Velo3D Q3 2026: Revenue up 50%, gross margin 26.5%, but profitability still two years out

What happened

Velo3D reported Q3 2026 revenue of $20.5 million, up 50% year-over-year, with new bookings of $28.9 million, indicating strong demand for its defense-focused metal AM solutions. Gross margin improved to 26.5% from low single digits a year earlier, validating the shift toward higher-margin Rapid Production Solutions (RPS) and cost reductions. Cash and equivalents surged to $75.7 million as of September 30, 2026, versus about $11.8 million a year prior, likely reflecting recent equity raises rather than operating cash generation. The company reaffirmed its full-year revenue guidance but revised gross margin guidance and reduced capex, while now expecting positive net cash from operations only in 2028, meaning losses will persist for at least two more years. Despite the progress, the company remains unprofitable and heavily dependent on defense contracts, with previous targets for EBITDA breakeven in 1H 2026 clearly missed.

Implication

Q3 results validate the RPS strategy and show real improvement in gross margin and cash position, but 26.5% gross margin is still below the company's long-term target of 30%+ and EBITDA breakeven has been delayed. The $75.7 million cash balance likely came from dilutive equity offerings, so per-share value creation is less clear than headline cash suggests. Management's guidance for positive net cash from operations only in 2028 indicates that two more years of losses are expected, keeping the stock speculative. Investors should monitor defense program conversion into recurring production and whether bookings quality improves without excessive customer concentration. At current levels, the risk-reward is less skewed to the downside than when the stock was rated 'POTENTIAL SELL', but the company must demonstrate consistent margin durability and cash flow improvement before becoming a core holding.

Thesis delta

The previous thesis rated Velo3D 'POTENTIAL SELL' due to low gross margins (3.2% in Q3 2025) and cash burn, but Q3 2026 shows 26.5% gross margin and $75.7 million cash, reducing near-term solvency risk. The bearish case is weakening, but profitability is still two years away and dilution remains a concern. The rating should shift to a cautious hold/speculative buy, contingent on continued margin expansion and defense program execution without further heavy equity raises.