Shares of IPG Photonics (IPGP +7.88%) rallied 7.9% on Tuesday. The industrial laser company reported second-quarter earnings on Tuesday morning. Although results were "mixed," with a revenue miss and bottom-line beat, stronger-than-expected guidance lifted shares following a July sell-off.
NASDAQ: IPGP
Key Data Points
IPGP looks ahead with optimism
In the second quarter, IPG grew revenue by 11.1% to $278.6 million, with adjusted (non-GAAP) earnings per share nearly doubling to $0.58. While the revenue figure slightly missed expectations, adjusted EPS beat expectations by a healthy amount.
Not only that, but IPG management also guided stronger-than-anticipated results for the current quarter. Q3 revenue is now supposed to be $280 million at the midpoint of guidance, above analysts' expectations of $276.6 million, with adjusted EPS set to come in at $0.45 at the midpoint, relative to analyst expectations of $0.43.
Management noted strength across IPG's portfolio of laser applications, spanning a variety of industries, from industrial cutting and welding to batteries, semiconductor equipment, and defense applications. Management highlighted strong quarter-over-quarter growth in both industrial and advanced applications, with a book-to-bill ratio above one, suggesting growth coming in future quarters. Specifically, management noted strength in battery manufacturing and semiconductor equipment lasers, suggesting some exposure to AI data center growth.
Even some of the segments that were weaker in Q2 received positive commentary. Defense revenue was slightly down year-over-year, but management noted strong interest in IPG's new Crossbow anti-drone laser technology, unveiled in early 2026. Anti-drone technology is certainly a hot topic today, given the use of drones in both the Iran war and the Russia-Ukraine war, and Crossbow appears to have strong potential for growth.
Medical revenue was also slightly down, but management noted it expects that segment to improve sequentially in the second half. IPG also highlighted its acquisition of Lumibird Medical just three weeks ago, a leader in laser technology for ophthalmology. This is part of the new strategy of CEO Mark Gitin, who became CEO just two years ago, to target higher-margin businesses for IPG.
Image source: Getty Images.
IPG is still in recovery mode
Despite today's strong rally and a 31.4% year-to-date gain, IPG remains well below its all-time highs from 2021. Shares still don't look "cheap" at 58 times this year's earnings estimates, but those earnings figures are recovering off a very low base. IPG also has lots of cash on its balance sheet and no debt, making the valuation more palatable. All in all, IPG remains an interesting recovery play in the industrial sector.
