Fiber laser manufacturer IPG Photonics (NASDAQ:IPGP) beat Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 9.6% year on year to $227.8 million. On the other hand, next quarter’s revenue guidance of $225 million was less impressive, coming in 6.2% below analysts’ estimates. Its non-GAAP profit of $0.31 per share was 40.9% above analysts’ consensus estimates.
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IPG Photonics (IPGP) Q1 CY2025 Highlights:
- Revenue: $227.8 million vs analyst estimates of $225.1 million (9.6% year-on-year decline, 1.2% beat)
- Adjusted EPS: $0.31 vs analyst estimates of $0.22 (40.9% beat)
- Adjusted EBITDA: $32.68 million vs analyst estimates of $23.42 million (14.3% margin, 39.6% beat)
- Revenue Guidance for Q2 CY2025 is $225 million at the midpoint, below analyst estimates of $239.9 million
- Adjusted EPS guidance for Q2 CY2025 is $0.10 at the midpoint, below analyst estimates of $0.33
- EBITDA guidance for Q2 CY2025 is $23.5 million at the midpoint, below analyst estimates of $29.81 million
- Operating Margin: 0.8%, down from 7.6% in the same quarter last year
- Free Cash Flow was -$11.37 million, down from $26.54 million in the same quarter last year
- Inventory Days Outstanding: 190, up from 180 in the previous quarter
- Market Capitalization: $2.70 billion
“IPG had a strong start to the year, delivering revenue, adjusted earnings per share and adjusted EBITDA above the midpoint of our guidance and gaining early traction in key areas that are central to our strategy, including medical, micromachining, and advanced applications,” said Dr. Mark Gitin, Chief Executive Officer of IPG Photonics.
Company Overview
Both a designer and manufacturer of its products, IPG Photonics (NASDAQ:IPGP) is a provider of high-performance fiber lasers used for cutting, welding, and processing raw materials.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, IPG Photonics’s demand was weak and its revenue declined by 5.3% per year. This wasn’t a great result and is a sign of poor business quality. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. IPG Photonics’s recent performance shows its demand remained suppressed as its revenue has declined by 17.7% annually over the last two years. 
This quarter, IPG Photonics’s revenue fell by 9.6% year on year to $227.8 million but beat Wall Street’s estimates by 1.2%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 12.7% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below average for the sector.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, IPG Photonics’s DIO came in at 190, which is 22 days below its five-year average. These numbers show that despite the recent increase, there’s no indication of an excessive inventory buildup.
Key Takeaways from IPG Photonics’s Q1 Results
We liked that IPG Photonics beat analysts’ adjusted operating income and EPS expectations this quarter. On the other hand, its revenue and EPS guidance for next quarter missed and its inventory levels increased. Overall, this print was on the weaker side, and the stock traded down 6.5% to $59 immediately following the results.
Is IPG Photonics an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.