Velo3D’s 2025 Earnings Call: RPS Revenue Guidance Dropped, Gross Margin Drivers Shift from RPS to Inventory Overhead

Date of Call: Mar 24, 2026

Financials Results

• Revenue: Q4: $9.4M, down 25% YOY. Full Year: $46M, up 12% YOY (28% growth excluding a $5M prior year licensing revenue).
• Gross Margin: Q4: -73.6%, compared to -3.5% in the year ago quarter and 3.2% in the prior quarter. Full Year: -16.1%, compared to -5.1% in the prior year.

Guidance:

• Full year 2026 revenue expected in the range of $60 million-$70 million.
• Product gross margins projected to exceed 30% in the second half of 2026.
• Non-GAAP adjusted operating expenses expected in the range of $45 million-$55 million.
• Capital expenditures projected to be in the range of $40 million-$50 million.
• Expect to achieve EBITDA positive in the second half of 2026.

Business Commentary:

Revenue Growth and Backlog Expansion:

• Velo3D reported full year 2025 revenue of $46 million, up 12% compared to $41 million a year ago, or 28% excluding a prior year licensing revenue item.
• The company ended 2025 with a backlog of $31 million, compared to $16 million at the end of 2024 and $21 million at the previous quarter.
• The growth was driven by increasing demand for Rapid Production Solutions (RPS) and large format additive manufacturing capabilities, particularly in defense and aerospace sectors.

Gross Margin Improvement:

• Fourth quarter gross margin was negative 73.6%, compared to negative 3.5% in the year-ago quarter, primarily due to a $7 million non-recurring inventory obsolescence write-off.
• Full year 2025 gross margin was -16.1%, compared to -5.1% in the prior year.
• The company expects margins to improve with scaling of RPS and new Sapphire XC systems being built to order.

Strategic Expansion and Capacity Planning:

• Velo3D is planning for up to approximately 400 production systems over the next decade, based on current demand and program scaling.
• The company is expanding its manufacturing footprint, focusing on automation and process enhancements to support increased throughput and quality.
• This expansion is supported by a strengthened balance sheet, with cash and cash equivalents totaling $39 million as of December 31, 2025.

Defense and Aerospace Adoption:

• Velo3D became the first additive manufacturing vendor qualified under the U.S. Army’s Ground Vehicle Systems Center initiative, highlighting its role in defense supply chains.
• The company has secured key Department of Defense contracts, including a multi-year full rate production contract with a major defense prime contractor.
• This adoption in defense and aerospace is part of a broader structural shift towards faster, more localized, and resilient supply chains in these sectors.

Sentiment Analysis:

Overall Tone: Positive

• CEO states '2025 was a defining year' with 'double-digit revenue growth' and 'record bookings', 'strong momentum', and 'high confidence' for 2026. Backlog is 'the largest quarterly bookings in company history' and 'clear evidence that demand is not only strong but accelerating'. 'The future is bright' and 'the story is clear' with a 'demand-driven roadmap'.

Q&A:

• Question from Jason Smith (Lake Street Capital Markets): Just curious if you could share how much RPS revenue comprised in 2025. Then as we look at 2026, how should we think about that composition increasing, either exiting this year or for the full year?
  Response: RPS was 10%-15% of revenue in 2025; it will rapidly grow and is expected to overtake systems sales as the main revenue in 2-3 years.

• Question from Jason Smith (Lake Street Capital Markets): Just looking at sort of the ramp of the printers this year, can you remind us how many printers you currently have? How should we think about that number growing to exiting this year? Relatedly, can you provide any update on the Midwest facility plans?
  Response: Currently have about 15 printers on floor and 140 in the field; own hosting will be 40+ in 2026. Phase one expansion for first 100 printers is in California to reduce costs, with later expansion based on customer demand.

• Question from Jason Smith (Lake Street Capital Markets): I’m just curious if you could provide some additional color on the U.S. Army ground vehicle announcement, how we should be thinking about that potential size and the revenue opportunity.
  Response: It is a milestone-based contract; first 12 months is qualification, with revenue expected to be recognized quickly. Specific details on potential size were not disclosed.

• Question from Alex Fuhrman (Lucid Capital Markets): Can you talk about sort of what are the biggest drivers [for gross margin improvement to 30%+ in H2 2026] and kind of help us understand the relative importance?
  Response: Key drivers are scaling RPS, improved pricing on systems, and reduced overhead from cleaning up inventory and debt, allowing the company to become gross profit profitable and EBITDA positive.

• Question from Alex Fuhrman (Lucid Capital Markets): You mentioned that most of the growth you’re expecting to see in the RPS business is coming from aerospace and defense. Are there any other sectors where you’re focused?
  Response: Focus is on Defense, Space, Semiconductor, and Energy markets. In 2026, revenue is expected to be ~50% from defense and ~20% from space, with the rest from semiconductor and energy, supported by a broadening customer base.

• Question from Troy Jensen (Cantor Fitzgerald): The backlog that you quoted, can you just comment on the duration of that backlog? Is that more than one year or is that within one year?
  Response: The backlog is within 12 months and is expected to be captured in 2026.

• Question from Troy Jensen (Cantor Fitzgerald): I guess my question was, is all of your machines in your RPS service internally developed by Velo? Can you also just talk about the automation that you’ve added to these machines?
  Response: Not all machines are internally developed; fleet includes three variations. Velo focuses on controlling its own technology as an OEM to ensure data collection and operational efficiency, not on using third-party machines.

• Question from Troy Jensen (Cantor Fitzgerald): Have you talked at all about what your margins are on the RPS side of the business? what they may be at scale?
  Response: RPS gross margins are between 40% and 60%, depending on the project, which is higher than machine sales margins of about 35%.

• Question from George Mariama (Pareto Ventures): Could you provide some color on your plans to strengthen supply chain, you know, feedstock materials you mentioned?
  Response: Plans focus on controlling the feedstock supply chain (metal powders) and building a robust ecosystem to ensure scaling to 400-500 machines, with vertical integration to avoid vendor delays.

• Question from George Mariama (Pareto Ventures): Would that be sort of into the data software sort of to create the AWS sort of idea along those lines?
  Response: Acquisitions will target data and software to create a digital manufacturing ecosystem, aiming to transform traditional manufacturing into a digitally connected platform for Velo's long-term vision.

Contradiction Point 1

RPS Revenue Composition and Growth Expectations

Guidance for 2025 RPS revenue percentage decreased from 20-30% to 10-15%.

Jason Smith (Lake Street Capital Markets) - Jason Smith (Lake Street Capital Markets)

2025Q4: For 2025, RPS revenue was 10-15% of total, with the remainder from system sales. - Arun Jeldi(CFO)

What percentage of total revenue did RPS contribute in 2025, and how do you expect this composition to change in 2026? - Jason Schmidt (Lake Street Capital Markets)

2025Q3: RPS is expected to represent 20-30% of revenue. - Arun Jeldi(CFO)

Contradiction Point 2

Gross Margin Improvement Drivers

Primary driver shifted from mix shift and efficiency to elimination of excess inventory overhead.

Alex Fuhrman (Lucid Capital Markets) - Alex Fuhrman (Lucid Capital Markets)

2025Q4: The primary driver is the elimination of excess inventory and associated overhead from previous years... - Arun Jeldi(CFO)

What are the key drivers behind the projected gross margin improvement from low single-digits to over 30% in H2 2026? - George Marima (Peretto Ventures)

2025Q3: The improvement is driven by a combination of factors: ... 2) The higher gross margin profile of RPS services. - Arun Jeldi(CFO)

Contradiction Point 3

Customer Order Fulfillment Timeline

Inconsistency in the expected duration to fulfill the backlog.

What are your thoughts on the company's earnings performance? - Troy Jensen (Cantor Fitzgerald)

2025Q4: The backlog is expected to be fulfilled within the next 12 months. - Arun Jeldi(CFO)

Okay, let's see. The user wants me to rewrite the input into one concise earnings-call question. The input is "What is the duration of the $31 million backlog?" First, I need to make sure I understand what the original question is asking. The user is asking about the duration of a backlog that's valued at $31 million. In the context of an earnings call, this probably relates to how long that backlog has been outstanding or how long it's expected to take to fulfill.Now, applying the hard output rules. The output must be exactly one line, only the final question text, ending with a question mark if a rewrite is possible. Also, if the input isn't a question, too vague, or lacks info, output it as-is. But here, the input is a question, so I can attempt to rewrite it.The original question is already pretty concise. "Duration" might be a bit vague. In earnings contexts, people often refer to time frames like "how long has the backlog existed?" or "when is the backlog expected to be resolved?" But the original uses "duration," which is acceptable. Maybe "How long has the $31 million backlog been outstanding?" or "What is the expected timeline for resolving the $31 million backlog?" But the original is shorter. Let me check if "duration" is clear enough. In business terms, "duration" can mean the length of time something has been in existence. So the original question might be acceptable as is, but maybe rephrasing for clarity. However, the user wants it concise. The original is already a single line. Maybe "How long has the $31 million backlog existed?" but that's similar. Alternatively, "What is the timeline for the $31 million backlog?" But perhaps the original is already acceptable. Wait, the instruction says to output exactly one line, only the final question. The original ends with a question mark. Since the input is a valid question and can be considered concise enough, maybe the best answer is to leave it as-is. But wait, the user might want it rephrased to be more specific. Let me think again. The original is "What is the duration of the $31 million backlog?" In an earnings call, they might want to know when it's expected to be fulfilled. So maybe "When is the $31 million backlog expected to be fulfilled?" That's more specific. But the original uses "duration," which could mean how long it's been there or how long until it's done. To make it clearer, perhaps rephrase to ask about the expected time to resolve. However, the user wants the output to be as concise as possible. The original is already concise. The user might not want to change the wording if it's already clear. So maybe the original is acceptable. But I need to ensure that the output is a single line, only the question. Since the input is a valid question, but maybe the user wants it rephrased. Alternatively, maybe the answer is to leave it as-is because it's already a clear question. Let me check the rules again. If the input is a question and can be rewritten, output the rewritten one. But if it's already clear, maybe leave it. But the user might prefer a slightly rephrased version. For example, "How long until the $31 million backlog is resolved?" But the original is "duration," which could be ambiguous. Hmm. I think the original is acceptable as a concise question. So the output would be the same as the input. Wait, but the user says "rewrite the input into one concise earnings-call question." So maybe they want a slightly different phrasing. Let me think of another angle. In earnings calls, backlogs are often discussed in terms of when they will be fulfilled. So asking about the expected timeline might be more relevant. So "What is the expected timeline for fulfilling the $31 million backlog?" But the original uses "duration," which is a bit vague. The user's instruction says to output exactly one line. Since the input is a question and can be rewritten, but the original is already concise, perhaps the answer is to leave it as-is. However, the user might expect a rephrased version. I'm a bit torn here. The safest bet is to keep it as the original if it's already clear. Alternatively, if "duration" is not the best term, rephrase. Let me check if "duration" is commonly used in earnings calls. Maybe not as much as "timeline" or "expected time to resolve." But the original is grammatically correct and concise. So perhaps the answer is to leave it as-is. Therefore, the output is "What is the duration of the $31 million backlog?" with a question mark. Since the input is a valid question and can be considered concise, even though it might be slightly ambiguous. The user's instruction says to output the final - Matthew (on behalf of Brian Kinstlinger, Alliance Global Partners)

2024Q1: The ability to help customers achieve their original economic models... is driving renewed confidence. - Bradley Kreger & Hull Xu(CEO/COO)

Contradiction Point 4

Composition of Bookings/Backlog

Contradiction in the primary sectors driving new orders and backlog.

Alex Fuhrman (Lucid Capital Markets) - Alex Fuhrman (Lucid Capital Markets)

2025Q4: The focus remains on key areas: Defense, Space, Semiconductors, and Energy. Defense and Space are the primary drivers... The customer base is broadening, contributing to the $31 million backlog. - Arun Jeldi(CFO)

Are the RPS business's growth expectations limited to aerospace and defense, or do they include other sectors? - James Ricchiuti (Needham & Company)

2023Q4: The orders were largely reflective of 2023's customer profile: a large portion from existing space customers expanding their fleets... and over a third from the defense sector. - Bradley Kreger(CEO) and Bernard Chung(CFO)