Xometry, Inc. Q3 2026 Earnings Call - XOMETRY INC

Explicit Guidance:

• Q4 2026 Revenue: Expected range of $254–$256 million, representing 32%–33% year-over-year (YoY) growth.
• Q4 2026 Revenue Mix: Marketplace revenue expected to grow ~35%–36% YoY; Services revenue expected flat to slightly up YoY.
• Q4 2026 Adjusted EBITDA: Expected range of $22–$22.5 million (compared to $8.4 million in Q4 2025).
• Full Year 2026 Revenue Growth: Raised outlook to approximately 37% YoY (up from prior guidance of 33%–34%), driven by ~41% Marketplace revenue growth.
• Full Year 2026 Adjusted EBITDA: Expected range of $68–$68.5 million (approximately $7 million higher than prior guidance), with an incremental adjusted EBITDA margin of ~20%.
• Long-Term Margin Target: Management targets at least 20% incremental adjusted EBITDA on a full-year basis once revenue exceeds the $1 billion run rate.
• Long-Term Gross Margin: Expectation to expand marketplace gross margins further into the 35%–40% target range over the long term.

Business-Segment Outlook:

• Marketplace Growth: Sustained double-digit growth expected to continue in 2027 and beyond, driven by product-led strategy and AI optimization.
• Enterprise Expansion: Anticipates more accounts crossing the $10 million annual spend threshold in 2026; currently at over 140 accounts with >$500k spend.
• International Segment: Revenue growth accelerating (32% YoY in Q3 vs. 29% in June); new GM for Europe rolling out the U.S. growth playbook globally over the next few quarters; international margins expected to improve toward U.S. levels (currently ~8.5% vs. 10.3% U.S.).
• Services Segment: Growth expected to be flat to slightly up in Q4; focus on monetization improvements via AI workflows and expanded buyer traffic.
• Supplier Network: Continued expansion of global capacity (currently >5,000 active suppliers); smaller manufacturers (under $50M) identified as key capacity sources with 44% operating below 70% capacity.
• Active Buyers: Expected to continue acquiring net buyers at scale, targeting millions of potential buyers in a market currently at <1% digital penetration.

Market and Competitive Outlook:

• Digital Transformation: Viewing the market as being in "opening innings" of a shift from offline (email/multi-day quotes) to online; expects this trend to accelerate.
• Unit Economics: Expecting continued improvement in marketplace unit economics, evidenced by declining ad spend as a % of revenue (record low 3.0% in Q3) and rising marketplace cross-margin (record 36.0% in Q3).
• AI & Data Moat: Proprietary AI models expected to continue optimizing conversion, sourcing, and pricing, creating structural advantages over competitors tied to physical assets.
• Industry Structure: Anticipates asset-light marketplaces gaining share against competitors with high fixed costs; expects "offline-to-online" conversion to be the primary driver of market share shifts.

Macro / Industry Outlook:

• TAM Opportunity: Operating in a $275 billion custom manufacturing TAM, currently largely offline and fragmented.
• End Markets: Strong demand trends identified in aerospace, defense, and medical devices; expecting multi-year production programs to drive enterprise wallet share.
• Economic Conditions: Management notes no current signs of labor availability issues or supply chain deterioration; asset-light model positioned to shine during potential industry volatility.
• Regulatory/Industrial Tech: Views deals like Schneider Electric/PTC as positive tailwinds that accelerate digital transformation and the need for best-in-class integrated solutions.

Strategic Initiatives:

• Siemens Partnership:
  • Beta Launch: Scheduled for Q1 2027 in Siemens Design Center.
  • Rollout: Gradual ramp of customers across various Design Center versions (NX Cloud, on-site) throughout 2027.
  • Impact: Expected to positively impact 2027 operating results by embedding Xometry's intelligence as infrastructure.
• Thomas & SupplyFrame Integration:
  • Launching first collaboration between SupplyFrame and Thomas to drive high-quality buyer traffic.
  • Leveraging Thomas's 500,000+ supplier network to supplement Xometry capacity and improve monetization.
• Technology & Platform:
  • New E-Commerce Platform: Complete migration of buyer traffic to new API-focused, AI-native architecture enabling faster product updates and "one-click" reordering.
  • Agentic Workflows: Building AI agents to handle complex order-to-part journeys, leveraging generative CAD and agent-linked purchasing.
  • TradeCentric Integration: Expanded punch-out capabilities to 220+ e-procurement solutions (Coupa, SAP Ariba, Microsoft Dynamics) for US customers; automated invoice-to-PO matching.
• Capital Allocation:
  • Investments: Focused on organic growth, software CapEx, and AI infrastructure.
  • M&A: Open to disciplined tuck-in acquisitions to augment technology, talent, and geographies.
  • Balance Sheet: Strong liquidity ($505M cash/marketable securities at end of Q3); Siemens invested ~$250M follow-on after initial $50M, providing flexibility.

Risks and Headwinds to Outlook:

• Standard Forward-Looking Risks: Statements subject to risks and uncertainties including actual results differing materially from expectations; no duty to update statements.
• Execution Risk: Timeline for Siemens beta (Q1 2027) and subsequent ramp is dependent on successful milestone achievements.
• Margin Sustainability: While long-term gross margin targets are 35-40%, short-term fluctuations may occur based on market share acquisition vs. margin optimization decisions.
• International Scaling: International profitability currently trailing U.S.; success relies on successfully replicating the U.S. playbook in new markets.

Management Tone on the Future:

• Confidence Level: High confidence expressed in long-term growth trajectory and "strong compounding growth."
• Momentum: Described Q3 as "record," "stellar," and "robust"; noted strong Q4 start and raised guidance.
• Strategic Clarity: Emphasis on "opening innings" of a massive transformation; clear focus on asset-light model, AI-native infrastructure, and product-led growth.
• Guidance Changes: Upward revisions for both Q4 and Full Year 2026 revenue and EBITDA guidance, signaling improved visibility and execution.
• Hedges: No specific downward hedges mentioned other than standard "forward-looking statement" disclaimers; tone is aggressive on growth and margin expansion.

Miscellaneous:

• Financial Milestones: First quarter of GAAP profitability achieved in Q3 2026; revenue run rate exceeds $1 billion.
• Capital Expenditures: Q3 CapEx was ~$15M, almost entirely software-related, reflecting the asset-light model.
• Cash Flow: Generated $25.6M in operating cash flow YTD through Q3; focus on improving cash flow conversion.
• AI Specifics: Q3 saw a record marketplace cross-margin of 36.0% (up 130 bps QoQ) driven by AI optimization.