What Proto Labs (PRLB) Said on Its Q3 Earnings Call

Proto Labs (NYSE:PRLB) reported record third-quarter revenue as demand from aerospace, defense, robotics and other advanced manufacturing markets supported broad-based growth across its major service lines.

Revenue for the quarter ended Sept. 30 rose 14.2% year over year in constant currency to $154.3 million, according to Chief Financial Officer Dan Schumacher. The company said it marked its fourth consecutive quarter of double-digit revenue growth. U.S. revenue increased 14.7% in constant currency, while European revenue grew 12.2%.

“Third quarter revenue grew 14%, resulting in another record revenue quarter,” President and Chief Executive Officer Suresh Krishna said. “This is the fourth consecutive quarter of double-digit growth.”

Krishna said larger strategic customers continued to expand their relationships with the company, contributing to a 17% year-over-year increase in revenue per customer. Proto Labs served nearly 21,000 customers during the quarter, representing its third consecutive quarter of sequential customer growth.

Service-Line Growth Led by CNC Machining

All three of Proto Labs’ largest service lines posted double-digit growth during the quarter. CNC machining revenue increased 16.7% year over year in constant currency, while Krishna said factory CNC machining grew 22%. The company cited continued demand in aerospace and defense, including space exploration, satellites and drones, as well as robotics.

Injection molding revenue increased 12.6% in constant currency, supported by electronics, aerospace and defense, and telecommunications demand. Revenue from 3D printing rose 11.5%, with the company highlighting demand for direct metal laser sintering and HP Multi Jet Fusion technologies in the U.S.

Krishna said year-to-date Multi Jet Fusion revenue at the company’s U.S. factory operation increased more than 40%, prompting investments in additional capacity.

Sheet metal revenue was the exception, declining 4.6% year over year in constant currency. Schumacher attributed the decline to broad end-market weakness that was partly offset by aerospace and defense demand.

Factory revenue outpaced the company’s network business. Schumacher said network revenue grew 3% year over year, implying factory growth of 17.5%. He said the network showed strong momentum in Europe but softer conditions in the U.S., where customers increasingly chose the speed offered by the company’s factory operations.

Profitability and Cash Position

Third-quarter non-GAAP gross margin was 44.5%, down 230 basis points sequentially and 140 basis points from a year earlier. Schumacher said the decline primarily reflected higher raw-material costs, machine upgrades and targeted investments in labor and contractor support intended to handle rising volumes while maintaining delivery, quality and reliability standards.

During the question-and-answer session, Schumacher said machine upgrades represented roughly 100 basis points of the sequential gross-margin decline, contract labor accounted for about 90 basis points, and material costs made up the balance. He said the company expected some contractor costs to decline in the fourth quarter, although lower expected revenue and holiday-related factory inefficiencies would also affect margins.

Non-GAAP operating expenses rose $1.7 million from a year earlier to $50.3 million, reflecting increased demand-generation investments as well as contractor, professional-services and software-license costs. Still, adjusted operating expenses fell to 32.6% of revenue from 35.9% a year ago.

• Adjusted EBITDA increased to $26.2 million, or 17% of revenue, from $21.1 million, or 15.6% of revenue, a year earlier.
• Non-GAAP earnings per share rose 33.4% year over year to $0.63.
• Cash from operations totaled $22.8 million during the quarter.
• The company repurchased $5 million of common stock.
• Proto Labs ended the quarter with $175 million in cash and investments and no debt.

Schumacher said the $0.63 adjusted EPS result was the company’s highest since the third quarter of 2020. For the first nine months of 2026, the company said revenue rose 12% year over year, adjusted operating margin expanded by 300 basis points, and adjusted EPS increased 46%.

Investments in AI, Capacity and Europe

Management outlined investments in technology, operations and manufacturing capacity. The company launched additional metal 3D-printing heat treatments, fused deposition modeling capabilities and CNC surface finishes through ProDesk. It is also developing AI-assisted order checks for the Proto Labs Network.

Proto Labs recently announced an enterprise implementation of Amazon Quick as part of its AI roadmap, initially focusing on go-to-market workflows, response times and order-to-quote processing. Krishna said the company also established forward-deployed AI engineer roles and opened a global capability center in India, where engineers are working on manufacturing and AI initiatives.

In Europe, Krishna said revenue grew at a double-digit rate following go-to-market changes initiated late last year. He said the company continues to work toward returning the region to profitability through organizational, operating-model and capability improvements, while describing the transformation as a longer-term effort.

Fourth-Quarter Outlook

For the fourth quarter, Proto Labs forecast revenue of $143 million to $151 million. At the midpoint, the forecast implies 8% year-over-year growth. The company raised its full-year 2026 revenue-growth outlook to 10% to 11%, from a prior range of 8% to 10%.

Schumacher said the company expects negligible foreign-currency effects on fourth-quarter revenue compared with the prior-year period. Proto Labs forecast fourth-quarter non-GAAP EPS of $0.46 to $0.54, assuming stock-based compensation expense of about $4.1 million, amortization expense of $900,000 and a non-GAAP effective tax rate between 19% and 21%.

The CFO said the fourth-quarter outlook incorporates typical holiday-season softness, potential factory inefficiencies tied to employee time off, and operating expenses as a percentage of revenue that are expected to be more consistent with the first two quarters of the year.

Looking ahead to 2027, Schumacher said Proto Labs expects to continue investing in capacity and its strategic priorities. He said operating-expense growth next year is expected to be closer to revenue growth than it was in 2026, while the company expects it can maintain its gross-margin percentage, subject to product mix.

About Proto Labs (NYSE:PRLB)

Proto Labs, Inc (NYSE: PRLB), operating as Protolabs, is a digital manufacturing company that provides rapid prototyping and on-demand production services. The company uses automated quoting and manufacturing systems to help engineers and product developers produce custom parts without relying on traditional, lengthy tooling and procurement processes.

Protolabs offers computer numerical control (CNC) machining, injection molding, 3D printing and sheet-metal fabrication. Its services support the development and production of components in a range of materials and are used across industries including automotive, aerospace, medical, electronics and consumer products.

Founded in 1999 by entrepreneur Larry Lukis, the company has expanded its reach beyond its original U.S.