Manufacturing services provider Proto Labs (NYSE: PRLB) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 7.8% year on year to $135.4 million. The company expects next quarter’s revenue to be around $129 million, close to analysts’ estimates. Its non-GAAP profit of $0.47 per share was 19.9% above analysts’ consensus estimates.

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“Protolabs generated another quarter of accelerated growth and record revenue, supported by strong performance in several key end markets, and a substantial increase in revenue per customer contact. I am very encouraged by the progress we’ve made over the last two quarters—we have significant momentum into year-end," commented President and Chief Executive Officer Suresh Krishna.

Company Overview

Pioneering the concept of online quoting and manufacturing for custom prototypes and low-volume production parts, Proto Labs (NYSE: PRLB) offers injection molding, 3D printing, and sheet metal fabrication for manufacturers in various industries.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Proto Labs’s sales grew at a sluggish 3.3% compounded annual growth rate over the last five years. This fell short of our benchmark for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Proto Labs’s annualized revenue growth of 2.4% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

We can better understand the company’s revenue dynamics by analyzing its three most important segments: Injection Molding , CNC Machining , and 3D Printing, which are 35.3%, 46.6%, and 14.8% of revenue. Over the last two years, Proto Labs’s CNC Machining revenue (custom CNC-machined parts) averaged 8.5% year-on-year growth while its Injection Molding (injection molds and parts) and 3D Printing (custom 3D-printed parts) revenues averaged 1.6% and 1.4% declines.

This quarter, Proto Labs reported year-on-year revenue growth of 7.8%, and its $135.4 million of revenue exceeded Wall Street’s estimates by 1.1%. Company management is currently guiding for a 6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months. Although this projection implies its newer products and services will fuel better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Proto Labs was roughly breakeven when averaging the last five years of quarterly operating profits, inadequate for an industrials business. This result is surprising given its high gross margin as a starting point.

Analyzing the trend in its profitability, Proto Labs’s operating margin decreased by 4.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Proto Labs’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Proto Labs generated an operating margin profit margin of 6.5%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Proto Labs, its EPS declined by 8.7% annually over the last five years while its revenue grew by 3.3%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into Proto Labs’s earnings to better understand the drivers of its performance. As we mentioned earlier, Proto Labs’s operating margin was flat this quarter but declined by 4.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Proto Labs, its two-year annual EPS growth of 6.6% was higher than its five-year trend. Accelerating earnings growth is almost always an encouraging data point.

In Q3, Proto Labs reported adjusted EPS of $0.47, in line with the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Proto Labs’s full-year EPS of $1.59 to stay about the same.

Key Takeaways from Proto Labs’s Q3 Results

We liked that Proto Labs beat analysts’ revenue and EPS expectations this quarter. Q4 EPS guidance also came in ahead of Wall Street's estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 1.7% to $54 immediately following the results.

Proto Labs had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.