Velo3D (VELO) Q3 2026 earnings review
Velo3D's defense backlog grows, but management delays profit until 2028
Velo3D, which makes metal 3D printers and prints parts for defense and aerospace customers, grew orders while its losses widened. Revenue rose 50% from a year ago and the order backlog climbed to $40 million, lifting gross margin to 26.5% with help from previously written-off inventory. However, overhead costs more than doubled as chief executive Arun Jeldi opened the new Livermore factory, so the company kept its full-year sales plan unchanged — which by our math leaves fourth-quarter sales falling to about $15 million.
| Revenue | $20.5M +50% from a year ago |
|---|---|
| Gross margin | 26.5% >30% H2 target dropped |
| Ending backlog | $40.1M $31.0M last quarter |
| Profitability outlook | Pushed to 2028 prior target: H2 2026 |
⚖️ Verdict: 🔴 Bearish
The story got worse because management abandoned its near-term profit and margin targets while delaying its factory build-out. Velo3D pushed its goal for positive earnings before interest, taxes, depreciation and amortization from the second half of 2026 out to 2028, dropped its 30% gross margin goal, and cut this year's equipment spending plan by $30 million. On the positive side, stock sales earlier this year allowed the company to remove its going-concern survival warning.
The question now is whether Velo3D's $76 million cash cushion can cover both two more years of operating losses and the equipment spending shifted into 2027. Either the new Livermore campus scales up quickly enough to cut cash burn, or the company will need to sell more stock to buy the delayed machines. Fourth-quarter operating cash flow and the 2027 capital budget will settle it.
🐂 Bull Case
Defense Orders Lifted Backlog Past $40 Million
Velo3D sells metal 3D printers and prints parts for aerospace and defense customers under its Rapid Production Solutions (RPS) service. For three quarters its order backlog sat near $30 million, even when quarterly bookings looked strong. In the third quarter, the backlog finally broke above that plateau.
- New bookings: $28.9 million, matching last quarter's $29.0 million pace
- Ending backlog: $40.1 million, up 29% from last quarter and up 90% from a year ago
- Net backlog added: $9.1 million by our math, matching the gap between bookings and $18.8 million of printer and parts sales
This matters because the order book reconciled with new bookings for the first time this year. Repeat customers continue to expand: Mears Machine Corporation ordered its sixth Sapphire XC printer to make copper-nickel parts for shipbuilding, and Velo3D joined the Government-Industry Data Exchange Program to qualify for more defense work.
What to watch: fourth-quarter revenue conversion from this $40.1 million backlog. Delivering above the $15.1 million implied by the middle of the full-year outlook would show that factory capacity is keeping up with defense orders.
Equity Raises Removed the Going-Concern Warning
Every recent filing carried an accounting warning that Velo3D might not survive the next twelve months. During the first half of 2026, management raised $98.6 million in net financing proceeds through stock offerings and converted debt into equity. In the third quarter, the company removed that warning, stating that "there is no longer substantial doubt about the Company's ability to continue as a going concern for the twelve months" following the report.
Velo3D ended September with $75.7 million in cash, while total debt fell 76% since December to $7.4 million. Removing the survival warning — paired with a $30 million cut to this year's equipment spending plan — eases the immediate funding crunch, though operating cash burn took $12.7 million in the third quarter alone by our math.
What to watch: cash used in operations and new stock sales in the fourth quarter. Slowing the quarterly cash burn below $10 million would allow Velo3D to fund next year's delayed equipment purchases without heavy new dilution.
🐻 Bear Case
Profitability and 30% Margin Targets Pushed Out
For three quarters management promised that earnings before interest, taxes, depreciation and amortization (EBITDA) would turn positive in the second half of 2026, alongside a gross margin above 30%. Our prior math showed that operating expenses were too high for those numbers to work. This quarter Velo3D dropped both goals.
The company stated that it "is no longer providing its prior expectation of greater than 30% gross margin in the second half of 2026" and now targets "Positive net cash from operations and positive EBITDA in 2028, compared with the Company’s prior expectation of positive EBITDA in the second half of 2026." Chief executive Arun Jeldi said overhead rose to bring the new Livermore campus, Forge 1, online.
- Loss before interest, taxes, depreciation and one-offs (Adjusted EBITDA): $9.8 million, worse than $8.1 million in Q2 and $7.3 million a year ago
- General and administrative overhead: 69.1% of revenue, up 25.8 percentage points from a year ago
- Research and development: 26.3% of revenue, up 6.4 percentage points from a year ago
Pushing breakeven out by two years confirms that scaling the parts business requires far more upfront overhead than management previously budgeted. What to watch: fourth-quarter operating expenses excluding stock compensation. Staying inside the full-year plan requires cutting that spending by 34% from the third quarter, down to $11.3 million by our math.
Equipment Spending Cut Delays the Capacity Ramp
Velo3D's growth plan rests on shifting from one-off printer sales to printing parts for customers at its own factories, especially the new Forge 1 campus in Livermore, California. Management had budgeted $40 million to $50 million in 2026 capital expenditures to build out that fleet. Through June it had spent only $4.5 million.
In the third quarter Velo3D spent just $1.9 million on property and equipment by our math, and slashed the full-year budget to a range of $10 million to $20 million. "While a substantial portion of our planned capital expenditures is shifting into 2027, we believe these investments in infrastructure, talent and manufacturing capabilities are essential to scaling our operations," Jeldi said. Forge 1 opened in July, but the company noted it "commenced operations in phases and is not yet operating at scale."
Because building and qualifying printers takes one to two quarters before they generate parts revenue, deferring $30 million of equipment spending into 2027 pushes the capacity expansion back as well. What to watch: the hosted printer fleet count at year-end, which management previously targeted at 40 machines. A lower count will cap how fast the $40.1 million backlog can turn into 2027 sales.
Accounting Shifts and Reserve Releases Helped Margin
Gross margin — the share of sales left after the direct cost of making printers and parts — reached 26.5%, up from 21.5% in the second quarter and 3.2% a year ago. However, accounting adjustments and one-time inventory gains carried part of that improvement.
Velo3D said gross margin benefited from "a net release of excess and obsolete inventory reserves in the current period, reflecting the utilization in production of previously reserved inventory", meaning it built products using parts it had already written off to zero. Margin also benefited from the "prospective refinement in the allocation of certain labor and overhead costs between cost of revenue and operating expenses" started in the second quarter. In addition, the company restated its first-half financial statements by $1.6 million to "correct errors related to its excess and obsolete inventory reserve".
Using zero-cost inventory and moving labor costs into overhead makes gross margin look stronger without improving total cash burn. What to watch: the dollar size of the inventory reserve release in the third-quarter 10-Q filing. Stripping that figure out will show the true underlying margin on new production.
Risks this quarter didn't answer
Three standing concerns from prior quarters received no new figures in the third-quarter press release and await the full quarterly filing or conference call.
- Rapid Production Solutions share of revenue: withheld for a second straight quarter after management quietly lowered its year-end target to 25–30%; the call or 10-Q must show whether parts production is growing faster than printer sales.
- Customer concentration: four customers accounted for 58.7% of second-quarter sales; the 10-Q footnote will show whether third-quarter bookings broadened the buyer base.
- Related-party dealings: after a chief-executive-controlled entity converted debt into shares earlier this year, the 10-Q related-party footnote will show whether any further insider transactions occurred.
💲 Other KPIs
Up from $12.2 million in June and $2.0 million at the end of 2025. Contract assets represent revenue recognized on work in progress before Velo3D can bill the customer. Along with $10.1 million used to pay down supplier bills, this unbilled work drove nine-month operating cash burn to $52.2 million.
The share count used to calculate loss per share rose 88.0% from 17.1 million a year ago and 9.3% from 29.4 million in the second quarter. Stock offerings and debt conversions cut the per-share loss by 20% from a year ago even though total net loss widened by 49% to $16.7 million.
Hardware and parts revenue rose 57.0% from $12.0 million a year ago, matching the 57.0% year-over-year growth rate recorded in the second quarter. Compared with the second quarter's $19.0 million, sales edged down 0.7% by our math, making up 92.1% of total company revenue.
🔮 Guidance
Unchanged. The middle of the range calls for $70 million, or 52.3% growth for the year. Because nine-month sales already reached $54.9 million, by our math the middle of the plan leaves $15.1 million for the fourth quarter — down 26.3% from the third quarter, though up 59.6% against a weak year-ago period hurt by a government shutdown.
Cut. Velo3D expects fourth-quarter gross margin to improve from the third quarter's 26.5%, but dropped its prior target of exceeding 30% across the second half. It is the second time in four quarters management has stepped back from a 30% gross margin goal after missing a fourth-quarter 2025 target.
Unchanged. Management kept the full-year overhead range at a $50 million midpoint, up 24.8% from 2025. With $38.7 million already spent in the first nine months, by our math the middle of the range leaves just $11.3 million for the fourth quarter, requiring a 33.8% drop from the third quarter's $17.0 million.
Cut. The company lowered its 2026 equipment budget by $30 million at the middle of the range, shifting most planned spending into 2027. After spending $6.4 million in the first nine months, by our math the revised $15 million midpoint still implies $8.6 million of spending in the fourth quarter, up from $1.9 million in the third quarter.
Cut. Management pushed its goal for positive earnings before interest, taxes, depreciation and amortization out from the second half of 2026 to 2028, while adding a 2028 target for positive operating cash flow. It is the second delay for the breakeven goal, which started as a first-half 2026 target last year.
❓ Key Questions
How much did inventory releases lift Q3 gross margin?
Gross margin reached 26.5% partly by using previously written-off inventory and shifting labor costs into operating expenses. Investors need the exact dollar benefit from both items to see what production margins look like on newly purchased materials.
Why does the outlook imply a Q4 revenue drop?
Keeping the $65–75 million full-year outlook after $54.9 million in nine-month sales leaves $15.1 million at the middle of the range for Q4, down 26% from Q3 despite a $40.1 million backlog.
How will Q4 overhead fall by a third?
Operating expenses excluding stock compensation jumped to $17.0 million in Q3 as Forge 1 opened, leaving $11.3 million in Q4 at the middle of the annual plan. Management has not explained which expenses will drop while the new factory ramps.
What was Rapid Production Solutions revenue in Q3?
The company stopped giving the percentage of sales coming from its parts-printing service two quarters ago. Without that figure, investors cannot tell whether the business model shift is driving growth or if one-off printer sales still dominate.