Xometry, Inc. Q3 2026 Earnings Call - XOMETRY INC

Financial Performance:

• Q3 2026 revenue reached a record $252 million, representing 40% year-over-year growth; marketplace revenue was $238 million (up 43%), while services revenue was $14.4 million (up 2%).
• Achieved first-ever GAAP net income of $1.9 million, reversing a $11.6 million loss in Q3 2025.
• Q3 Marketplace gross margin hit a record 36.0%, an increase of 130 basis points quarter-over-quarter; long-term target range is 35-40%.
• Adjusted EBITDA reached $21.4 million for the quarter (8.5% margin), with an incremental margin of 21%; U.S. segment adjusted EBITDA margin was 10.3%.
• Operating costs increased 17% year-over-year to $77.4 million, growing less than half the rate of revenue; operating costs as a percentage of revenue improved 590 basis points.
• Marketplace advertising spend dropped to a record low of 3.0% of revenue (down 200 basis points).
• Cash and marketable securities totaled $505 million at quarter-end; generated $25.6 million in operating cash flow YTD; CapEx was $15 million (mostly software).
• Active buyers grew 20% YoY to 93,812, with a record net addition of 4,255; revenue per active buyer increased 19% YoY.
• Enterprise accounts (>$50k spend) grew 26% YoY to 2,172; top accounts (>$500k) grew revenue over 40%.

Guidance and Future Outlook:

• Raised full-year 2026 revenue growth guidance to ~37% (from 33-34%), driven by ~41% marketplace growth.
• Q4 2026 revenue guidance raised to $254-$256 million (32-33% YoY growth), with marketplace growth expected at 35-36%.
• Q4 2026 Adjusted EBITDA guidance raised to $22-$22.5 million (vs. $8.4 million in Q4 2025); services revenue expected flat to slightly up.
• Full-year 2026 Adjusted EBITDA guidance raised to $68-$68.5 million (approx. $7 million higher than prior), targeting 20% incremental margin.
• Long-term outlook remains positive with expectations of at least 20% incremental Adjusted EBITDA margins on a full-year basis as revenue scales beyond $1 billion.
• Siemens integration beta launch expected in Q1 2027, with gradual customer ramp throughout the year; full impact anticipated on 2027 results.
• International segment expected to accelerate with a new GM for Europe and rollout of the U.S. growth playbook.

Business Segments and Product Lines:

• Marketplace: Core growth engine; AI models optimizing conversion, sourcing, and pricing; moved majority of traffic to new AI-native e-commerce platform.
• Enterprise: Strong wallet share expansion via TradeCentric integration enabling PO/invoice automation with 220+ e-procurement systems (Coupa, SAP Ariba, etc.); 17,000+ TeamSpace users globally.
• Siemens Partnership: Building native integrations into Siemens Design Center (NX Cloud) and SupplyFrame; aiming to become the "connective layer" between design intent and production.
• Services: Leveraging Thomas network to monetize non-marketplace suppliers; integrating specialized AI workflows for marketing services.
• Supplier Network: Over 5,000 global active suppliers; expanded certified capacity and ITAR sponsorships; suppliers reporting rapid revenue growth and capacity expansion (e.g., one shop grew from $140k to $1M in one year).
• Product Innovation: Launched new work center experience for suppliers with 3D viewers and performance scores; introduced one-click reordering and "arrive-by" dates for buyers.

Market and Competitive Landscape:

• Operating in a $275 billion custom manufacturing TAM with less than 1% digital penetration; market remains largely offline with fragmented sourcing.
• Driving digital transformation by replacing email quotes and multi-day turnarounds with instant AI-driven pricing and sourcing.
• Competitive advantage derived from asset-light model, deep proprietary data for AI, and ability to match demand with underutilized capacity in small manufacturers.
• Positive sentiment regarding industry M&A (e.g., Schneider/PTC) as catalysts for further digital adoption and demand for integrated solutions.
• Market trends show a shift toward digitally native buyers who demand frictionless B2B experiences similar to B2C.

Risks and Challenges:

• Market risks include potential labor availability or supply chain issues, though management notes the asset-light model mitigates specific segment downturns.
• Execution risk regarding the integration of the Siemens partnership and scaling international operations.
• Dependence on continuous AI model refinement to maintain conversion and margin gains.
• Competition for enterprise spend remains high as customers diversify suppliers; success relies on deep workflow embedding (ERP integrations).

Management Commentary and Tone:

• Tone is highly confident and optimistic, citing "robust growth," "stellar Q3 results," and being in the "opening innings" of a massive digital transformation.
• Management emphasized the success of the "product-led growth" strategy and the effectiveness of AI in optimizing unit economics.
• Highlighted the achievement of a $1 billion+ revenue run rate and the milestone of GAAP profitability as validation of the business model.
• Expressed strong belief in the long-term trajectory to capture market share from offline incumbents.

Analyst Questions and Answers:

• Siemens Partnership: Confirmed global integrated teams; beta launch Q1 2027; expects multiple formal launch events as different Design Center versions go live.
• Enterprise Growth: Drivers include workflow embedding (punch-out integrations, TeamSpace) and technology adoption; 140+ accounts now over $500k spend; friction being removed via deep ERP integrations.
• Buyer Acquisition: Growth is broad-based; new buyers and large enterprise accounts both contributing; improvements in MarTech, personalization, and brand awareness driving unit economics.
• Capital Allocation: Strong balance sheet ($505M cash); focus on organic growth, disciplined investments, and potential "tuck-in" acquisitions to expand tech/talent; maintaining flexibility.
• International: Viewed as a key growth vector; new GM for Europe; revenue growth accelerating (32% vs. 29% previously); margins improving toward US levels.
• Margin Strategy: Targeting 35-40% long-term gross margin and 20%+ incremental EBITDA; flexibility to balance market share gain vs. margin optimization based on demand signals.

Other Key Points:

• The company is actively testing and deploying "agentic" e-commerce workflows where AI agents interact with the site to assist purchasing.
• Focus on "digital threads" to connect design software (like CAD) directly to manufacturing execution.
• Over 5 million potential buyers remain to be converted, emphasizing the scale of the untapped opportunity.
• New e-commerce architecture enables significantly faster product update cycles and reduced friction in buyer/supplier journeys.