IPG Photonics(IPGP -4.10%) reported Q2 2025 revenue of $251 million, up 10% sequentially and representing its first year-over-year increase (excluding divestitures) since 2022. Adjusted gross margin reached 37.8% in Q2 2025, at the top of guidance, supported by operational improvements and cost controls, while adjusted earnings per diluted share of $0.30 exceeded management’s guided range.
IPG Photonics books rebound as end markets stabilize
Driven by sequential improvements in welding, cutting, and marking, the company’s global book-to-bill ratio was approximately one in Q2 2025, reflecting stable orders against elevated revenue. Notably, revenue from advanced applications reached record levels, buoyed by strength in directed energy, semiconductor, and scientific verticals.
"Booking trends are encouraging. With demand showing signs of improvement and book to bill at approximately one on our higher second quarter revenue as we move into the second half of the year. Such as PMIs and the industrial production through June, but the demand environment remains uncertain. We also expect demand for our products will benefit from increased onshoring and local investment in automated production."
-- Mark Gitin, CEO
A stabilized order environment, with normalized inventory levels at key customers, supports increasing visibility and further recovery potential across IPG Photonics’ diversified industrial and advanced application segments.
IPG Photonics delivers strategic milestone in directed energy
Advanced applications revenue set a new high, with the company announcing initial deliveries of its Crossbow counter UAV (unmanned aerial vehicle) laser system to Lockheed Martin. Rigorous partner and field testing over the last six months validated Crossbow’s effectiveness against Class 1 and 2 drone threats, supporting anticipated growth in both defense and commercial markets.
"I am thrilled to announce that we have now delivered multiple units of our first laser counter UAV solution, Crossbow, to Lockheed Martin. This disruptive turnkey directed energy system is enabled by IPG's laser systems expertise and high-performance commercial single-mode lasers and supported by our high-volume manufacturing capabilities. Crossbow is a scalable and cost-effective laser defense system that can neutralize unmanned aerial threats and can operate as a standalone system or integrate into layered defense architectures."
-- Mark Gitin, CEO
This successful high-profile deployment substantiates IPG Photonics’ strategy of leveraging vertical integration and photonics expertise to win share in fast-growing, high-value defense and security subsegments.
Cost discipline and supply chain agility bolster IPG Photonics' margins
Adjusted gross margin increased to 37.8% in Q2 2025, aided by improved manufacturing cost absorption, lower inventory provisions, and strategic optimization of the production footprint to offset tariff impacts. Tariffs affected gross margin by 115 basis points, less than expected, and operating cash flow is projected to significantly strengthen in the second half of 2025, helping to offset a planned $100 million in 2025 capital expenditures.
"The impact of tariffs was 115 basis points which was better than our expectations. We have made statements, so that is a real focus of ours of trying to get that improved. We are automating the production of some of our consumable fibers for medical. And there are other areas that we are working on to get the product cost down. So expect that product gross margin to improve."
-- Tim Mammen, CFO
Continued process improvements and cost-saving initiatives position IPG Photonics to protect profitability amid uncertain macro and trade conditions, enhancing financial flexibility for organic and inorganic growth initiatives.
Looking Ahead
For 2025, management guides for revenue between $225 million and $255 million and adjusted gross margin between 36% and 38% for Q3 2025, with operating expenses of $89 million to $91 million for Q3 2025. Adjusted EBITDA is expected in the $22 million to $36 million range for Q3 2025. Capital expenditures are forecast at $100 million for 2025, primarily to expand capacity in Europe, with a significant reduction in capital expenditures and improved free cash flow expected next year.
