Why Velo3D's Strategic Shift and Defense Sector Partnerships Signal a High-Conviction Buy Opportunity

The aerospace and defense sectors are undergoing a transformative shift, driven by the urgent need for advanced manufacturing solutions that prioritize speed, precision, and supply chain resilience. At the forefront of this revolution is Velo3D, a company that has repositioned itself as a critical enabler of additive manufacturing (AM) innovation. Recent developments-including strategic partnerships with Mears Machine Corporation and the U.S. Navy, a robust Q3 2025 revenue beat, and the expansion of its Rapid Production Services (RPS) model-underscore a compelling investment thesis. These milestones not only validate Velo3D's technological leadership but also align with the defense sector's growing reliance on AM to address complex operational and strategic challenges.

Strategic Partnerships: Scaling Additive Manufacturing for Mission-Critical Applications

Velo3D's collaboration with Mears Machine Corporation represents a breakthrough in large-format additive manufacturing. By leveraging Velo3D's Sapphire XC printers, Mears has achieved the production of the world's largest single-piece, non-welded powder bed laser components, eliminating structural weaknesses inherent in traditional welding processes. This advancement is particularly significant for defense applications, such as rocket motors and missile systems, where precision and material integrity are non-negotiable. According to industry analysis, the partnership also highlights Velo3D's ability to scale AM for high-complexity, high-performance components, a capability that is increasingly critical as the U.S. military accelerates its modernization efforts.

On the defense front, Velo3D's $6 million contract with the U.S. Navy under the Maritime Industrial Base Program further cements its role in national security infrastructure. The agreement focuses on qualifying copper-nickel (CuNi) alloys for ship repair processes, leveraging AM to reduce lead times and costs compared to traditional casting methods. This aligns with the Navy's broader strategy to enhance supply chain independence, a goal reinforced by Velo3D's partnership with Linde AMT to secure domestic production of CuNi powder. According to financial reports, the company's four-year Cooperative Research and Development Agreement (CRADA) with NAVAIR to characterize advanced materials for flight systems underscores its deepening integration into the defense R&D ecosystem.

Financial Resilience and Margin Expansion: A Path to EBITDA Profitability

Velo3D's Q3 2025 financial results demonstrate a clear trajectory toward profitability. Revenue surged to $13.6 million, a 65% year-over-year increase, with adjusted EBITDA improving to -$7.3 million from -$9.7 million in Q3 2024. While gross margin remains at 3.2%-well below the 49.4% in Q3 2024-this decline is largely attributable to a one-time $5 million license deal in the prior year. The company's RPS model, which contributes recurring revenue and margin expansion, has gained significant traction. RPS backlog grew by 22% quarter-over-quarter, with 48% of Q3 bookings sourced from the space and defense sectors. This diversification of revenue streams, combined with the recent AS9100D certification for its RPS quality management system, enhances credibility in aerospace and defense markets.

Velo3D's financial strength is further bolstered by its Nasdaq uplisting and a $17.5 million public stock offering, which increased cash reserves to $11.8 million as of September 30, 2025. According to financial disclosures, these actions signal investor confidence in the company's ability to navigate capital-intensive R&D cycles while maintaining operational flexibility. With EBITDA profitability targeted for the first half of 2026, Velo3D is demonstrating a disciplined approach to scaling its business.

The RPS Model: A Catalyst for Sustainable Growth

The RPS model is central to Velo3D's long-term value proposition. By offering end-to-end AM solutions-including Flow™ software, Sapphire printers, and Assure quality control-the company is addressing the fragmented nature of traditional manufacturing ecosystems. The integration of Dyndrite's LPBF Pro software into its platforms, for instance, enhances production capabilities for defense clients requiring micron-level tolerances. Meanwhile, partnerships with entities like Vaya Space and Momentus illustrate the RPS model's scalability across aerospace, defense, and hybrid rocket industries.

The RPS model's recurring revenue structure also provides a buffer against cyclical demand fluctuations. According to government budget documents, with 48% of Q3 bookings from defense and space sectors, Velo3D is capitalizing on the U.S. government's $1.7 trillion defense budget for 2025, which prioritizes AM for rapid prototyping and production. This alignment with macroeconomic tailwinds positions Velo3D to capture a disproportionate share of the $5.4 billion AM market in aerospace and defense by 2030.

Conclusion: A High-Conviction Buy in a Strategic Sector

Velo3D's strategic shift toward defense and aerospace is not merely a tactical pivot but a foundational repositioning. The company's partnerships with Mears Machine and the U.S. Navy, combined with its RPS-driven margin expansion and EBITDA improvement, create a compelling near-to-mid-term investment case. As additive manufacturing becomes a cornerstone of national security and industrial competitiveness, Velo3D's vertically integrated solutions and defense-focused innovation are poised to deliver outsized returns. For investors seeking exposure to the next phase of manufacturing disruption, Velo3D represents a high-conviction opportunity.