Fiber laser manufacturer IPG Photonics (NASDAQ:IPGP) beat Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 2.7% year on year to $250.7 million. On the other hand, next quarter’s revenue guidance of $240 million was less impressive, coming in 0.8% below analysts’ estimates. Its non-GAAP profit of $0.30 per share was significantly above analysts’ consensus estimates.
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IPG Photonics (IPGP) Q2 CY2025 Highlights:
- Revenue: $250.7 million vs analyst estimates of $229.2 million (2.7% year-on-year decline, 9.4% beat)
- Adjusted EPS: $0.30 vs analyst estimates of $0.14 (significant beat)
- Adjusted EBITDA: $31.55 million vs analyst estimates of $21.64 million (12.6% margin, 45.8% beat)
- Revenue Guidance for Q3 CY2025 is $240 million at the midpoint, below analyst estimates of $241.9 million
- Adjusted EPS guidance for Q3 CY2025 is $0.20 at the midpoint, above analyst estimates of $0.20
- EBITDA guidance for Q3 CY2025 is $29 million at the midpoint, above analyst estimates of $28.25 million
- Operating Margin: 0%, down from 4.7% in the same quarter last year
- Free Cash Flow was -$17.57 million, down from $29.24 million in the same quarter last year
- Inventory Days Outstanding: 176, down from 190 in the previous quarter
- Market Capitalization: $3.29 billion
“I am happy to report that we delivered second quarter results well above expectations. Our revenue improved sequentially, driven by modest demand recovery in general industrial and e-mobility markets. Excluding the impact of a divestiture, this was our first year-over-year revenue increase since 2022. We’re making progress on our strategy to drive profitable growth with initiatives that are already yielding results. This quarter, we saw higher revenue in medical, supported by a customer win earlier in the year, and reported strong growth in advanced applications. We are also launching a directed energy system for counter-UAV applications, which we believe will unlock significant value for our customers,” said Dr. Mark Gitin, Chief Executive Officer of IPG Photonics.
Company Overview
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ:IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. IPG Photonics struggled to consistently generate demand over the last five years as its sales dropped at a 4.3% annual rate. This wasn’t a great result and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. IPG Photonics’s recent performance shows its demand remained suppressed as its revenue has declined by 16.9% annually over the last two years. 
This quarter, IPG Photonics’s revenue fell by 2.7% year on year to $250.7 million but beat Wall Street’s estimates by 9.4%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 2.9% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4% over the next 12 months. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below the sector average.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, IPG Photonics’s DIO came in at 176, which is 34 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from IPG Photonics’s Q2 Results
We were impressed by how significantly IPG Photonics blew past analysts’ EPS expectations this quarter. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. On the other hand, its revenue guidance for next quarter slightly missed, although the market seems to be willing to overlook this. Zooming out, we think this quarter featured some important positives. The stock traded up 9% to $84.55 immediately after reporting.
Indeed, IPG Photonics had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.