Velo3D: From Hardware Volatility to Recurring Revenue Dominance

The 3D printing industry has long been characterized by its reliance on high-margin hardware sales, but Velo3D is redefining the playbook. By pivoting from volatile hardware-centric models to a recurring revenue-driven approach through its Rapid Production Solutions (RPS), the company is building a more predictable and defensible business. This strategic shift, coupled with aggressive cost-cutting and a focus on high-value systems, positions Velo3D as a compelling long-term investment in the $500B global metal machining market.

A Strategic Pivot to Recurring Revenue

Velo3D's transition to RPS marks a fundamental reorientation of its business model. The company now aims for RPS to account for 40% of total revenue by 2026 according to earnings calls, a target underpinned by a strategic focus on value-driven operations and diversified revenue streams. This pivot includes a shift toward higher average selling prices for advanced systems and a total solutions approach that integrates parts production capabilities for aerospace, defense, and industrial clients as announced in Q4 2024.

The RPS model is designed to address a critical pain point in additive manufacturing: the high capital and operational costs of scaling production. By offering scalable surge capacity without requiring customers to invest in their own infrastructure, Velo3D is shortening design cycles and accelerating production qualification. This not only enhances customer stickiness but also transforms the company's revenue structure from one-time hardware sales to recurring, service-based income.

Financial Projections and Operational Efficiency

Velo3D's financial roadmap reflects confidence in this transformation. The company projects over 30% revenue growth in 2025 and expects to achieve EBITDA profitability by mid-2026 as reported in financial analysis. These goals are supported by a 20% reduction in operating expenses compared to 2023 according to investor presentations, demonstrating disciplined cost management.

Strategic Production Scalability and Market Positioning

The RPS model's scalability is a key differentiator. By leveraging its proprietary Intellectual Fusion technology-a combination of software, hardware, and process expertise-Velo3D enables customers to produce complex metal parts with minimal setup costs as detailed in public filings. This technology underpins the company's ability to deliver rapid, high-quality production at scale, a critical advantage in industries where time-to-market is paramount.

While the exact role of Intellectual Fusion in accelerating RPS adoption remains underexplored in public filings, its integration into Velo3D's total solutions approach suggests a strong alignment with customer needs. The technology likely reduces barriers to entry for clients, enabling faster adoption of additive manufacturing in traditionally rigid sectors like aerospace and defense.

A Compelling Long-Term Investment

Velo3D's transformation is occurring against the backdrop of a maturing $500B metal machining market, where additive manufacturing is increasingly viewed as a disruptive force. By shifting to a recurring revenue model, the company is insulating itself from hardware volatility while capturing a growing share of a market that values flexibility and scalability.

The 40% RPS revenue target by 2026 according to earnings guidance is ambitious but achievable, given the company's operational improvements and strategic focus. If successful, Velo3D could emerge as a leader in a sector where recurring revenue models are rare, creating a durable competitive advantage.

Conclusion

Velo3D's pivot to RPS represents a masterclass in business model innovation. By prioritizing recurring revenue, operational efficiency, and customer-centric solutions, the company is building a foundation for sustainable growth. While challenges such as improving gross margins remain, the strategic clarity and execution progress in 2025 suggest that Velo3D is on a path to profitability and long-term value creation. For investors, this transformation offers a rare opportunity to back a company redefining its industry.