Velo3D Q1 2026: Revenue Surges 48% but Margin Path Remains Steep

What happened

Velo3D reported Q1 2026 revenue of $13.8 million, up 48% year-over-year, and a GAAP gross margin of 17.2%—a notable improvement from the 3.2% reported in Q3 2025 but still well below the >30% target. The company reaffirmed its full-year 2026 revenue guidance of $60–$70 million and expects to turn EBITDA positive in the second half of 2026, signaling confidence in its defense-driven turnaround. However, the DeepValue master report rates the stock a Potential Sell with a base case of $12 per share, highlighting persistent cash burn, heavy reliance on defense contract conversions, and the likelihood of further dilutive financing. While the gross margin rebound reduces near-term execution risk, the company's cash position remains thin and the path to sustainable profitability still hinges on scaling Rapid Production Solutions (RPS) and converting DIU, Navy, and Army programs into recurring production orders. At ~$14 per share, the market is pricing in a successful turnaround that has yet to be proven through consistent margin expansion and positive free cash flow.

Implication

The margin improvement is a positive signal for the turnaround, but the stock still trades on high expectations; only enter on further proof of margin expansion and defense contract conversion.

Thesis delta

The Q1 gross margin of 17.2% is a meaningful improvement from the 3.2% in Q3 2025, reducing some near-term execution risk and supporting the turnaround narrative. However, the margin is still below the >30% target and the company's cash position remains thin, requiring continued financing. The reaffirmed outlook provides a floor for expectations, but the path to sustainable profitability still hinges on converting defense contracts into production revenue.