nLight (NASDAQ:LASR) reported record second-quarter revenue and product sales as demand increased across its defense, space and advanced-manufacturing markets, while management said supply-chain constraints involving materials sourced from China are expected to reduce third-quarter shipments.
Second-quarter revenue rose 34% year over year to $82.6 million, including record product revenue of $59 million, up 45%. Chairman and CEO Scott Keeney said revenue, gross margin and adjusted EBITDA were at or above the company’s expectations. Adjusted EBITDA totaled $10.7 million, compared with $5.6 million a year earlier, while operating cash flow reached a record $20.7 million.
Defense Revenue Sets Record
Aerospace and defense revenue reached a record $57.3 million in the quarter, up 41% from the prior-year period. Aerospace and defense product revenue increased 72% year over year, while development revenue rose 11% to $23.2 million.
Chief Financial Officer Joe Corso said the growth reflected continued work on the HELSI-2 program, expansion in munitions programs, and execution on directed-energy and laser-sensing programs. The company also said its products for kinetic weapons recorded strong growth, supported by global restocking activity and expanding mission applications.
The company highlighted its recent Joint Laser Weapon System, or JLWS, award from the Department of War. The multiyear agreement has a contract ceiling of more than $600 million. Under the program, nLight is expected to develop, integrate and deliver high-energy laser weapon systems built on its HADES directed-energy technology platform.
Keeney said the JLWS program builds on the company’s delivery of a 300-kilowatt laser under HELSI-1 and a 50-kilowatt laser for the DE M-SHORAD program. nLight is also continuing work on a 1-megawatt coherent beam-combined laser under HELSI-2, which Corso said remains on track for delivery late in 2026.
Corso said JLWS revenue will begin contributing in the third quarter, continue through the fourth quarter and ramp more substantially in 2027. He characterized the expected JLWS contribution as “a nice replacement and then some” relative to the anticipated wind-down of HELSI-2 work.
Management said JLWS and HELSI-2 are separate contracts. The company also said initial JLWS work, including work beyond the initially funded $44 million, is expected to be largely unaffected by current supply-chain issues.
Commercial Demand Gains, but Cutting and Welding Exit Continues
Commercial-market revenue, including industrial and microfabrication sales, increased 20% year over year to $25.3 million. Microfabrication revenue was $13.3 million, while industrial revenue was $12 million.
Industrial results benefited from higher demand for additive-manufacturing products and sales related to last-time purchases of cutting and welding products. nLight is exiting its legacy cutting and welding markets and does not expect material revenue from those markets in the second half of 2026.
Management said additive manufacturing demand has been strong, including demand associated with rocket engines and a broader range of aerospace and defense components. Keeney also said the company sees accelerating needs for laser sensing and advanced-manufacturing products in the space sector, although he did not provide further details on specific programs.
Margins Improve From Prior Year
Total gross margin was 31.1%, compared with 29.9% a year earlier, though down from 33.1% in the first quarter. Product gross margin increased year over year to 41.2%, aided by sales mix and higher production volumes that improved absorption of fixed manufacturing costs. Development gross margin was 5.6%, compared with 13.1% a year earlier, reflecting contract mix and the timing of program deliverables.
On a GAAP basis, nLight posted a net loss of $1.3 million, or $0.02 per share, improving from a $3.6 million loss a year earlier. Non-GAAP net income was $9.6 million, or $0.15 per diluted share, versus $2.9 million, or $0.06 per share, in the prior-year quarter.
The company ended the quarter with $330.8 million in cash equivalents, restricted cash and investments. It also repaid the $20 million previously drawn on its credit line.
China Supply Constraints Weigh on Third-Quarter Outlook
For the third quarter, nLight forecast revenue of $63 million to $73 million, with a midpoint of $68 million. The midpoint includes about $43 million of product revenue and $25 million of development revenue.
Corso said the outlook excludes roughly $17 million in product revenue that the company otherwise expected to ship during the quarter. Those deliveries are now expected in future periods because nLight is experiencing delays obtaining certain parts and materials from Chinese suppliers.
Keeney said the affected materials primarily include optics and are not specialized components, but China has developed an outsized role in that supply chain. The issue is mainly affecting commercial products, although management acknowledged some indirect exposure in defense products because certain commercial items are incorporated into defense offerings.
The company said it has been reducing its China exposure by moving manufacturing out of the country, working with existing suppliers, qualifying new suppliers and considering product redesigns that could provide greater sourcing flexibility. Corso said the issue emerged only in recent weeks and could resolve quickly or persist for months to quarters depending on mitigation efforts.
nLight expects third-quarter gross margin of 24% to 30% and adjusted EBITDA of $1 million to $7 million. Management said the broader-than-usual revenue guidance range is exclusively related to the supply-chain uncertainty.
About nLight (NASDAQ:LASR)
nLIGHT, Inc designs, develops, manufactures, and sells semiconductor and fiber lasers for industrial, microfabrication, and aerospace and defense applications. The company operates in two segments, Laser Products and Advanced Development. It offers semiconductor lasers with various ranges of power levels, wavelengths, and output fiber sizes; and programmable and serviceable fiber lasers for use in industrial and aerospace and defense applications. The company also provides laser sensors, including light detection and ranging technologies for intelligence, surveillance, and reconnaissance applications; and fiber amplifiers, beam combination, and control systems for use in high-energy laser systems in directed energy applications.
