LASR Q2 Deep Dive: Aerospace and Defense Momentum Drives Upside, Commercial Markets Stable

Laser company nLIGHT (NASDAQ:LASR) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 22.2% year on year to $61.74 million. On top of that, next quarter’s revenue guidance ($64.5 million at the midpoint) was surprisingly good and 13.8% above what analysts were expecting. Its non-GAAP profit of $0.06 per share was significantly above analysts’ consensus estimates.

Is now the time to buy LASR? Find out in our full research report (it’s free).

StockStory’s Take

nLIGHT’s second quarter results were shaped by robust execution in its aerospace and defense segment, which management described as the primary contributor to revenue and margin outperformance. CEO Scott Keeney credited record shipments for directed energy and laser sensing programs and highlighted the transition of amplifier products into advanced manufacturing as a key driver. Notably, the company began shipping to a new international defense customer, expanding its global footprint. Commercial markets, including industrial and microfabrication, showed sequential improvement, but management emphasized these gains were due to backlogged orders and not a sustained change in market demand.

Looking ahead, nLIGHT’s outlook is anchored by expectations for continued strength in aerospace and defense, particularly as U.S. and allied nations accelerate investments in directed energy and sensing systems. Management forecast sequential growth in this segment, with the ongoing HELSI-2 program and new classified sensing contracts set to play major roles. CFO Joseph Corso noted that the company is transitioning critical amplifier production toward higher volumes and tighter quality controls, which is expected to support scalability. While commercial demand is expected to remain subdued, nLIGHT is focusing resources on high-growth defense projects, with Keeney stating, “We believe we are well positioned to benefit from new U.S. and international initiatives in missile defense and laser sensing.”

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to strong defense program execution, operational improvements in amplifier manufacturing, and expanded international opportunities in directed energy.

• Aerospace and defense strength: The company’s revenue mix shifted further toward aerospace and defense, now accounting for 66% of total sales. Management pointed to record defense product revenue and highlighted momentum in both directed energy and laser sensing programs as core drivers of growth.
• HELSI-2 program impact: A significant portion of defense growth stemmed from increased shipments for the U.S. Department of Defense’s HELSI-2 high-energy laser initiative. Management noted that ramping up hardware delivery for HELSI-2 also accelerated related development work, creating a positive feedback loop for future revenue.
• Amplifier production transition: The company began shifting amplifier manufacturing from R&D teams to standard production lines, a move described as essential for handling volume growth. Management cited this transition as a foundation for scalable operations and further margin leverage.
• International market expansion: nLIGHT started shipping directed energy products to a new overseas customer, signaling early-stage international growth opportunities. CEO Scott Keeney mentioned that the company is seeing strong global demand for cost-effective counter-drone and missile defense systems.
• Commercial market stabilization: While commercial sales (industrial and microfabrication) improved sequentially due to cleared backlogs and increased additive manufacturing demand, management underscored that underlying market demand remains weak. The company is reallocating engineering resources from slower-growth commercial projects to higher-value defense initiatives.

Drivers of Future Performance

nLIGHT’s outlook is supported by ongoing defense program execution, the scaling of amplifier production, and a disciplined focus on high-growth segments, with commercial markets expected to remain stable.

• A&D pipeline and scaling: The expected continuation of government investment in directed energy and sensing, including classified U.S. and new allied programs, is projected to drive at least 40% growth in aerospace and defense revenue for the year. Management emphasized the significance of progressing on both current contracts and bidding for additional Golden Dome missile defense initiatives.
• Manufacturing and margin leverage: The transition of amplifier manufacturing to high-volume production is expected to enable further gross margin improvements and operational efficiency. Management cautioned that margins may fluctuate quarter-to-quarter depending on production mix and absorption, but overall leverage is expected to improve as volumes rise.
• Commercial market headwinds: Despite sequential improvements, nLIGHT does not anticipate a sustained rebound in industrial or microfabrication demand. The company is rationalizing investments in commercial markets and focusing engineering efforts on additive manufacturing, which is viewed as more closely aligned with its defense technology.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the pace of shipments and backlog conversion for key defense programs like HELSI-2 and international directed energy contracts, (2) progress in transitioning amplifier production to high-volume manufacturing and its impact on gross margins, and (3) the company’s ability to win new classified and Golden Dome-related sensing contracts. Shifts in U.S. and allied defense budgets and any signs of sustained improvement in commercial laser demand will also be key markers of execution.

nLIGHT currently trades at $26.88, up from $20.46 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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