Xometry's Transition to Profitability: A Structural Shift in a High-Growth Marketplace

Xometry Inc (NASDAQ:XMTR) has long been a poster child for high-growth tech companies willing to sacrifice short-term profits for long-term dominance. But its Q2 2025 earnings reveal a pivotal inflection point: the company is no longer just scaling—it is now scaling profitably. This shift is not merely a function of better cost controls but a structural reorientation of its business model, driven by operational discipline, strategic cost optimization, and a maturing marketplace. For investors, the question is no longer whether Xometry can grow, but whether it can sustain its profitability amid aggressive expansion.

The Numbers: From Burn to Break-Even

Xometry's Q2 2025 results are a masterclass in balancing growth with margin discipline. Revenue hit $163 million, up 23% year-over-year, with its core marketplace segment contributing $148 million (26% growth). More importantly, gross profit surged 23% to $65.2 million, with gross margins expanding to 35.4%—a 190-basis-point improvement year-over-year. This margin expansion is critical. It reflects not just pricing power but operational efficiency gains, particularly in reducing advertising spend (down to 5.6% of marketplace revenue) and optimizing supplier networks.

The adjusted EBITDA story is even more compelling. Xometry posted $3.9 million in positive adjusted EBITDA, a $6.6 million improvement from Q2 2024. This marks the first time the company has consistently generated positive cash flow from operations while maintaining aggressive growth. The scalability of its asset-light model is evident: for every dollar of adjusted EBITDA, the company generates over $5 in revenue, with a margin flow-through of 20% above a $600 million annual revenue run rate.

Strategic Cost Optimization: The Unsung Hero

Xometry's profitability is not accidental. The company has systematically reduced non-GAAP operating expenses to 37.8% of revenue in Q2 2025, down from 42.0% in Q2 2024. This 420-basis-point decline is a testament to disciplined spending, particularly in marketing and R&D. For example, advertising spend as a percentage of revenue fell by 130 basis points, a move that likely reflects better targeting of high-intent buyers rather than broad, inefficient campaigns.

The company's enterprise strategy also deserves attention. High-spend accounts (those with $500,000+ in 12-month spend) grew by over 40% year-over-year, indicating that Xometry is not just attracting more buyers but also deepening relationships with its most valuable customers. This shift to higher-margin, recurring revenue streams is a hallmark of sustainable growth.

Global Expansion: A Tailwind, Not a Distraction

Xometry's international revenue grew 31% year-over-year, now accounting for 18% of marketplace revenue. With local operations in Munich and Shanghai, and support for 18 languages and 6 currencies, the company is positioning itself to capture a larger share of the global manufacturing market. This expansion is not just about top-line growth—it's about diversifying risk and accessing markets where demand for on-demand manufacturing is surging.

The Road Ahead: Can This Sustain?

Xometry has raised its full-year 2025 guidance, projecting at least 20% total revenue growth and 23-24% marketplace growth. For Q3, it expects revenue of $167-169 million and adjusted EBITDA of $4-5 million. These numbers suggest confidence in maintaining both growth and profitability. However, investors should watch for two risks:
1. Margin pressure: As the company scales, maintaining advertising efficiency and supplier margins will be critical.
2. Competition: The digital manufacturing space is becoming crowded, with rivals like Protolabs and 3D Hubs investing heavily in AI-driven quoting systems.

Investment Implications

Xometry's Q2 results demonstrate that it has moved beyond the “growth at all costs” phase. The company is now executing a dual strategy: expanding its marketplace while tightening its cost structure. For investors, this creates a compelling risk-rebalance. The stock trades at a forward P/E of 18x, significantly lower than its 2023 peak of 45x, suggesting the market has yet to fully price in its profitability potential.

However, patience is still required. While Xometry's adjusted EBITDA is positive, it remains small relative to its revenue base. The company must continue to prove that its margin expansion is durable and that its international expansion does not dilute profitability. For those willing to take a medium-term view, Xometry offers a rare combination of high-growth potential and improving financial discipline—a structural shift that could redefine its industry.

In the end, Xometry's story is not just about manufacturing. It's about how a digital platform can transform an old, fragmented industry into a scalable, profitable business. And in Q2 2025, it took a decisive step toward proving that this transformation is real.