nLIGHT Q3 Revenue Rises 11% as Product Margin Hits Record Despite Supply Constraints

nLIGHT Inc. reported an 11% year-over-year increase in fiscal third-quarter revenue as growth in Defense & Space and development programs offset supply-constrained product shipments. Product gross margin reached a record, while the laser maker said supply-chain challenges prevented it from fulfilling about $15 million of demand during the quarter and will also limit fourth-quarter shipments.

Revenue for the quarter ended in 2026 was $73.8 million, above the high end of the company’s guidance and up from $66.7 million a year earlier. Revenue declined 11% from the second quarter, reflecting the supply constraints.

Product revenue rose 1% year over year to $48.0 million but fell from $59.4 million in the preceding quarter. Development revenue increased 34% to $25.7 million and was also higher sequentially. The company expects to ship the balance of the unmet third-quarter demand over the next several quarters.

Defense & Space leads growth

Defense & Space revenue increased 15% from a year earlier to $52.5 million, accounting for 71% of total revenue. The company attributed the growth to continued execution in directed-energy and defense-sensing programs. Within the market, product revenue was $26.7 million, up 1% year over year but down 22% sequentially, while development revenue advanced 34% year over year and 11% sequentially to $25.7 million.

Advanced Manufacturing revenue was $21.3 million, up 1% from the prior-year period and down 16% from the second quarter. nLIGHT also disclosed that it is exiting the commercial cutting and welding markets.

The company said demand continues to build across its directed-energy, laser-sensing, kinetic and advanced-manufacturing opportunities. However, the quarter’s sequential revenue decline and the timing of future deliveries remain tied to component availability and the company’s ability to work through deferred demand.

Product margins reach a record

GAAP gross margin was 33.1%, compared with 31.1% in both the year-earlier quarter and the second quarter of 2026. GAAP product gross margin reached a record 47.4%, up from 41.0% a year earlier, driven by a favorable sales mix, stronger factory absorption, lower reserves and reduced tariff spending. GAAP development gross margin was 6.5%.

On a non-GAAP basis, total gross margin was 34.7%, including a record product gross margin of 48.8% and a development gross margin of 8.3%.

Adjusted EBITDA increased to $11.1 million from $7.1 million a year earlier and $10.7 million in the prior quarter. nLIGHT attributed the result to revenue above guidance, stronger-than-expected product margins and lower non-GAAP operating expenses, partly offset by lower overall revenue. Non-GAAP operating expenses declined sequentially to $17.4 million from $19.5 million.

The company recorded a GAAP net loss of $7.2 million, or $0.12 per share, compared with a loss of $6.9 million, or $0.14 per share, a year earlier. Non-GAAP net income was $10.2 million, or $0.16 per diluted share, up from $4.3 million, or $0.08 per diluted share.

Cash and marketable securities totaled $314.5 million at quarter-end, compared with $330.8 million in the second quarter. Operating cash flow was negative $13.1 million, reflecting a planned increase in working capital to support growth and mitigate supply-chain constraints. The company said operating cash flow remained positive for the first nine months of 2026. Capital expenditures were $4.4 million.

Fourth-quarter outlook reflects delayed shipments

For the fourth quarter of 2026, nLIGHT expects revenue of $84 million to $90 million, with a midpoint of $87 million. The midpoint assumes product revenue of $63 million and advanced-development revenue of $24 million.

The product revenue outlook excludes about $15 million of shipments that nLIGHT had expected to deliver in the fourth quarter but now anticipates delivering during the first half of 2027 because of continuing supply-chain challenges. Management said supply conditions have improved enough for the company to meet current fourth-quarter demand, but it does not expect to fulfill pent-up demand deferred from the third quarter until the first half of 2027.

Fourth-quarter GAAP gross margin is expected to range from 30% to 36%. The company projects product gross margin of 40% to 46% and advanced-development gross margin of approximately 8%. Adjusted EBITDA is forecast at $12 million to $18 million.

The outlook remains subject to supply-chain disruptions and delivery timing. nLIGHT also identified competition, rapid technological change, high fixed costs and inventory levels, customer concentration, reliance on third-party manufacturers, international operating exposure and government export and import controls among the factors that could affect future results.