In the manufacturing industry, finding new ways to make products more efficiently is a must. IPG Photonics (NASDAQ:IPGP) has provided key advances in that regard through its work with fiber lasers, and its industry-leading position has benefited from the advantages that fiber lasers offer over both non-laser cutting-and-welding equipment and other types of lasers as well.

Coming into Tuesday's second-quarter financial report, IPG Photonics investors had expected to see extremely large increases to revenue and net income from the company. Yet even bullish shareholders were happily surprised by what the laser manufacturer delivered. Let's look more closely at IPG Photonics quarter, and what the numbers have to say about what's coming down the road.

An IPG Photonics laser demonstration.

Image source: IPG Photonics.

IPG posts record results

IPG Photonics' Q2 results included unprecedented levels of activity. Revenue was up 46% to $369.4 million, blowing past even analysts' optimistic projections for a roughly 32% gain. Net income jumped at an even more impressive 55% pace to $104.1 million, and the resulting $1.91 per share in earnings soared above analysts' consensus forecast of $1.64 per share.

The relative contributions from the company's segments remained consistent with what we've seen in past quarters. Its materials processing unit was the biggest contributor to the revenue gains, with segment sales climbing by nearly 50% from year-ago levels. The "other applications" area, which includes communications, medical, and other advanced areas, saw more sedate revenue growth of about 20%. IPG said that cutting and welding demand was the biggest reason for the improving numbers in the materials processing area, while telecom strength boosted the other portion of IPG's business. The company once again pointed to China as an area of intense growth, with sales there nearly doubling from year-ago levels and representing about half of total revenue for the quarter.

Most of IPG Photonics' strength in product sales came from the quasi-continuous wave laser and high-power laser areas, which had year-over-year gains of 82% and 57% respectively. Gains in the QCW area came from demand for consumer electronics production and percussion hole drilling. The medium-power, low-power, and pulsed laser markets all had growth rates closer to 10%.

Outside of China, IPG saw mixed performance from its geographical regions. North America produced 20% gains, but Europe was slightly weaker, and Japan saw revenue actually fall from the year-ago quarter.

"IPG delivered record quarterly results," said CEO Valentin Gapontsev, Ph.D., "driven by rapid growth in our core products, applications, and geographies." He also noted that accelerating adoption of fiber lasers among customers has contributed to the pace of recent gains.

What's ahead for IPG Photonics?

Management is pleased with how things are going, pointing once again to a book-to-bill ratio above 1, which signals a rising order backlog. "Demand for our core products, particularly high-power, kilowatt-scale fiber lasers, has never been stronger," asserted Gapontsev.

IPG Photonics' guidance for the third quarter was favorable. The laser maker forecasts revenue of between $350 million and $375 million for the quarter, which is well above analysts' consensus figure of $318 million. Similarly, guidance for earnings in the $1.70 to $1.90 per share range far exceeded the $1.57 per share projection among those following the stock. IPG warned that after its outperformance in the first half of 2017, growth could ease off in the remainder of the year, but that comment looked like a way to rein in expectations rather than an actual prediction of a big slowdown. The company also left open the possibility of upgrades later if negative seasonal factors don't impact it to the same extent they have in the past.

The market was happy with the report, and the stock soared more than 7% in the first hour of trading following the announcement. All things considered, IPG Photonics appears to be in an excellent position to remain the leader in the fiber laser niche for the foreseeable future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.