Executive Summary / Key Takeaways

• Xometry's AI-powered marketplace is rapidly digitizing the fragmented custom manufacturing industry, demonstrating robust market share gains and a resilient business model.
• The company delivered record Q2 2025 revenue of $163 million (up 23% year-over-year) and a record marketplace gross margin of 35.4% (up 190 basis points year-over-year), culminating in positive Adjusted EBITDA of $3.9 million.
• Continuous investment in proprietary AI, including generative AI and multimodal models, is a core differentiator, enhancing buyer/supplier experience, optimizing pricing, and expanding the service menu.
• Strategic initiatives like the "land-and-expand" approach with enterprise customers and aggressive international expansion are accelerating growth, with the full-year 2025 marketplace revenue growth outlook raised to 23-24%.
• Despite ongoing macroeconomic uncertainty and tariff volatility, Xometry's asset-light, multi-sourcing model provides crucial supply chain resilience, positioning it for sustained market penetration and increasing profitability.

The Digital Transformation of Manufacturing: Xometry's Core Thesis

Xometry, Inc. is at the forefront of digitizing the vast, multi-trillion-dollar global custom manufacturing industry. Incorporated in 2013, the company's mission is to accelerate innovation by providing real-time, equitable access to global manufacturing capacity and demand. Its vision is to drive efficiency, sustainability, and innovation by lowering barriers to entry in this traditionally fragmented and offline sector. Xometry operates a two-sided AI-powered online marketplace, complemented by the Thomasnet industrial sourcing platform and cloud-based services like Workcenter and Teamspace.

The industry is undergoing a secular shift towards digital sourcing, driven by the need for greater efficiency, speed, and, crucially, supply chain resilience in an increasingly volatile global trade environment. Xometry's asset-light marketplace model is purpose-built for this dynamic, allowing it to respond to customer needs in real-time without being constrained by in-house manufacturing capacity. This flexibility and the ability to offer multi-sourcing options are proving invaluable to customers seeking to mitigate risks from geopolitical tensions, tariffs, and other macroeconomic factors.

In this competitive landscape, Xometry stands out against rivals like ProtoLabs (PRLB), Fathom Digital Manufacturing (FATH), and 3D Systems (DDD). While ProtoLabs excels in rapid prototyping and Fathom in specialized additive manufacturing, Xometry's strength lies in its comprehensive, AI-driven marketplace that offers a broader array of services and a more extensive network of suppliers. This network effect, combined with its technological integration, positions Xometry as a scalable, one-stop solution for diverse manufacturing needs, from rapid prototyping to high-volume production.

The AI Engine: Xometry's Technological Moat

At the heart of Xometry's competitive advantage is its proprietary AI technology. The company's instant quoting engine, powered by machine learning algorithms and extensive datasets, enables buyers to quickly receive pricing, lead times, and manufacturability feedback. This core technology has been instrumental in driving significant and steady increases in marketplace gross margins, from 23.5% at its IPO in Q2 2021 to a record 35.4% in Q2 2025. This 190 basis point year-over-year expansion in Q2 alone underscores the value created by its continuously improving AI.

Xometry is actively deploying generative AI at scale to further enhance both buyer and supplier experiences. Recent product introductions highlight this commitment. In Q2 2025, the company expanded instant quoting for new additive materials and added dynamic 2D drawing viewing in the quote flow. In early Q3 2025, an AI-powered capability was introduced to automate information extraction from technical drawings, aiming to accelerate instant quoting for these traditional formats. This capability is critical as it opens up a large universe of parts that can be instantly quoted, reducing friction and improving customer experience.

For suppliers, the Workcenter cloud-based platform is being enhanced, with an improved mobile experience launched in July 2025. This allows suppliers to more easily interact with the platform, view 3D part files, share work-in-progress images, and receive push notifications, ultimately optimizing their productivity and asset utilization. On the Thomasnet platform, initial tests of a new search experience using natural language algorithms showed a 10%+ improvement in buyer engagement levels, with a new ad serving technology platform set to launch in Q3 2025 to increase advertising penetration and engagement. These technological advancements are not just features; they are foundational to Xometry's competitive moat, driving operational efficiency, expanding market share, and enhancing profitability.

Strategic Execution: Land, Expand, and Globalize

Xometry's growth strategy is multifaceted, focusing on deepening engagement with existing customers, expanding its global footprint, and enhancing its supplier ecosystem. The "land-and-expand" strategy, particularly with enterprise accounts, is yielding significant results. As of June 30, 2025, active buyers reached 74,777, a 22% increase year-over-year. More impressively, accounts with a last twelve-month (LTM) spend of at least $50,000 grew 15% year-over-year to 1,653. For Q2 2025, 98% of Xometry's revenue was generated from existing accounts, demonstrating strong customer stickiness. The company's enterprise strategy targets its largest accounts, which are believed to have over $10 million in potential annual revenue each.

Key to this enterprise penetration is Teamspace, a cloud-based collaboration software that unites engineers, managers, and purchasing executives. Its launch in Europe, the U.K., and Turkey in Q2 2025, along with new enterprise integration capabilities in early Q3, enables deeper embedding into customer workflows, reducing friction and expanding wallet share. This focus on enterprise solutions, coupled with ERP integrations and CAD plug-ins, is driving robust revenue growth from Xometry's largest customers.

International expansion is another critical growth pillar. For the six months ended June 30, 2025, international revenue accounted for 16% of total revenue. In Q2 2025, international revenue growth accelerated to 31% year-over-year. Xometry EU launched Teamspace in Europe, the U.K., and Turkey, and the company became a preferred supplier for a major European aerospace company. The long-term goal is for international revenue to represent 30-40% of marketplace revenue, aligning with other global online marketplaces. The company's global supplier network, now over 4,375 active suppliers across four continents, is a key differentiator, providing resilience against supply chain disruptions by not being concentrated in just a few sourcing markets.

The Supplier Services segment, including Thomasnet, while experiencing revenue declines (down 6% YoY in Q2 2025), remains a high-margin opportunity (88.7% gross margin in Q2 2025). Efforts to modernize the Thomas advertising platform, including a new ad server technology and enhanced search, aim to stabilize and restore growth. These initiatives also foster synergies with the marketplace, leveraging Thomasnet's vast directory to identify and onboard new suppliers for expanding manufacturing capabilities like tube bending and cutting.

Financial Performance: Scaling Towards Profitability

Xometry's financial performance in Q2 2025 underscores its strategic execution and the increasing operating leverage of its AI-powered model. The company reported record revenue of $163 million, a 23% increase year-over-year. Marketplace revenue, the primary growth engine, surged 26% year-over-year to $148.2 million. This robust top-line growth, combined with the efficiency of its AI algorithms, drove marketplace gross margin to a record 35.4%, up 190 basis points year-over-year. Overall company gross margin also reached a record 40.1%.

Operating expenses are demonstrating significant leverage. Total non-GAAP operating expenses increased 10% year-over-year in Q2 2025, well below the revenue growth rate. Sales and marketing expenses decreased to 18.3% of total revenue (from 20.7% in Q2 2024), and general and administrative expenses decreased to 10.4% (from 12.4% in Q2 2024). This discipline, coupled with gross margin expansion, resulted in Adjusted EBITDA of $3.9 million in Q2 2025, a substantial $6.6 million improvement year-over-year. The U.S. segment was a key contributor, with Adjusted EBITDA of $6.9 million (5.1% margin), while the International segment's Adjusted EBITDA remained relatively flat at $2.9 million due to ongoing growth investments.

Liquidity remains solid. As of June 30, 2025, cash and cash equivalents and marketable securities totaled $225.8 million. The company recently completed a strategic convertible debt refinancing in June 2025, issuing $250 million of 0.75% convertible senior notes due 2030. Proceeds were used to repurchase approximately $201.7 million of the higher-coupon 2027 notes, extend debt maturity, and repurchase $8.1 million of Class A common stock. This transaction fortifies the balance sheet and minimizes potential future dilution with an effective 75% conversion premium. While net cash used in operating activities was $4.1 million for the six months ended June 30, 2025, management expects CapEx to remain approximately $7 million per quarter, focusing on technology investments.

Outlook and Risks: A Balanced Perspective

Xometry's outlook for the remainder of 2025 reflects continued confidence in its growth initiatives and operating leverage, even as management maintains a cautious stance on the broader macroeconomic environment. For Q3 2025, the company expects revenue in the range of $167 million to $169 million, representing 18% to 19% year-over-year growth. Marketplace growth is projected at 20% to 22% year-over-year, with Adjusted EBITDA expected to be between $4 million and $5 million.

For the full year 2025, Xometry has raised its marketplace growth outlook from "at least 22%" to "23% to 24% growth." Overall revenue growth is anticipated to be at least 20%, exceeding the 18% growth achieved in 2024. The company expects to be Adjusted EBITDA positive for the full year, with an incremental Adjusted EBITDA margin of approximately 21%. This consistent delivery of 20%+ incremental Adjusted EBITDA leverage underscores the scalability of its model as it progresses towards $1 billion in revenue.

Despite this optimistic outlook, Xometry operates in a dynamic environment with inherent risks. Macroeconomic uncertainty, including fluctuations in inflation, interest rates, and geopolitical tensions, could lead to reduced spending on manufacturing. Changes in U.S. and international trade policies, particularly tariffs, pose a risk of increased raw material costs, supply chain disruptions, and decreased demand. The complexity of these policies could also lead to regulatory scrutiny or a preference for local competitors.

However, Xometry's business model is inherently resilient to many of these challenges. Its asset-light structure and diverse global supplier network (over 4,375 suppliers across four continents) enable dynamic sourcing and multi-sourcing strategies, mitigating single-point-of-failure risks. The AI-driven platform can rapidly adjust pricing to account for tariff changes, and the company actively works with enterprise customers to secure domestic supply or identify alternative offshore solutions. This flexibility, combined with a focus on market share gains in a massively fragmented market, positions Xometry to continue its growth trajectory regardless of broader economic headwinds.

Conclusion

Xometry is demonstrating a compelling investment thesis centered on its AI-powered marketplace, which is fundamentally transforming the custom manufacturing industry. The company's consistent ability to drive market share gains, expand gross margins through technological differentiation, and achieve operating leverage, even amidst a challenging macroeconomic backdrop, highlights the strength and resilience of its business model. With a clear strategic roadmap for enterprise penetration, international expansion, and continuous AI innovation, Xometry is well-positioned to capitalize on the secular shift to digital manufacturing.

The recent financial performance, including record Q2 2025 revenue and gross margins, coupled with a raised full-year growth outlook and a fortified balance sheet, provides a strong foundation. While macroeconomic and geopolitical risks persist, Xometry's flexible, asset-light, and globally diversified platform offers a robust solution for supply chain resilience. Investors should recognize Xometry's unique position as an AI-driven leader digitizing a critical, multi-trillion-dollar sector, with a clear path towards sustained growth and increasing profitability.