IPG Photonics (NASDAQ:IPGP) reported fourth-quarter 2025 revenue above its expectations, pointing to improving demand conditions and stronger execution across several growth initiatives. Management said revenue increased 17% year-over-year and 9% sequentially in the quarter, supported by stabilization in industrial demand, increased opportunities in battery and additive manufacturing, and continued progress in medical and advanced applications.
Fourth-quarter results show broad-based improvement
CEO Dr. Mark Gitin said materials processing revenue rose 6% sequentially and 17% year-over-year, citing stable general industrial demand and increased demand tied to battery and additive manufacturing applications. Within materials processing, management said welding revenue was stable sequentially while cutting demand increased. Cleaning was also cited as a strong performer, with Gitin noting the company is “starting to see increased revenue synergies” following its cleanLASER acquisition.
Full-year 2025: first revenue growth since 2021
For the full year, IPG said revenue grew 3%, marking its first year of revenue growth since 2021. Management described materials processing sales as flat, with lower cutting sales offset by growth in other applications such as cleaning and additive manufacturing. Welding revenue was also flat for the year, as weaker demand in general industrial and traditional automotive markets was offset by higher demand in battery manufacturing.
Gitin said the company saw a strong increase in Asia welding sales as battery investments rebounded in China. He also described a shift in demand from electric vehicles to stationary storage, which management characterized as positive for IPG because stationary storage batteries often require more sophisticated welding processes. The company also said it is beginning to see increased demand for its battery manufacturing solutions in consumer and medical devices.
Management emphasized that 2025 progress included expanding beyond materials processing. Gitin said business outside of materials processing accounted for approximately 14% of total revenue, with micromachining, medical, and advanced applications all increasing by double digits.
Medical, directed energy, and innovation updates
In medical, IPG said sales grew 21% to a record level in 2025, aided by a new customer win that became a major contributor to revenue growth. Gitin also noted FDA clearance for the company’s next-generation urology system featuring its StoneSense and advanced modulation technologies. The company began shipping the product in the fourth quarter, and management said additional medical product introductions are planned for 2026. Gitin said IPG also sees an opportunity to increase recurring revenue through consumable delivery fibers.
In directed energy, Gitin said IPG rolled out its first complete standalone defense system in 2025. The company introduced Crossbow, described as a scalable, cost-effective laser defense system designed to neutralize smaller Group One and Group Two drones. IPG created IPG Defense to drive development and customer engagement and opened a new office and manufacturing facility in Huntsville, Alabama.
During the Q&A, Gitin said the company launched what it calls “Crossbow Mini,” a 3-kilowatt system aimed at shorter-range applications, and outlined a roadmap that could include 6- to 8-kilowatt versions. He emphasized the company is not pursuing megawatt-class systems or government contracting, framing the effort as a commercial product approach.
On technology and recognition, Gitin said IPG received a Prism Award in the lasers category for its new 8-kilowatt single-mode laser at SPIE Photonics West. He also highlighted the demonstration of a compact 148-nanometer vacuum ultraviolet (VUV) laser source based on the company’s proprietary crystal materials technology, which he said could open opportunities in areas such as nuclear clocks, quantum computing, and metrology.
Margins, tariffs, and capital allocation
CFO Tim Mammen said fourth-quarter revenue exceeded IPG’s expectation of $274 million. He also noted foreign currency increased revenue by approximately $6 million, or 2%, compared with the same period a year earlier, and that the company responded quickly to strong customer order activity late in the quarter.
Gross margins reflected several headwinds. Mammen reported GAAP gross margin of 36.1% and adjusted gross margin of 37.6%, excluding accelerated depreciation on a long-lived asset and amortization expense. He said the adjusted result was below what the company would normally expect at that revenue level, primarily due to planned inventory management that reduced absorption of fixed costs. Tariffs remained a headwind as well, reducing gross margin by 200 basis points year-over-year, which Mammen said was 50 basis points higher than expected due to timing of recognizing tariff expenses. He said the tariff impact will likely persist in 2026, though potentially at a moderated level.
For the quarter, Mammen reported GAAP operating income of $3 million and adjusted EBITDA of $41 million, above the top end of guidance. GAAP net income was $13 million, or $0.31 per diluted share, while adjusted net income was $20 million, or $0.46 per diluted share.
IPG ended the quarter with $839 million in cash, cash equivalents and short-term investments, plus $77 million in long-term investments and no debt. The company spent $18 million on capital expenditures in the quarter and $4 million on share repurchases. Mammen said free cash flow was positive in the fourth quarter as operating cash flow improved significantly in the second half of the year. He added that 2025 capital spending came in below initial expectations because approximately $50 million tied to a major fiber manufacturing facility investment in Germany shifted into 2026, leading to 2026 CapEx expectations of $90 million to $100 million.
IPG repurchased $53 million of stock in 2025 and said it has returned over $1 billion to shareholders via buybacks over the past four years. The board authorized a new $100 million share repurchase program, and management said it plans to continue repurchasing shares opportunistically.
Outlook: strong orders, cautious optimism
Management said bookings were strong in the fourth quarter, resulting in a book-to-bill “firmly above one.” Mammen cautioned that some fourth-quarter bookings include medical and systems orders scheduled to ship beyond the first quarter.
For the first quarter of 2026, IPG guided to revenue of $235 million to $265 million, reflecting typical seasonality. The company expects adjusted gross margin of 37% to 39%, including an estimated tariff impact of about 150 basis points, and operating expenses of $90 million to $92 million. IPG also guided to adjusted earnings per diluted share of $0.10 to $0.40 and adjusted EBITDA of $25 million to $40 million.
In Q&A, Gitin said cutting revenue has been stable over the past several quarters and improved in the fourth quarter, citing stabilized inventories among core OEMs and the benefit of the company’s rack-integrated platform. He reiterated IPG’s focus on both core industrial markets and newer investment areas such as medical, micromachining, and directed energy, which he said address a “several billion” dollar total addressable market opportunity with expected growth of “hundreds of millions” over the next several years.
About IPG Photonics (NASDAQ:IPGP)
IPG Photonics Corporation is a global leader in the design and manufacture of high-performance fiber lasers and amplifiers used in industrial, medical, scientific, and telecommunications applications. The company’s core products include ytterbium and erbium fiber lasers, diode lasers, and fiber amplifiers that deliver high power and efficiency for precision cutting, welding, marking, and engraving. IPG’s systems are engineered to optimize process speed, reliability, and energy consumption, making them a preferred choice for advanced manufacturing environments.
In addition to stand-alone laser sources, IPG offers turnkey laser systems and integrated solutions tailored to sectors such as automotive, electronics, aerospace, additive manufacturing, and life sciences.
