What happened 

Shares of 3D printing industry leader 3D Systems Corporation (NYSE:DDD) fell as much as 14.4% in trading Friday after the company reported fourth-quarter 2018 results. At 1:45 p.m. EST, shares were still down 13.7% and bouncing near their daily lows. 

So what

Revenue was up 2% from a year ago to $180.7 million on the back of a 113% increase in printer unit sales. Net loss for the quarter improved from $10.1 million a year ago to $4.1 million, or a loss of $0.04 per share. On a non-GAAP basis, earnings were $0.10 per share. Revenue was in line with expectations, and adjusted earnings per share were above the $0.07 Wall Street expected.

3D printed shoe in blue.

Image source: Getty Images.

The one downside was that gross margin fell from 48.2% a year ago to 45.7% last quarter. This is because printers are lower margin than materials or software sales, but they're also necessary to generate ongoing revenue from other segments. Still, in an environment in which revenue wasn't up significantly, falling margins aren't what investors wanted to see. 

Now what

Selling more printers is great news for 3D Systems in the long term, and the challenge now becomes selling more materials and software services. That's where management's focus is now, and that should help margins. But until we see progress in growing margins combined with more improvement on the top line, we may see more pressure on 3D Systems shares like we have today.