Lasers have become a must-have technology for companies seeking to maximize the efficiency of their manufacturing operations, and IPG Photonics (IPGP -1.29%) has worked hard to deliver useful laser solutions to its customers. Between cutting, welding, and other applications, IPG Photonics has seen immense gains in demand from its clients, and competitive advantages in providing customized products and systems have given the laser maker an edge over its rivals.

Coming into Tuesday's third-quarter financial report, IPG Photonics investors fully believed that the company would stay on its impressive growth trajectory. For its part, IPG once again exceeded those ambitious expectations, and it sees an increasingly bright future. Let's take a closer look at what's driving IPG Photonics forward and what investors can look forward to seeing in the months ahead.

Overhead laser beaming down at an unseen target, with focal point marked.

Image source: IPG Photonics.

Another record run for IPG

IPG Photonics' third-quarter results continued its streak of record performance. Sales jumped 48% to $392.6 million, dramatically outpacing the 38% growth most investors were looking to see. Net income soared by two-thirds to $115.6 million, and that produced earnings of $2.11 per share. That figure blew away the consensus forecast among those following the stock for $1.82 per share.

The materials processing unit remained the key driver of IPG's performance, posting 52% gains in revenue compared to a 9% decline elsewhere. IPG said that strength in cutting, welding, and 3D printing applications were primarily responsible for the big gains in sales for the segment. In particular, quasi-continuous wave lasers saw the biggest gains in demand, with sales more than doubling on strength in the production of consumer electronics. High-powered lasers were also popular products, with revenue from the segment jumping 60% as manufacturers sought the equipment for cutting and welding operations.

Geographically, IPG saw many of the same trends continue from past periods. China was a key driver of growth, with sales jumping by more than 70%. European growth of about 50% was also strong, but more sluggish conditions in the Japanese market weighed on IPG's overall sales gains as the company reported a 10% drop in revenue from the island nation. U.S. sales were up between 10% and 15% from year-ago levels.

IPG Photonics has also done an exceptionally good job of keeping its expenses in check. Overall operating expenses were up just 27%, showing a dramatically slower rate of increase than revenue. Discipline in sales and marketing, general overhead, and research and development expenses was clearly evident, and IPG's ability to avoid overspending when revenue goes up has played an important role in promoting growth in its bottom line.

Can IPG Photonics aim higher?

CEO Dr. Valentin Gapontsev was quite happy with the company's performance. "IPG delivered another record quarter," Gapontsev said, "driven by the secular shift to high-power products and increasing adoption of our technology across our largest applications and geographies." The CEO pointed to IPG's vertical integration in helping to support business initiatives while keeping costs down.

IPG Photonics responded to its good results by boosting its guidance. The company now believes that full-year revenue growth will be between 37% and 39%, up from its previous range of 32% to 34%. Gapontsev noted that this would be the fastest growth rate in six years, showing the extent of the boom in laser demand. For the fourth quarter, revenue gains of 18% to 27% would work out to between $330 million and $355 million in the quarter, and earnings of $1.55 to $1.80 per share would also be above the high end of what most investors following the laser company currently expect.

IPG Photonics shareholders celebrated the news, and the stock climbed 3% in pre-market trading following the announcement. As long as demand for lasers remains this strong, IPG Photonics will seek to capture an ever-increasing share of the lucrative business.