Velo3D's Resilience: Assessing Strategic Viability in a Turbulent Additive Manufacturing Landscape

The additive manufacturing (AM) industry, once hailed as a cornerstone of the Fourth Industrial Revolution, has become a proving ground for resilience and innovation. Velo3D, a trailblazer in metal 3D printing for aerospace, defense, and semiconductor applications, has faced a harrowing year. A 1-for-35 reverse stock split in June 2024, followed by a delisting from the NYSE and a migration to the OTCQX Best Market, has raised urgent questions about the company's strategic viability. Yet, beneath the turbulence lies a narrative of adaptation and potential—a story worth dissecting for investors with a long-term lens.

Strategic Pivots: From Hardware to Ecosystem

Velo3D's core challenge has always been its business model. Historically, the company relied on selling high-margin Sapphire printers, which cater to niche markets requiring extreme precision. However, this approach left it vulnerable to cyclical demand and pricing pressures. The turning point came in 2025 with the aggressive expansion of its Rapid Production Services (RPS) offering. By shifting from hardware-centric sales to a service-based model, Velo3D is positioning itself as a full-stack solution provider—a move that mirrors the broader industry's shift toward digital manufacturing ecosystems.

The RPS model, which allows clients to outsource complex additive manufacturing tasks without upfront capital expenditures, has shown early traction. In Q1 2025, RPS backlog tripled year-over-year, with 75% of first-quarter bookings coming from new customers. Defense and aerospace clients, in particular, are adopting the service, driven by U.S. government incentives to reshore critical supply chains. A $15 million master services agreement with Momentus, Inc., and a partnership with Ohio Ordinance Works to produce 3D-printed military weapons underscore this trend.

Financial Realities: A Delicate Balancing Act

Velo3D's financials remain precarious. The company reported a GAAP net loss of $25.4 million in Q1 2025, with cash balances at $3.9 million as of March 31. While gross margins improved to 7.5% (from -28.8% in Q1 2024), this progress is offset by a $12.6 million operating expense burden. The recent forbearance agreement with creditors, which granted a reprieve on $12 million in senior secured notes, buys time but does not eliminate the risk of default.

Yet, these figures must be contextualized. Velo3D's RPS model is designed to generate recurring revenue with higher gross margins over time. Management projects a 30%+ gross margin by Q4 2025 and EBITDA positivity by mid-2026—a timeline that hinges on executing on its cost-cutting measures (e.g., 32% workforce reduction in October 2024) and scaling RPS. The company's recent OTCQX listing upgrade, while a step down from the NYSE, signals improved transparency and could attract smaller institutional investors.

Competitive Landscape: Navigating Chinese Rivals

The global AM sector is witnessing a seismic shift as Chinese competitors gain ground. State-backed firms are leveraging aggressive pricing, localized supply chains, and government subsidies to challenge Western incumbents. While Velo3D's focus on aerospace and semiconductor applications—sectors with stringent quality and security requirements—provides a natural moat, it cannot ignore the threat of Chinese players in commoditized segments.

However, Velo3D's differentiation lies in its Intelligent Fusion technology and real-time analytics, which are critical for producing defect-free, mission-critical parts. The company's recent $8 million licensing agreement with SpaceX, though controversial for its terms, highlights its ability to secure high-value partnerships. Moreover, its collaboration with Arrayed Additive—a new owner with a vision for vertical integration in parts production—could unlock synergies in materials innovation (e.g., magnesium alloy printing) and aerospace applications.

Long-Term Investment Potential: Risks and Rewards

For investors, Velo3D presents a classic high-risk, high-reward scenario. The company's strategic pivot to RPS and defense-focused partnerships offers a path to sustainable growth, but execution risks remain acute. Key concerns include:
1. Liquidity Constraints: With $3.9 million in cash and $12 million in outstanding debt, Velo3D must secure additional funding or extend its forbearance agreement to avoid default.
2. Market Competition: Chinese firms could erode margins in commoditized AM segments, forcing Velo3D to defend its premium pricing in high-value markets.
3. Operational Scalability: The RPS model's success depends on scaling without compromising the precision and quality that define Velo3D's brand.

That said, the additive manufacturing sector is projected to grow at a 20% CAGR through 2035, driven by demand from aerospace, energy, and semiconductors. Velo3D's niche in these sectors, combined with its technological edge, positions it to capture a disproportionate share of growth—if it can stabilize its financials.

Conclusion: A Calculated Bet on Resilience

Velo3D's journey is a microcosm of the AM industry's broader struggles and opportunities. The company's reverse stock split and delisting have tested its mettle, but its strategic reorientation toward RPS and defense applications offers a plausible path to recovery. For investors, the key is to assess whether the company can achieve its 2026 EBITDA-positive timeline while mitigating liquidity and operational risks.

Those willing to take a long-term view might consider Velo3D as a speculative play—a bet on its ability to transform from a hardware vendor into a vertically integrated AM solutions provider. However, this should be approached with caution, given the company's current leverage and the volatile nature of the sector. As the AM industry evolves, Velo3D's success will hinge not just on its technology, but on its capacity to adapt in an increasingly competitive and capital-intensive landscape.