DDD Q2 Deep Dive: Cost Actions Offset Revenue Decline as Tariffs Disrupt Demand

3D printing company 3D Systems (NYSE:DDD) fell short of the market’s revenue expectations in Q2 CY2025, with sales falling 16.3% year on year to $94.84 million. Its non-GAAP loss of $0.07 per share was 54.8% above analysts’ consensus estimates.

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StockStory’s Take

3D Systems' results in Q2 reflected ongoing challenges from weakened customer capital spending and tariff uncertainty, but the market reacted positively as the company delivered significant improvements in cost control and profitability measures. Management attributed the 16% year-over-year sales decline primarily to customers delaying new production capacity investments amid volatile tariffs and global economic uncertainty. CEO Jeffrey Graves highlighted that sequential revenue excluding the divested software business grew 8%, pointing to stabilization and the early benefits of strategic restructuring and operational efficiencies. In particular, cost reductions and in-sourcing initiatives helped narrow operating losses and strengthen margins.

Looking ahead, 3D Systems' guidance is shaped by continued focus on cost alignment, new product launches, and sector-specific growth opportunities in medical and aerospace markets. Management expects ongoing margin improvement through further operational streamlining and automation, while highlighting the ramp-up of FDA-cleared dental products and expansion in MedTech as drivers for future growth. CEO Jeffrey Graves noted, “Our top priority is to align our costs with current market conditions in order to move to positive cash flow in 2026,” emphasizing disciplined investment in high-ROI R&D and targeted commercialization efforts despite ongoing macro headwinds.

Key Insights from Management’s Remarks

Management saw Q2 performance shaped by aggressive restructuring, sector-specific product momentum, and the impact of tariffs on customer spending decisions.

• Cost restructuring accelerated: 3D Systems implemented broad cost reduction actions, including process automation and consolidation of facilities, targeting over $85 million in annualized savings by mid-2026. These moves have already yielded a 27% year-over-year reduction in operating expenses and improved margins, though management cautioned about timing risks related to facility subleasing.
• Healthcare segment highlights: The MedTech business, encompassing orthopedic solutions, surgical guides, and point-of-care services, grew 13% year-over-year and 16% sequentially. Management cited strong demand for personalized medical devices, particularly for above-the-neck trauma and cancer applications, as a key factor in the segment’s resilience.
• Dental launches and market expansion: The company rolled out its NextDent Jetted Denture Solution, an FDA-cleared product targeting the U.S. market for dental prosthetics. Management sees this as a significant growth opportunity, with early purchase orders and plans for expanded regulatory approvals globally in the coming year.
• Aerospace and defense momentum: The Aerospace business nearly doubled its annualized revenues, driven by application wins in both the U.S. and Europe. 3D Systems’ metal printing platforms have gained traction in high-reliability markets such as aerospace, defense, and AI infrastructure, supporting the company’s "3P" strategy (process, parts, printers).
• Tariffs and CapEx delays: Customers remain hesitant to invest in new printing capacity due to ongoing tariff volatility, causing delays in printer sales but increasing demand for limited-quantity part production. Management is using this period to bridge customers from process development through small-batch production until capital spending resumes.

Drivers of Future Performance

Management expects near-term results to be shaped by disciplined cost execution, new product commercialization in healthcare, and ongoing macroeconomic and tariff-related headwinds.

• Margin improvement focus: The company aims to reach positive cash flow in 2026 by further reducing operating expenses, streamlining back-office functions, and consolidating global manufacturing. Operational efficiency gains from in-sourcing and automation are expected to offset rising component costs due to tariffs.
• Healthcare and dental product scaling: Expansion of MedTech offerings and ramp-up of the NextDent denture solution are seen as primary growth drivers. Management expects regulatory approvals and broader market penetration in dental to increase healthcare revenue mix and support sustainable growth.
• Tariff and CapEx uncertainty: Persistent uncertainty around tariffs continues to delay large capital equipment purchases by customers, particularly in industrial markets. While this creates near-term headwinds for printer sales, management is leveraging its ability to provide limited-run parts and services as a bridge, with the expectation that demand for new equipment will rebound once the tariff environment stabilizes.

Catalysts in Upcoming Quarters

In the coming quarters, StockStory analysts will closely monitor (1) the pace of cost reductions and whether operating expenses reach management's targeted range, (2) the commercial uptake and regulatory progress of the NextDent Jetted Denture Solution in both the U.S. and international markets, and (3) sustained growth in MedTech and Aerospace revenues despite ongoing macro headwinds. Execution on facility consolidation and visibility into customer CapEx recovery will also serve as key indicators of future performance.

3D Systems currently trades at $2.25, up from $1.75 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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