Proto Labs (NYSE:PRLB) executives said the company ended 2025 with “clear momentum,” highlighted by a record fourth-quarter revenue performance, expanding demand in CNC machining and sheet metal, and a strategic plan aimed at serving customers from prototype through production.
Record fourth quarter capped strongest organic growth since 2018
CEO Suresh Krishna, eight months into the role, said the fourth quarter results showed “what’s possible when we align execution around the right priorities,” citing double-digit year-over-year growth and record quarterly revenue. Krishna said fourth-quarter revenue increased 11% in constant currencies and full-year revenue grew 6% in constant currencies, which he described as the company’s strongest quarterly and annual organic growth rates since 2018.
In response to an analyst question about the unusual sequential increase in Q4 and the implied decline into Q1 at the midpoint of guidance, management said order volumes remained strong through November and December, while January started more “normalized” and softer due to post-holiday seasonality, with order rates improving from that point.
Demand driven by CNC, sheet metal, and innovation-led end markets
Krishna said 2025 performance was fueled by “exceptional demand for CNC machining and sheet metal,” with both delivering double-digit growth for the year. He noted U.S. CNC revenue grew 25% in 2025 and pointed to continued demand from innovation-driven industries including drones, space exploration, satellites, and robotics.
Schumacher provided additional detail by service line for 2025 in constant currencies:
- CNC machining: up 16.7% year-over-year; U.S. CNC up 25% year-over-year, with strong demand for parts used in drones, satellites, and rockets. U.S. CNC revenue grew 35% in the fourth quarter.
- Sheet metal: up 12% year-over-year, supported by demand in U.S. aerospace and defense.
- Injection molding: down 1.9%, which management attributed to weakness in medical devices and lower prototyping demand.
- 3D printing: down 4.7% year-over-year due to weak prototype demand for plastic parts in older technologies, though management said metal 3D printing was stronger, with U.S. DMLS revenue growing double digits.
Krishna also highlighted “strong momentum” in data centers, describing the segment as another high-growth market where Protolabs can enable faster execution for infrastructure providers. He referenced customers including Amphenol and CommScope, saying these are “well-funded and long-cycle markets” where the company believes its digital manufacturing model is a durable advantage.
Financial performance: margin mix, network headwinds, and cash generation
Schumacher said fourth-quarter non-GAAP gross margin was 44.8%, up 140 basis points year-over-year, driven by higher volume and improved gross margins in U.S. factories. Fourth-quarter non-GAAP operating expenses were $48.7 million, up $5.2 million from the prior year, primarily from higher incentive compensation, commissions, and medical expenses. Non-GAAP EPS was $0.44, above guidance and up $0.06 year-over-year, aided by volume and factory gross margin improvements and partially offset by a higher tax rate.
For full-year 2025, the company reported record revenue of $533.1 million, up 5.7% in constant currencies. Factory revenue grew 3.7% and Protolabs Network revenue grew 13.8%. U.S. revenue increased 9.1% year-over-year while Europe declined 7% in constant currencies.
On profitability, Schumacher said full-year non-GAAP gross margin was 45.1% versus 45.2% in 2024. Factory non-GAAP gross margin was 49%, up 70 basis points year-over-year, while Network non-GAAP gross margin was 31%, down 190 basis points year-over-year, which he said was “largely due to inefficiencies related to tariffs.” In the fourth quarter, management disclosed network gross margin of 30.3%.
Non-GAAP operating expenses for 2025 were $193.3 million, or 36.3% of revenue, slightly above 36% in 2024. Schumacher said most of the increase was variable and tied to revenue growth, including incentive compensation and commissions, while also noting an opportunity to leverage operating costs as the company scales.
Schumacher said Protolabs generated $74.5 million in cash from operations in 2025 and returned $43 million to shareholders via repurchases. The company ended 2025 with $142.4 million of cash and investments and “zero debt.”
Strategy: prototypes through production, anchored by four pillars
Krishna said Protolabs has clarified its strategy to serve customers “across the entire life cycle of a part, from prototype through production,” emphasizing that while the direction is not new, the rigor and execution plan are. He said the strategy is built on four pillars:
- Elevate Customer Experience: reducing friction for customers and simplifying processes, including efforts to unify what management described as multiple “storefronts” across factory and network offerings.
- Accelerate Innovation: increasing the pace of customer-facing product and service launches, leveraging assets such as “over 60 patents and more than 60 trade secrets,” a CAD dataset, and experience applying automation and AI.
- Expand Production: building capabilities and certifications for production work, with a more deliberate customer-led approach.
- Drive Operational Efficiency: improving productivity and cost discipline to fund investments and increase profitability over time.
Krishna said the company will also evaluate “selective inorganic opportunities” that align with the strategy, while remaining disciplined.
2026 outlook: transformation initiatives and guidance
Management described 2026 as a year of “transformation and growth,” including organizational and operational changes intended to accelerate growth. Krishna outlined several initiatives:
- A reorganization of the technology group into a domain-focused structure led by Chief Technology and AI Officer Marc Kermisch, with product management moved into the technology organization to reduce silos.
- Expansion of the company’s business operating system, “Proto Excellence,” beyond factory operations across the organization.
- Establishment of a Global Capability Center (GCC) in India, led by Ashish Sharma, to scale innovation and digital capabilities in support of the global business. Krishna said the company has had an India presence through network partners and supporting engineering roles and plans to build additional capability over time.
- A reset in Europe, where management said revenue has declined over the past two years due to macro uncertainty and “internal complexity,” prompting new go-to-market strategies, a renewed customer focus, and cost alignment to “stabilize margins and reset the cost base.”
Krishna said the company plans to launch “ProDesk” in the first quarter as a customer-facing experience across ordering, collaboration, and service, calling it an initial step toward a simplified e-commerce platform. He also said the company released advanced CNC machining and expanded metal 3D printing capabilities late in 2025, with additional quoting and manufacturability improvements and factory capability expansions planned in 2026.
On production expansion, Krishna highlighted ISO 13485 certification achieved in January for the U.S. injection molding operation, which he said is critical for medical device production programs. He said the company is running pilot programs with two medical device customers for high-precision, higher-volume injection molding parts, using capabilities including traceability, process validation, and automated inspection.
Schumacher said the company expects full-year 2026 GAAP revenue growth of 6% to 8% and guided first-quarter revenue to $130 million to $138 million. He said foreign currency is expected to have a $2.1 million favorable impact on first-quarter revenue versus the prior year. The company guided first-quarter non-GAAP EPS to $0.36 to $0.44, assuming stock-based compensation of about $3.6 million, amortization of $900,000, transformation and restructuring costs of $700,000, and a non-GAAP effective tax rate of 24% to 25%.
When asked about investment needs given the transformation agenda, management said the company expects to reallocate resources rather than broadly expand spending, citing plans to eliminate costs in some areas and reinvest in others. Schumacher added that, from a full-year perspective, he would not expect margin expansion as the company funds transformation efforts.
About Proto Labs (NYSE:PRLB)
Proto Labs, Inc is a digital manufacturing company that offers on-demand production services for custom parts and prototypes. Utilizing technologies such as 3D printing (additive manufacturing), CNC machining and injection molding, the company transforms digital CAD designs into functional parts on accelerated timelines. Its platform-driven process combines automated quoting, rapid tool generation and manufacturing execution to serve product developers, engineers and small- to medium-sized production runs.
Founded in 1999 by Larry Lukis, Proto Labs has championed the application of digital workflows to traditional manufacturing methods.
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