition.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.41 | $0.35 | $0.38 | 7.9 % |
| Revenue (GAAP) | $135.1 million | $128.0 million | $125.6 million | 7.6 % |
| Gross Margin (Non-GAAP) | 44.8 % | 45.7 % | (0.9) pp | |
| Operating Margin (Non-GAAP) | 8.6 % | 8.9 % | (0.3) pp | |
| Adjusted EBITDA | $19.7 million | $19.3 million | 2.1 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Company Overview and Business Model
Proto Labs operates a digital manufacturing platform, leveraging advanced software and automation to produce custom prototypes and production parts for clients worldwide. The company fulfills orders through both in-house digital factories and a global partner network, giving customers flexibility in lead times and access to a wide range of manufacturing processes.
It has recently focused on building out its global manufacturing network, scaling its partner-driven Protolabs Network, and investing in proprietary automation software. Key business priorities include broadening production offerings, enhancing customer engagement, and supporting trends like faster product cycles and e-commerce-driven sourcing. Revenue per customer contact and network-enabled production are important measures of success, reflecting the company's efforts to capture a greater share of customer needs across prototyping and production stages.
Key Developments in the Quarter
The period delivered record GAAP revenue, up 7.5%, outpacing analyst forecasts. Growth came mainly from CNC Machining services, up 20.9% year-over-year (GAAP), and strong performance from the Protolabs Network, which partners with outside manufacturers to meet complex or high-volume orders. Digital Factory revenue also improved, but at a slower rate of 4.8% year-over-year. The company noted "record quarterly revenue of $135.1 million (GAAP)," highlighting the value delivered to customers through both in-house and network channels.
Injection Molding, which produces parts by injecting material into molds, saw a 3.4% decline in GAAP revenue from the prior year. Company leaders attributed this to nonrecurring large part orders in the first quarter of 2024. The 3D Printing line, which creates parts layer by layer from digital files, remained effectively flat, with GAAP revenue slipping 0.3% year over year. Sheet Metal services, catering to small-batch or custom metal parts, posted revenue growth of 9.7%.
Non-GAAP earnings per share grew 7.9% compared to Q2 2024 and exceeded expectations on a non-GAAP basis. However, non-GAAP gross margin fell by 0.9 percentage points to 44.8%. This drop stemmed from a higher share of lower-margin network-fulfilled revenue. The company's non-GAAP operating margin fell slightly to 8.6%. Adjusted EBITDA rose 2.1% compared to Q2 2024.
Customer engagement was a bright spot, with revenue per customer contact rising 10.9% year-over-year. At the same time, the number of customer contacts slipped 3%. The company continued to repurchase shares, buying back $24.0 million of common stock in the first half of 2025. Cash and investments climbed slightly to $123.2 million, with no debt on the balance sheet at quarter-end.
Strategic Shifts, Segment Results, and Other Noteworthy Events
The CNC Machining segment led growth. Network-driven revenue increased 18.6% year-over-year. Management emphasized network flexibility in rerouting work -- on a real-time basis, move work around across the network and redirect orders based on the customer needs, pricing and so forth.
By contrast, revenues in Europe declined 10.1 %, or 14.9 % when adjusting for currency fluctuations. This regional weakness offset some of the growth seen in the US, where United States revenue climbed 12.4% year over year. Exposure to tariffs was limited, with 90% of U.S. revenue already fulfilled domestically using both digital factories and partner network resources.
Cost control remained a focal point. Operating expenses rose, driven by higher spending on sales, marketing, and general administration. Company leaders attributed the gap between GAAP and Non-GAAP earnings to these cost increases, alongside one-time items such as CEO transition costs and restructuring. The closure of a German molding facility streamlined operations in Europe, part of a multi-year effort to align capacity with market demand after an earlier exit from Japan.
Proto Labs has invested in its brand as a production-focused manufacturer rather than just a prototyping service. Its marketing aimed at highlighting the integrated digital model and on-demand production drove increased visibility. Optimizing fulfillment through both factory and network, the company positioned itself to respond quickly to shifts in supply chain needs, tariffs, and changes in customer sourcing patterns. Technological upgrades, including new digital quoting and workflow tools, were noted as drivers of efficiency.
Outlook and What to Watch Next
The company provided guidance for Q3 2025, projecting GAAP revenue between $130.0 million and $138.0 million. Non-GAAP earnings per share are expected to range from $0.35 to $0.43. At the upper end, this would mark another record for the company.
Looking ahead, investors should watch for further changes in the balance of factory and network revenue, as margin gaps between these lines are shaping overall profitability. Indicators like customer contacts and revenue per contact will matter as the company looks to reignite customer growth beyond driving higher spend among existing clients.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
