Xometry Stock

Okay. I think with that, I know we're going to have people moving in and out of the room, but to keep the train moving on time, we're going to get started. So it's my pleasure to welcome Xometry back to the conference, but it's actually the first time for Sanjeev to be here at the conference in the role of CEO. So welcome to the conference.

Thank you for having me. It's such a pleasure.

So I think for those who are less familiar with Xometry as a story and as a business, maybe frame for us the custom manufacturing landscape today and what some of your key priorities are now that you're in the CEO role when you think about the next couple of years?

Sure. So custom manufacturing, just for anybody who's not done or seen many of it is basically things that don't exist today. So a part that you can't just pick off the shelf, a SKU that you can't buy on Amazon or Grainger or whatever, things that people are innovating or building for themselves. We think of that as like a $275 billion opportunity. Most of the work today is done offline manual where people within a 30-, 50-mile radius of their manufacturing facility will find a small job shop or a manufacturing shop that will help create that custom part that they want for their overall end goal.

The way we think of that opportunity is that if you can take that offline $275 billion, bring them online, make it easier to shop custom parts that have never been produced before, the way you shop your most favorite e-com platform, Amazon, Walmart, whatever you would like, we have the opportunity to convert those people from waiting for multiple weeks to get the offline quote, to then have it produced over multiple months, to get them to a stage where custom parts come at the speed of e-commerce today, 2 days, 5 days, 10 days, your choice, at a price that you see instantly online and an experience that feels as good as shopping your best platform. So completely transforming that space, traditional offline, manual, small radius to global opportunity, instant buys at your speed. Today, maybe 1% of that TAM is online and almost all of it we have. But hopefully, we can take a lot more of it online.

So maybe talk a little bit about this online penetration idea. You've obviously produced as a company, improved accelerating growth over the last couple of quarters and couple of periods. How are you thinking about that penetration opportunity? And what some of the unlocks have to be executed against to capture that market opportunity?

I would say just a little more context on the opportunity as well, right? As you think about why this opportunity exists today. One, of course, the traditional process is slow and cumbersome. But also the nature of customers and leaders that you're seeing in R&D, in production, in procurement are the Gen-Zers who are now looking to get the same kind of B2C experience in their purchases as they do on their favorite e-commerce players, but also want to go at much faster speed like I was sharing.

So to that extent, creating a great e-commerce experience, helping them find the products easily, helping them continue to actually feel like they have one partner to depend on, not hundreds of shops. And so becoming that one shop where they can get all of the parts that they need and then continuing to actually bring them the best intelligence on the parts that we can. So when there's a manufacturing issue, making sure we surface it super early. When there's actually a pricing that they want based on little changes that they made on the part, we are able to iterate at the speed that they would like. And so to that extent, what we've done is we've tried to create a strategy around making that journey significantly better.

Okay. And how does that feed back to your views about the durability of growth over the medium to long term? So you've got the operating momentum, you've got the market opportunity. Bridge to how investors should be thinking about the durability of that growth over a medium or longer-term duration period of time.

I mean we're just coming off of a phenomenal quarter. We had 4 consecutive quarters of accelerating growth. As you've seen, it's gone not only just on growth, but even the revenue per buyer has been accelerating. So we had 21% growth in revenue per buyer. A lot of it is actually really long term because, one, we're not seeing that growth in one segment or the other. We're not seeing that growth in any particular process type we do. So we do CNC machining, additive manufacturing, sheet metal, injection molding, so various different categories. It's not concentrated anywhere. It's not happening because a particular industry is growing faster. It's not happening because a particular process is growing faster. It's growing because it's a secular trend of that offline to online. It's growing because we know our experiences online are resonating better where we are substantially pulling ahead of any little competition that exists elsewhere. I mean the simple comparison comes to other marketplaces, which grew at 0% in the same period, we grew 45%. So clearly pulling ahead because of the strategy that we've been implementing in the last 1.5 years.

Okay. Obviously, there's multiple sides to your marketplace. But let's talk about growing the supplier side, both in terms of depth of work on the supplier side as well as continuing to grow the geographic skew of suppliers. Talk about some of the initiatives you have in place to continue to sort of grow and scale the supplier side.

I mean coming from an e-commerce background of my own, I think to me, for the first time, our partners are getting to be treated as equals to our customers. I think that's the very beginning and fundamental difference. Historically, suppliers in manufacturing are treated like order takers. On our platform, they are treated the same way our customers do. So we have a dedicated online platform called Work Center for them, where they get jobs from our platform. They can see their performance scores. They can actually see their financials and invoices, just like you would expect on a customer side of the marketplace, that experience is more really holistic on the other side as well.

But what we are also doing thoughtfully is as the nature of demand is really picking up across all of the sectors, we are making sure that we are not only bringing partners online on a first come first basis, but actually making sure that, for example, in the U.S., we've seen a lot of demand around parts that need to be produced from certified shops, whether that's AS9100 for aerospace, whether it's ITAR for export restricted stuff. We are making sure partners that bring specific capabilities get to skip the queue and get onboarded first. While we are continuing to expand globally, we made a massive push into India. We have more than 300 partners there as we speak. We are driving growth in Vietnam. We've always had a big presence in Europe and Turkey, thanks to the work we've done over the years. So both dimensions, one, their capability, their experience and using that to actually drive their ongoing engagement.

Okay. Helpful on the supplier side. When you think about the journey you've been on with enterprises, if we went back years and years before you joined the organization, there was a lot of prototyping, you're moving deeper into larger production runs. Talk a little bit about the enterprise journey you've been on to create and capture more volumes from enterprise clients over time.

I would say enterprises are a big, big focus for us. As you've seen, we've been sharing stats on what used to be greater than $50,000 orders, then we moved to showing $500,000 orders. Last year, we showed you core customers did more than $10 million. There's going to be a lot more in each bucket this year for sure. All of that is happening because one of the big things that we pride ourselves on is those buyers that actually see us deliver on the value they keep bringing more buyers to the platform. So not only are the accounts that we work with growing, the number of buyers in each account keeps growing. And I think to me, the enterprise value stems from that good word spreading and more people using our services, but then also actually continuing to build mechanisms to make it easier to work with us.

So we spent a lot of time in the last 18 months executing our strategy where PunchOut, which is our ability to actually integrate straight into procurement platforms where if you're on your Ariba or your Coupa platform, you can click a button and land to Xometry and actually purchase on Xometry without necessarily having to go outside your platform. On the post-order side, integrating things like purchase orders, invoices, ASNs, and of course, Siemens, which we can talk about a little bit, is going to be another step in that direction. But really, our focus has been on just making it easier for the enterprise buyer to shop on Xometry, whether they're staying within their platform or getting information in their platform, but then also their ability to actually share what they're doing. So Teamspace is a product that we have where they can share all their orders with their teams. And as we see them use that Teamspace, we see them bring more users to the platform too.

Got it. Okay. I do want to talk about Siemens. Obviously, that announcement was -- had a positive reaction from the stock market, and there was multiple elements to that announcement about both the partnership, what it might mean to build scale and volume on the platform longer term as well as an equity stake as well. Talk a little bit about how that partnership came about and how investors should be thinking as the partnership rolls out and scales, what it could mean for contribution to the platform as we get into 2027 and beyond?

So Siemens, I'll start with the history. For a long time, we've actually been talking to and working with various different CAD software companies. And if you think about it, the integrations we've done in the past is we've launched add-ons. So if you're a CAD user, you can go and download an add-in. That add-in then becomes the way you actually can interact with Xometry from within your CAD software. But for us, that is not something that brings traction in the large enterprise customers and big customers where the IT teams decide what you can add to your software or not. If it ships with the software that they approved, you're more likely to be open to it. But if it's a lonely engineer on the shop floor or in the R&D team who wants to download an add-in, likely they will not get that approval. That has been a challenge.

On the Siemens side, it is very obvious a lot of these CAD companies have invested for years together on what's called should costing. And should costing is basically if you create a part in your CAD tool and the CAD tool has an input on what's the cost of the material, what's the cost of the labor, what's the number of parts needed, you can create a bottom-up estimate. Those should costs have improved over the years, but they are never the market price. And they're never the market price on which somebody is guaranteeing that they will have the part on your door. Bringing those 2 problems together is what we are trying to actually make sure we can address the customer's real issue. And the customer's real issue is, "In my tool, show me a price that if I say, yes, I want to buy you will promise to deliver it to my door. And if I iterate multiple times in real time, tell me how the price changes." Right? And so we are doing true deep integration with Siemens as part of our work now, where our pricing intelligence, our manufacturability intelligence is going to be natively embedded in the Siemens software when it ships to the customers, which means no add-ins, no shipping your file, you click an X button on your design center tooling and you get instant pricing and guarantee of time line from Xometry and your file never actually leaves until you hit 'order placed'.

So for us, this is actually very, very exciting. This needs a complete transformation in how integrated we are, how we take this intelligence and put it behind their firewall. And I think that's where the teams are really doubling down right now. The tech teams have developed a joint plan, the release date, scaler plan. So we are going to be available across all versions of design centers. So they have a cloud version. They have a version called NX, which is integrated across multiple software and they have an on-prem version. We are going to be present in every single version as this release happens. Very, very exciting. A lot of it is going to start rolling out in 2027. And so for '26, we have not made any such assumptions. Even for '27, we expect to actually show a gradual ramp-up in that use. But it's very exciting. The first time we'll be truly deeply integrated. In fact, any pricing -- market pricing being available in those tools.

Okay. Interesting. Beyond Siemens, what is the potential scope for that sort of partnership model to be replicated in other parts of the broader manufacturing ecosystem? When you think about what you've built and sort of plugging and integrating it into existing providers like what does that landscape of opportunity look like?

Massive. In my view, I think that's the one fundamental thing that's changed in the last 18 months that we've been driving transformation. We've realized that the real value that Xometry adds is, like I said, the pricing intelligence, the manufacturing intelligence and the massive data that we've built all that intelligence on. One of the things that was really front and center in the conversations in February when all of SaaS was dying and the challenges were being spoken about everywhere, it became very obvious that the one thing that nobody else has access to is the proprietary data of millions of files on a decade-plus of work that Xometry has done. So that market price is based on data only we possess and the data that only we have access to. And so therefore, making that pricing, that manufacturability and their time lines available in other people's platforms, became a true opportunity that we are actually very aggressively pursuing.

So Siemens is the first place in the design stage, it will show up, but you think about the entire manufacturing from intent to the delivered part cycle, there is intent, there is design finalization, there's procurement integration, there's feedback and then there's the actual manufacturing shop where tools are used to produce that specific part, and materials are sourced. You're going to have our intelligence show up across that entire spectrum. And so to me, that's very exciting because now customers will have access to our intelligence, not just from our portal, but from the tools that they use every day, which changes the dynamics on how you think about our business in itself. These are channels that ride on other people's platforms, customers that are already using them today.

So we get access to what could be millions of customers versus our 90,000 active customers today, thanks to all these investments that we are doing across the floor. So it's very, very exciting where you go from a small number to a very large number and you save all your marketing and sales dollars.

Yes. Understood. And we'll get to that as well. But sticking with what you've built from an AI model standpoint, obviously, the output of these models is improving the business, improving the outcomes for your customers. How should investors think about the scalability of your AI models? How much better can they get? How linear versus nonlinear will this all be? This is a jumping off point, but what does this all look like in a couple of years' time?

A big focus of continuing to develop our AI models has been actually making them modular while connected. So 2 years ago, our primary model was our instant Quoting Engine, which is our pricing model that spoke about how quickly can you get this price and at what -- how quickly can you get this part and at what price? Today, we've actually taken a model and federated into multiple different parts. The 3 core models that we talk about today are our pricing model, which faces the customer gives them price, our lead time model that faces the customer gives them price, our manufacturability and costing engines, manufacturability tells the partners and ourselves and the customer, whether it can be made or not and costing gets certain estimate of what the market will pay for this if we get it manufactured.

These models are now supported by a full layer of personalization, segmentation, sequencing. So for example, the sequencing model works to make sure that when jobs come in, partners who get to see that job are also based on our understanding of who is likely to give us the best cost for this, who is likely to deliver this on time, but who also has all of the certifications and supporting needs that are required for that, right? So again, our models have now gone from monolith to multiple different federated models, and each of those models can scale with the data.

And so therefore, we feel a lot confident that as we strike these partnerships and scale the volume from current levels to hopefully 10, 15, 20x, all of these models will actually continue to grow.

Okay. Maybe one more, if I can, just on the growth algorithm for the company. International has been something you've talked about. Can you talk a little bit about adoption of the platform outside the United States? What do you see as some of the key investments to continue to grow and scale the international operations of the company and even what some of the long-term mix of U.S. versus international might look like?

Just some more background on our international business. So we really started expanding internationally in '21 with a couple of acquisitions in Germany and Turkey. And today, our international business is $125 million or so annual run rate revenue. And that business is actually much further ahead in its growth trajectory than the U.S. business was at the same life stage. However, all of the transformation that I've done in the last 18 months in the U.S. business, we've not even started to do on international. Now you take that and couple that with the same kind of reshoring and manufacturing focus that you have in Europe, couple that with the growth in aerospace, defense and new edge physical AI opportunities there. As you can see that business take on a life of its own much, much higher rates than we've ever seen before in the rest of the business. So I think international innings is truly not even started even though that is at a faster pace already than in the U.S.

Okay. Interesting. I wanted to turn below the revenue and the market growth opportunity to gross margins. How do you frame for investors thinking about long-term marketplace gross margins? And when you think about scaling these models and the output in terms of volume, how should investors think about what the key variables are that might impact long-term gross margins for the business?

Absolutely. I think we are very, very committed to what we've said as the 35% to 40% gross margin target range. In fact, at IPO time, we had that number at 30% to 35%. But over time, as we've hit the 35% number, we've become even more confident. With the model delineation that I was just describing between pricing and costing, today, those models actually feed off of each other. So a simple example is if we get a job that we price to the customer for 100 and we see that the partners are actually not opening that job, not accepting that job as quickly as jobs prior had been accepted and when the final pricing lands, it's at 70, that they took, say, less than 35%. We are actually able to feed back that into the pricing model at an order level.

So think about AI models that used to train at 3 months, 6 months, 9 months time lines, our models are now designed to train at an order level. So every next order make the model better, which means as we continue to scale when we see opportunity to take market share, which we clearly have in the first two quarters, given the different growth rates that you've seen across the market, we have the ability to say, okay, let's optimize for growth, let the difference between the two models shift away for a little bit. Once we've captured the growth, if you want to go back and actually optimize for margin and bring it even closer, we can do that. But that's the level of control that is hard to have even in the manufacturing business in itself.

So we are now super confident that depending on the opportunities that come our way, we can optimize for growth, depending on the opportunities that feel like actually we should be taking more margin at this stage because actually there's not enough jobs, we actually can literally at an order level tweak that.

Okay. I do have to ask about the macro environment that's been coming up at this conference as well. Given the macro environment you're operating in, how does that translate into demand trends for you? And even some of the elements of sourcing that's playing out globally as some manufacturing activity continues to sort of repopulate itself around the globe? And how does that feed back into what you're building and scaling?

I mean in our world, the one data point that gets spoken about most often as far as macro is concerned is the ISM. I mean, as you know, for the last multiple years, 4 plus, the ISM was actually contracting. So we've grown in an environment where actually there was headwinds. It's nice to have a little tailwind. The ISM has now turned. But really, I mean when I think about it, $1 billion in a $275 billion opportunity that at this point, our real opportunity is to just keep taking share from offline and continuing to grow and grow and grow.

As far as the global supply chains and the conversations that happened there, my view in general is that any time there is disruption in supply chains that requires somebody to actually explore options that always helps somebody to think, "This was off-line. Can I get a better price online? Can somebody online actually source it from a different geography?" So it actually helps initiate opportunity where they look around and think of other things. And at the low penetration we have, every such disruption is kind of welcome.

Okay. Let me transition to Thomasnet. And with the ad tech transition done, the search enhancements have been put in place, how are you thinking about monetization from Thomasnet longer term?

I mean that's a phenomenal business that we've had. I mean it runs at 89% margins plus. I mean it's a business that is truly akin to advertising to think about it more broadly. We've, of course, spent a bunch of time, like you said, changing the ad tech underneath and changing the search algorithms. We are committed to, as we've mentioned, turning that around and growing that business now. What really is actually useful is to think about it, that is a business that has access to 500,000 North American manufacturers. At that number, it is 100x the marketplace active participants. So as we continue to grow, it gives us presence and it gives us visibility to that partner network that we probably don't need today but might need as we continue to scale the marketplace at a very rapid pace. So to me, that business is a very core business to helping us continue to feed the marketplace with the right set of players to help us grow the core business.

Okay. So far, we primarily talked about market opportunity, growth initiatives, repositioning the platform for capitalizing on AI models and partnerships. And I don't know if this will bring my good friend, Shawn, into the conversation, but can you help us better understand just some of your key investment priorities? Like what do you think are the key investments you have to make in the business from a growth standpoint that will make sure you capitalize on the opportunity set when you look out over the next couple of years?

I mean, I laid out in the last quarterly earnings, but I think there's 5 key areas that we've prioritized that will build our vision around and continue to double down. One is establishing ourselves as the infrastructure for that pricing and intelligence for Siemens Plus+ as we were speaking about, continue to improve our e-commerce experiences for both customers and partners, growing just the base of the partners and customers around the world, international, as we spoke about, but ongoing partner expansion everywhere, continuing to actually drive enterprise the amount of integrations we can do enterprise, the amount of conversations we can have to continue to drive enterprise engagement always ongoing and then the services business, as we spoke about, the Thomas business to me. Those are 5 very clear focus areas and pillars where we continue to lean behind and drive our strategy with those in the forefront.

Very clear. Okay. So in the last few minutes we have left, I always try to put to someone -- if we were to have this conversation, hopefully, we're having this conversation next year. But if we have this conversation several years from now and you talk to investors and you think about the opportunity set, what do you think is the most underappreciated aspects of this company and its operating story going forward that you believe in terms of through operating, you can close the gap between some of the perceptions and where the company might go?

I would say the biggest conversation we'll have is how Xometry change the way custom manufacturing happens around the world. And that what we are building is not just a marketplace, but a true connected network of manufacturing around the world. So you can have a job that gets manufactured in a network that you don't even have to worry about where pricing and lead time are guaranteed today. That feels like a little black box to it, Tomorrow, it will be that -- think of dark factories. This will be the dark network, where you can actually plug in your job, AI ensures that manufacturability happens properly, can happen properly, pricing ensures that you get the right price and the partner integrations at the back with CAM tools, with things like that, ensure that the partners have the right tools already to make those. So actually, AI implemented in a distributed network to deliver custom manufacturing, that's the book we would have written.

Okay. Well, Sanjeev, thanks so much for coming to the conference. Really appreciate the opportunity to have the conversation. Please join me in thanking Xometry for being part of the conference.

Thank you.

Good day, and thank you for standing by. Welcome to Xometry's Q2 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Shawn Milne, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on Xometry's Q2 2026 earnings call. Joining me are Sanjeev Singh Sahni, our Chief Executive Officer; and James Miln, our Chief Financial Officer. During today's call, we will review our financial results for the second quarter of 2026 and discuss our guidance for the third quarter and full year 2026.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-Q for the quarter ended June 30, 2026. We caution you to not place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations.

We'd also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of these non-GAAP measures, please refer to our earnings press release distributed today and our investor presentation, both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website.

With that, I'd like to turn the call over to Sanjeev.

Thanks, Shawn. Good morning, and thank you for joining our Q2 earnings call. Our accelerating growth and record Q2 results demonstrate the growing strength of our AI-native marketplace. Q2 was a record quarter for Xometry across many fronts, including revenue, gross profit and adjusted EBITDA. Q2 revenue increased 41% year-over-year to a record $229 million. Marketplace revenue growth accelerated to 45% year-over-year, driven by broad-based strength across many verticals, improving conversion rates, increasing adoption by new buyers and growing wallet share of existing buyers. We continued to see strong enterprise growth.

Q2 marks our fourth consecutive quarter of accelerating revenue growth. Our AI models are effectively optimizing conversion, buyer growth and market share gains. On top of the revenue growth, Q2 adjusted EBITDA improved $10.2 million year-over-year to $14.1 million. We delivered record results in the first half of 2026, and we are again raising our outlook for the second half of this year. The strength we saw in Q2 has continued in Q3, and we are off to a strong start in the quarter. We expect strong compounding growth and operating leverage to continue through the second half of 2026 and for years to come.

I reiterate this point every quarter because it remains fundamental to our long-term growth thesis. We have penetrated less than 1% of our massive $275 billion custom manufacturing TAM. This is a market that remains largely offline today, still run on e-mail quotes and multi-day turnarounds. The majority of it is still sourced within 30- to 50-mile radius of a factory floor. To me, that gap is the opportunity. We are in the opening innings of a digital transformation and our ability to capture this massive untapped opportunity gives us strong confidence in our long-term growth trajectory.

Beyond the shift from offline to online, we see a long-term tailwind in physical AI. The rapid growth of robotics, autonomous systems and defense platforms creates a new category of customers needing fast on-demand parts. Our marketplace is well positioned to capture this demand. The 4 consecutive quarters of accelerating growth are direct evidence that the product-led strategy put in place last year is working. We are defining the e-commerce playbook in custom manufacturing and raising the experience bar for buyers and suppliers everywhere.

We will structure our calls going forward to provide updates on our key focus areas. First, I will talk about establishing Xometry as the infrastructure for custom manufacturing. Our confidence in driving the next S-curve of our growth stems from our ability to apply our core AI models to a decade plus of proprietary data. The intelligence we derive from our data gives our customers the confidence in manufacturability of their part, the instant pricing options we present and Xometry's ability to source the part optimally. The depth of our data and the intelligence is unrivaled in custom manufacturing.

That same intelligence is now extending beyond our marketplace, embedding natively into partnership environments like Siemens Design Center, proof that intelligence itself not just the marketplace around it, is the infrastructure other platforms want to build on. More broadly, we see this as Xometry becoming the connected layer between design intent and actual physical production. Siemens is the first but not the only place we expect to integrate our intelligence. Deep technical integration is a critical pillar of our product-led growth strategy. Establishing seamless AI-native digital threads that remove friction from the custom manufacturing workflows will be an ongoing focus.

We are making excellent progress on the Siemens collaboration with both teams moving at the pace we expected, we are building real integration, bringing Xometry's manufacturability and pricing insight directly into Siemens Design Center. In addition to the work within design center, there's also active collaboration between Siemens Supplyframe and Thomas, extending the value both teams can bring to their customers. We will share more as we hit milestones, and we expect the Siemens partnership to positively impact our 2027 operating results.

Our second focus area is improving our AI-native marketplace experiences. Our customer and supplier online journeys are rapidly defining the e-commerce playbook in custom manufacturing. As I've shared before, one of our core beliefs is that the B2B buying experience should be every bit as good as what people experience in their personal lives. The days of clunky B2B software, multistep checkout processes and waiting days for an e-mail quote are simply over. What we are seeing is a generational shift in who is making manufacturing purchasing decisions.

The engineers, procurement buyers and supply chain lead roles are now full of dynamic digitally native individuals. They expect the same frictionless experience at work that they have in their personal lives. When they find that Xometry can deliver, they become Xometry champions inside their organizations. In Q2, we made significant upgrades to our proprietary AI models that power our marketplace. Specifically, we enhanced model capabilities in costing, sourcing and process recommendations. These comprehensive upgrades deploy a new generation of high-capacity interconnected models that span the entire manufacturing journey. The upgrades enable additional data insights across 5 elements of our data architecture: geometry, manufacturability, certifications, supplier capability and production outcomes. The smarter the platform gets, the faster we can turn complex engineering inputs into manufacturing decisions.

As part of our AI model upgrades, we launched a new generation cost prediction model that considers a greater breadth and depth of inputs, including geometry, material, finish and whether the part is a stand-alone part or one of several in a job. This granular input leads to more accurate pricing. The model understands the specific parameters each part requires, delivering an approximately 15% improvement in CNC cost prediction accuracy. In addition, in Q2, we launched a new adaptive sourcing model that uses our proprietary data to price jobs dynamically for our suppliers. The new model incorporates an upgraded partner suitability score for each job measured against partners' specific machine capabilities, quality and on-time shipping history. By matching jobs to the right machines, we ensure our suppliers receive a curated flow of better fitting work, which strengthens our network overall.

Lastly, we launched an upgraded context-aware AI process recommender. It reads a part's industry application to anticipate needs like tighter tolerances for aerospace components. By factoring in material and geometry, it closes a real gap for first-time customers. Buyers are now accepting the recommendation more than 85% of the time with the biggest gains coming from exactly those first-time customers.

I will now share advances we made in our third focus area, expanding our buyer and supplier networks. Our focus is on becoming the most expansive custom manufacturing e-commerce platform for buyers and suppliers. We delivered strong active buyer growth during the quarter. The active buyers increasing 20% year-over-year to over 89,000. Our marketing teams have strengthened our martech and personalization capabilities, helping drive almost 4,000 net adds. Their efforts, combined with our AI model optimizations are driving conversion rate improvements and continued robust buyer growth.

At the same time, these efforts are also steadily decreasing our marketing costs as a percentage of revenue, which is improving marketplace unit economics. There are still millions of potential buyers to convert. We expect continual improvements in marketing technology and AI models will enable us to steadily increase our conversion rates and net adds. Our partnership with Siemens and our other initiatives to become the infrastructure layer in custom manufacturing will further accelerate these trends.

In Q2, we further strengthened our U.S. injection molding offering. We added new auto-quotable materials to expand choices for our buyers. We also made free on-demand design for manufacturability consultations schedulable directly on the platform, connecting customers with our injection molding experts from the very first quote. Additionally, we launched self-service one-click reordering for injection molded parts. Customers can generate new quotes that automatically carry forward configurations, specifications and files from the original order, routing them directly back to the original supplier holding the tool. Small thing on the surface, but it is exactly the kind of friction we are trying to strip out everywhere because friction is the only thing standing between a first order and a habit.

We are ever more focused on expanding our global supplier network and improving our supplier experience. Our global network of over 5,000 active suppliers across 50 countries remains a significant strategic advantage, giving buyers unmatched speed, capacity and resilience. In Q2, we added capacity in newer international markets, providing our buyers more choice and flexibility, including India and Vietnam. We continue to expand domestically as we recently referenced in our Texas market press release. Additionally, we are investing in new categories, adding suppliers with specific advanced capabilities and certifications. Furthermore, we are supporting our high-performing partners in obtaining additional certifications to meet growing production demands. Alongside expanding supplier breadth, we continue to expand the depth of our relationship with each supplier, driving up average volume per supplier and becoming more integral to their long-term success.

Our fourth focus area is deepening enterprise engagement. We continue to deliver robust enterprise growth. Our Q2 revenue from our larger customers increased by more than 40%. We delivered a record net addition of 175 accounts with greater than $50,000 spend. As Xometry becomes more embedded in our customers' workflows, we are seeing continued wallet share gains and more predictable spend. We ended 2025 with 4 accounts spending at least $10 million annually. We expect more accounts to cross that threshold in 2026. This is driven by multiyear production programs across key end markets.

For example, this deeper integration is exactly what we saw with a major enterprise robotics leader who faced a critical build deadline. They turned to us with a massive challenge, nearly 200 complex parts, including metal structures and tight tolerance CNC components, all needed within a short delivery window. We brought the strength of our marketplace to bear and leveraged 40 network suppliers to deliver the full build on time and on spec. This success proved that our platform is the go-to solution for high stakes, large-scale hardware programs directly resulting in significant follow-on production work.

The final focus area I will share is leveraging services opportunities. Our services offerings under Thomas helped us engage with suppliers who aren't yet in the marketplace ecosystem. Thomas has built the largest digital sourcing network in North America for industrial manufacturing, providing buyers access to over 500,000 suppliers. We are focused on improving our monetization on the Commerce platform and leveraging the VOS network to supplement Xometry's supplier capacity. We made strong progress on our Thomas platform in Q2. We have completed the transition to our new ad platform and redesigned search experience. These are already yielding improvement in monetization. We are building on this momentum by launching new AI-powered tools and processes for our Thomas Marketing Services. With the traction we are seeing across advertising and marketing services, we are ever more confident about inflecting the revenue curve and bringing our services offerings back to revenue growth year-over-year in the second half of 2026.

In conclusion, I'm very excited about the road ahead. And before I hand it over, I want to thank our entire team. The stellar results we are reporting today are the outcomes of a lot of hard work across product, technology, sales, marketing and operations. I'm proud of the pace at which our teams continue to execute our product-led growth strategy.

I will now turn the call over to James for a more detailed review of Q2 and our business outlook.

Thanks, Sanjeev, and good morning, everyone. Our record results for the second quarter underscore the continued scaling and increasing efficiency of our marketplace, driving both accelerated growth and expanding profitability. Revenue growth accelerated for the fourth quarter in a row. This accelerating top line was paired with yet another quarter of improved adjusted EBITDA profit margins. These achievements demonstrate that our marketplace is becoming the essential infrastructure for a predominantly offline and fragmented industry.

Driven by our record Q2 results and strong start to Q3, we are raising our revenue and adjusted EBITDA guidance for the full year. Q2 revenue grew 41% year-over-year to $229 million, a 500 basis point sequential acceleration from Q1. Q2 marketplace revenue was $215 million and services revenue was $13.9 million. Q2 marketplace revenue increased 45% year-over-year, a 500 basis points acceleration from Q1, driven by broad-based strength and adoption across the marketplace as we continue to capture significant market share.

Q2 active buyers increased 20% year-over-year to 89,557 with a net addition of 3,976 active buyers, the highest number of net adds in 10 quarters. Strong Q2 net additions were driven by our product-led growth strategy, optimization of AI models for market share and efficient marketing, including personalized pricing initiatives. Q2 Marketplace revenue per active buyer increased a robust 21% year-over-year, primarily due to increasing wallet share.

We view accounts with at least $50,000 spend as the top of the enterprise funnel. In Q2, the number of accounts with last 12-month spend of at least $50,000 on our platform increased 23% year-over-year to 2,039 with a record 175 quarterly net adds. Enterprise investments continue to show strong returns. Our enterprise strategy focuses on our largest accounts, each of which we believe have $10 million plus in potential annual account revenue. Services revenue was up slightly quarter-over-quarter as we stabilize the core advertising business. We expect services revenue will return to year-over-year growth beginning in Q3. We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions.

Q2 gross profit was $87.5 million, an increase of 34% year-over-year. Q2 marketplace gross profit dollars increased a robust 42% year-over-year. Q2 gross margin for marketplace was 34.7%, flat quarter-over-quarter. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. Our AI models are effectively optimizing conversion, buyer growth and market share gains. In Q2, this led to accelerating active buyer net adds, accelerating revenue growth and increased leverage on marketplace advertising, with spend down 220 basis points year-over-year. In fact, over the last year, our marketplace revenue growth has accelerated nearly 20 points to approximately 45%, driven by our optimization efforts. We expect marketplace gross margins to be higher in the second half of the year than the first half of the year, and we expect this trend to continue, expanding further into our target range of 35% to 40%.

Our commitment to strong discipline and rigor in capital and resource allocation across all teams while continuing to invest in growth initiatives is reflected in our Q2 operating costs. Total non-GAAP operating expenses for Q2 were $73.2 million, a 19% increase year-over-year, which is less than half the growth rate of our revenue. Q2 operating costs as a percentage of revenue improved 590 basis points year-over-year. In Q2, sales and marketing decreased 320 basis points year-over-year to 13.2% of revenue. This reflects improving enterprise sales execution, efficiency of AI models as well as the strength in martech and personalization capabilities that Sanjeev mentioned earlier.

Marketplace advertising spend was a record low 3.4% of marketplace revenue, reflecting our optimization efforts, driving improved marketplace unit economics. In Q2, operations and support decreased 90 basis points year-over-year to 8% of revenue. We are focused on driving increasing automation with AI across operations and support. Q2 adjusted EBITDA was $14.1 million compared with $3.9 million in Q2 2025. Q2 adjusted EBITDA improved $10.2 million year-over-year, driven by strong revenue growth, gross profit and operating efficiencies. Alongside accelerating revenue growth, we delivered expanded adjusted EBITDA margin of 6.2%, a 380 basis point increase compared with 2.4% in Q2 2025.

Q2 U.S. segment adjusted EBITDA was $17.4 million, a $10.6 million improvement year-over-year. Q2 U.S. segment adjusted EBITDA margin was 9%, a significant increase compared to 5.1% a year ago, driven by strong gross profit dollar growth and operating expense leverage. Our International segment adjusted EBITDA loss was $3.3 million in Q2 2026 or 9.6% of revenue, a 140 basis point improvement from a loss of 11% in Q2 2025. At the end of the second quarter, cash and cash equivalents and marketable securities were $517 million, including $248 million raised in our follow-on offering completed on June 2 and $50 million from the Siemens investment announced on May 7. Our successful follow-on offering will support key organic growth initiatives and our selective tuck-in M&A strategy.

We generated $17 million in operating cash flow in the first half of 2026, driven by strong operating leverage and working capital efficiency. In the second quarter, we invested approximately $13 million in cash CapEx, almost entirely software related, reflecting our technology investments in the platform and accelerating product rollouts. We are focused on improving cash flow conversion given our asset-light model and limited capital spending.

Our disciplined execution has led to strong revenue and gross profit growth in our AI native marketplace, coupled with significant operating leverage and increased operating cash flow generation. We are focused on strategically balancing future investment with a relentless pursuit of operating leverage given the vast market opportunity and our low penetration rates. As we rapidly approach a $1 billion run rate this year, we have a clear trajectory for improved adjusted EBITDA margins while sustaining our investment in growth.

Now moving on to guidance. We are raising our outlook for 2026, which includes higher revenue and profitability for the full year. For the second half of 2026, we are now expecting revenue growth of approximately 30% year-over-year and incremental adjusted EBITDA of 20%. For the third quarter, we expect revenue in the range of $234 million to $236 million or 30% to 31% growth year-over-year. We expect Q3 marketplace growth to be approximately 33% year-over-year, driven by ongoing momentum from our growth initiatives. We expect Q3 services revenue to be up modestly year-over-year. In Q3, we expect adjusted EBITDA of $16 million to $17 million compared to $6.1 million in Q3 2025. For the full year 2026, we are raising our revenue growth outlook to 33% to 34% from 27% to 28%, driven by approximately 37% marketplace growth. This equates to an approximately 8-point acceleration over full year 2025 growth. For the full year 2026, we expect adjusted EBITDA in the range of $60 million to $62 million.

Before we open up to questions, I want to recognize our team. The results we've discussed today reflect their execution, and I'm equally excited for what those results make possible going forward. We have real momentum, a large market in front of us and a team that has demonstrated it can deliver. That combination gives us genuine confidence in what's ahead.

With that, operator, can you please open up the call for questions?

[Operator Instructions] Your first question comes from the line of Andrew Boone with Citizens.

I wanted to ask about demand. It sounds like AI has been a key unlock on the platform. Can you just expand upon that? How do we think about AI in terms of unlocking incremental demand? What specifically is it helping with? And then just as a bigger picture, how do we think about AI and model improvements and that rolling through the model on a go-forward basis?

And then secondly, on Siemens, I'd love to hear more broadly just how partner conversations are going outside of Siemens, right? It feels like it's a step function change for functionality for CAD platforms, broadly speaking. What has that done as you guys now look more broadly across the industry? How are those conversations going?

Thanks for the question, Andrew. This is Sanjeev Sahni. Let me take the questions one after the other. First, as you can see, we are clearly super excited about the phenomenal outcomes our teams delivered, marketplace revenue accelerating to 45% growth and 43% in the first half year-over-year. All of that is broad-based. We see growth happening across categories, across new and existing buyers, conversion rate improvements and just a broad-based increase in adoption of the platform as the go-to place for custom manufacturing.

To me, this is all rooted in the product-led growth strategy we've been working on and we've been talking about over the last year. So that product-led strategy is truly bringing together the AI models that actually are no longer independently doing pricing, sourcing and manufacturability. They're all interconnected models that are truly focused on driving the real big outcomes, which is the marketplace revenue, the profitability, the gross profit that is and then the EBITDA. And as they do that, we want to make sure that we are continuing to get new buyers excited about joining the platform. You saw active buyers were up 20%, net adds in the last -- highest net adds in the last 10 quarters. All of that to say that the product-led strategy that we put in place is the real core and the AI models are not just independent models now. They are an ecosystem that's powering the growth that we have.

To your second question on Siemens, we are making excellent progress on that collaboration. Like I said even in my prepared remarks, the 2 teams are actually working together through a time line on integration, we are really fundamentally changing the way price for custom parts shows up inside a CAD tool, as we said, so that's actually really net new. The most exciting part is that we are getting continuous approaches by customers who want to be part of the initial group experiencing this new way of working, and in some cases, even wanting to provide feedback so they can actually help shape what gets rolled out. And I think this is really, really exciting because we see the same asks, come to us, not just here in the U.S., but also in EMEA where we have a strong platform as you know. So lots more exciting things to come. We'll share more milestones as we go along, but we expect clearly the Siemens partnership to positively impact our FY '27 results.

Your next question comes from the line of Brian Drab with William Blair.

I'm just going to ask one question for now. Sanjeev, can you just elaborate on what changes you're making in the pricing algorithm? And you've been leveraging the millions and millions of parts and the data associated with them to improve that algorithm for years. Is this a step function change in the algorithm? What -- can you just elaborate on what exactly is changing and what this could do for gross margin in the marketplace longer term?

Thanks, Brian. I think I'll start by saying first that we expect the marketplace gross margin to expand further into the target range of 35% to 40%, driven by all of these changes that we are making. What you're seeing is actually the proprietary data that we've had for a decade plus of parts that we produce. We are actually more extensively mining that data to find behavior patterns, find conversion rate opportunities and optimizing those models such that every part that gets produced helps make the next quote stronger, which means that the feedback mechanisms on the actual production floor are actually making their way back to when the next part is priced on the site.

So we already know if we've got a part that actually was more complicated than anticipated, what should that do to the pricing of the next part, what kind of questions we should be asking the customer. So it's really becoming to me an intelligence engine. And I think the exciting part there then is that how are we taking that intelligence engine and embedding in places like Siemens in the future to truly drive the future of manufacturing.

Your next question comes from the line of Ron Josey with Citi.

Sanjeev, I wanted to ask a little bit more just about the improving conversion rates you mentioned on active buyers while also delivering that leverage in sales and marketing. Just talk to us about the drivers of the conversion rate improvements, especially as we think about the millions of clients to convert, I think you mentioned. And so just with conversion rates improving, sales and marketing showing leverage and millions to go, I just wanted to hear more about the approach here for sales and marketing.

And then on the self-service for injection molding, you just talked about how that also has increased conversion rates. I wanted to hear a little bit more about the potential for other products to go self-service as you continue to integrate those capabilities.

Thanks, Ron. This is Sanjeev. I'll start off and then have James chime in as well. What really is happening is as we think about the application of technology, I spoke a little bit about what we are doing in the marketing technology front or martech. We're actually using the signals we are getting from the customers' shopping behavior to identify what kinds of sales and marketing interventions should follow.

So in the same way, we are connecting the models. We are connecting the signals that the customer give us by amount of time that they spend on the platform, which page do they leave, which page do they actually continue to browse on to then use that to differentially plan our sales follow-ons or sales conversations. And I think that is what is making the change in us being able to really leverage the data we've had. But now with the scale and the strength we have, that's truly becoming a difference maker in being able to know when a customer is likely to convert and actually following a much stronger follow-on rhythm versus a customer who's a casual browser looking at the site and then may not convert and then how do we resource that follow-on in a much more efficient way. James?

Yes. And thank you, Ron, for noticing on the leverage. I think we're really very happy here with what this is indicating in terms of improving unit economics, which bodes very well for continuing to grow into the large TAM ahead of us. So 4,000 net adds in the quarter. That was, I think, a record in the last 10 quarters, doing that while our AI models are optimizing our gross margin for gross profit for conversion for buyer growth. We also saw accounts above $50,000 at a record as well net adds in the quarter of 175,000. So just as Sanjeev said, the work that we're doing on these AI models gives us a lot of confidence that we'll continue to see gross margin expand further over time into our target range of 35% to 40%, while also being able to support this strong growth on top line into our expanding opportunity.

And on self-service?

Ron, what was the question on service?

Excuse me, I already promoted the next questioner. I can go back.

That would be great.

Yes, Ron, could you just repeat your second -- just clarify the second question you had.

Yes. Just if you can hear me, hopefully, you can. Just with more insights on injection molding. I think you launched self-service there more recently. And I wanted just to hear about how that has changed sort of the conversion rate to project and maybe you can collapse the time frames or compress the time frames and also how you think about self-service going forward for other projects?

Thanks for the question, Ron. The injection molding work that we are doing is truly transformational in the sense that we are not only taking a completely offline process that is a 2-part process, as you know, between the mold and the actual production. We are actually making a ton of progress in making sure the connective tissue between the mold and the actual final production actually set in stone from the beginning. And to that, the increasing adoption in injection molding is actually making a ton of great traction for us.

The benefits of linking all of that upfront with the expert advice that I mentioned with the reordering made super easy as one click as it can be, I think that's driving the awareness, and we are seeing that in the adoption numbers already. So lots more to come on that space. We actually are very excited about the tech improvements we've made there.

Your next question comes from the line of Troy Jensen with Cantor Fitzgerald.

Gentlemen, congrats on great results here.

Thank you.

Thank you, Troy.

Sanjeev, I'd love to maybe start with you. Could you just give us just your thoughts on the M&A focus comment that you had? Curious if it's just kind of like software tuck-ins or if you ever think you would need to own some more equipment?

Thanks, Troy. I can start. I think maybe there's almost 2 elements to it. One is the tuck-in M&A for us are focused specifically on continuing to drive our moat. As you've seen, we've become more and more focused on driving product-led growth strategy, which means ensuring that we are -- we have access to some of the best technology capabilities in this space, and we continue to drive some of the growth that actually comes from that. So to that, we don't necessarily have a next update to give you. But as you can imagine, both thanks to the Siemens conversation and the point on M&A that we made during the equity raise, phones have been continuously ringing. And so there's conversations around that are ongoing that we'd share as soon as we can. But James, do you have anything?

Yes. And Troy, I think you know us, we're very disciplined in terms of our capital allocation. We feel that we're in a very strong position now in terms of our performance and in terms of our balance sheet, but one that we'll remain disciplined around. Building on Sanjeev's point, the marketplace model is clearly winning here and being very strong and ways that we can continue to blend that and improve our offerings, improve our geographies, augment technology and talent that can help us on our road map. I think that complements also the approach that we're taking in terms of partnerships as well.

Perfect. All right, James, maybe just a follow-up for you. I guess, I'm assuming a lot of the profitability leverage is going to come from the international side as that kind of shifts from being a drag on profitability to accretive. So can you just talk us through maybe like investments you're doing there? Are you trying to accelerate that more than the U.S. or maybe timing to a breakeven? Or any help would be great.

Yes. I'll kick off and I think also Sanjeev, too, in terms of like extending our playbook because I think I'd point first to the fantastic progress we've been demonstrating in the U.S. that we've made a lot of progress on enterprise and then a lot of progress on our product road map and playbook. And in fact, in the last quarter, on a segment basis, our U.S. margin was at -- adjusted EBITDA margin was at 9%. So that's up from 5% a year ago. I think showing great progress towards our longer-term target.

On international, we're really pleased with how the marketplace offering is a truly global offering that it works well. The unit economics are similar across the markets we're in, that the strength that we get with being able to source globally and continue to grow that as we've done, we talked about places like India and Turkey, Southeast Asia is also as areas that we're expanding into. And I think that the performance that we're seeing is really encouraging for us in terms of getting to $120 million run rate earlier than we had in the U.S. and we'll continue to build on that momentum. And I think the opportunity for us is to now take more of that playbook on the go-to-market and product side to international.

And I totally echo James' point. I think you've seen us execute to a product-led playbook here in the U.S. You're seeing the impact of phenomenal revenue growth impact on the adjusted EBITDA. We're going to take the same playbook and do the same kind of a growth trajectory build in Europe. And you'll see that come through the numbers in the quarters and years to come. But clearly, we've perfected that playbook that we want to now take on and execute in enterprise, in product differentiation, in marketing technology, more to come.

Your next question comes from the line of Eric Sheridan with Goldman Sachs.

I want to come back on the first one to something you said in the beginning of the prepared remarks that I thought was really interesting. You talked about the rapid growth in new market segments like robotics and autonomous systems and defense platforms opening up pockets of market opportunity. Can you talk to us a little bit about how new verticals and innovation in the broader manufacturing landscape is opening up a wider array of potential customer growth for the medium to long term? Would love to go as far as you can in terms of digging deeper on that topic.

And then secondarily, maybe for James, following on the equity offering you did recently, how should investors think about capital allocation and broadly balance sheet flexibility, strategic M&A and making sure you're making all the critical growth investments in the business over the medium, long term in terms of the balance you want to strike there?

Thanks for the question, Eric. Let me answer actually the first question in 2 parts. One, in terms of the momentum that we are trying to -- we are seeing on the platform. As I mentioned, we've seen really broad-based expansion in new customers and categories that we are getting traction on. So whether it's CNC or additive or sheet or tube, all of those areas, including injection molding, we've seen growth.

But to your point, we are also seeing people who are in new areas like robotics and autonomous vehicles just naturally find their way to the online marketplace much more easily. In fact, part of the growth in the active buyer base that I mentioned also talks about the new buyer growth and how we are actually continuing to see that traction. And to your point, a lot of that is coming from the digital native or digitally native individuals in the right roles there that are finding that when they come to Xometry and we deliver like the friendly e-commerce platform they are used to in their personal lives, they stay on and be part of the platform longer term. So actually, in the physical AI space, in robotics and autonomous vehicles, all of those spaces, we are seeing significant traction from new buyers.

The other side of the spectrum, and I mentioned in the first priority for us, which is truly becoming the infrastructure for custom manufacturing, we're seeing a real interesting trend there where clearly, everybody is looking to get to a zero-touch manufacturing reality. And I think the intelligence that we have that we can actually insert in other platforms, think Siemens, that opportunity is actually surfacing in multiple other spaces along the manufacturing spectrum from design intent all the way to capacity planning and production. And I think we see ourselves play a key role in that provider of design intelligence or the infrastructure that helps manufacturing go from today's multi-touch environments to a zero touch. So more to follow on that, but that's the other exciting part about new areas and new opportunities that we're seeing. James?

And Eric, on the question, I think that what you've seen from us really over the last couple of years has been a very deliberate strategy to ensure that we've got the capital structure and balance sheet that the opportunity ahead of us merits. And so we went through -- we refinanced our convertible to give us a lot of flexibility as we continue to grow and show the opportunity ahead here. We were fortunate to be able to do a strong equity raise as well as the investments in Siemens. So we've ended the quarter with $517 million in cash. We also have moved from being a cash burning a couple of years ago to now in the first half of this year, basically neutral. So that puts us now in a really strong position in all operating environments to continue on the strategy and mission and opportunity that Xometry has ahead of it.

Our first focus is about building shareholder value. So it's about growing into the $275 billion TAM that we have, that we're less than 1%. We think we've got a huge opportunity ahead. So our focus will remain on sustainable profitable growth, continuing to adjust our profitability and maintaining a strong balance sheet gives us a lot of flexibility in different operating environments as well as the opportunities we're just saying for selective disciplined tuck-in M&A that can help us execute on that strategy.

And if I can just go in and touch on that M&A. The way we think about M&A opportunities is not adjacency. It's actually, to my point that I made in the prepared remarks about becoming the expansive marketplace for custom parts, which means opportunities in categories that we are already strong in, but we see opportunities to grow further, geographies where we are actually already having a presence, but we can see an additional add there. So it's very much focused on the expansive e-commerce platform that we are building and driving traction to that.

Your next call comes from -- question comes from the line of Matt Swanson with RBC Capital Markets.

You've spent the last couple of years showing really strong growth despite having headwinds from PMI and kind of like the overall macro environment. As we're starting to see some of those indicators improve, are there any parts of the business that you're noticing like a notable impact in terms of pickup that maybe you didn't know we're seeing headwinds before, whether it be enterprise, discrete manufacturing or certain like international geos?

Matt, it's Shawn. I'll take that. I mean, certainly, we talked a lot about the last couple of years, really driving strong enterprise growth, which drove a big lift in our revenue growth rates. And then, Sanjeev, of course, has really driven the product-led growth strategy, which has added a whole another layer to the growth. And what we talked about on the call is these added markets now around physical AI, which are going to drive long-term tailwinds. So a lot of what you're seeing has been driven by the execution of the company. That said, we're now seeing manufacturing, the PMI has turned positive for several months, and we can lean into that. And you saw our active buyers this quarter were near a 10-quarter high. And so we're prepared to continue to gain outsized market share capture.

Yes. And just to build on that, Matt, I think, yes, Xometry, as we talked about before, I think we feel very much that we are built for this pivotal time in manufacturing. And the choice of a resilient and flexible supply chain, the marketplace offerings and the value of our network and the value of an e-commerce, improving e-commerce experience just continues to raise. And just as Sanjeev talked about in his remarks, it's really just transformational in terms of how buyers, suppliers, the marketplace, these cross currents are all areas that Xometry was built to work in and solve for.

That's super helpful. And then I guess just one follow-up question to an earlier question on the Siemens partnership. We talked a little last quarter about how the workflow integrations kind of supercharged this enterprise adoption that you've been working on for a long time. Is there anything from these early, early conversations with customers that is starting to kind of help the way you think of your own R&D process and maybe some different features or use cases that are going to help you develop Xometry's kind of overall enterprise capabilities inside and outside of Siemens in the future?

That's an excellent question. I would say one of the most interesting outcomes of the Siemens collaboration has been across the world, we are seeing the understanding of what we are trying to do just lift up in most of the enterprise conversations we are having, from being able to explain what custom manufacturing marketplace can do for you as an initial push into a new enterprise. Now we are talking directly about here are the 3 opportunities we have, you can work with us on prototyping, you can work with us on production, you can work with us on special projects and tell us where your data is strongest and how you can actually help us gain insight. I think the nature of that conversation that we have with our enterprise customers is already changing.

And to your point, a lot of them are asking the next level of question and saying, "Hey, I'm a design center user already. And so when I start working with Xometry in the box, what would that be? Could the flow actually do X, Y and Z"? So actually, a lot of those inputs are super helpful, as you can imagine, because with the close partnership work that the tech teams are doing, we want all of those inputs to be defining what the outcome looks like. But even on the outset, just being able to have those conversations with the enterprise customers with an acknowledgment of the role we will play long term, that's a welcome change for sure.

Your next question comes from the line of Greg Palm with Craig-Hallum.

This is Jackson Schroeder on for Greg Palm. Just kind of a follow-up first to that PMI question. Is there any effect that that's kind of having on the buyers and suppliers on the platform, both like buyers kind of expediting shipping more, seeing elevated traction and suppliers being maybe more or less price sensitive, how much extra capacity it seems like they have? And then also, can you kind of separate what you're seeing internationally versus the U.S.? Does international like PMI ticking up possibly be a bigger benefit and help you get to a point where you're kind of growing that at a rate above the domestic market again to expand that as a percentage of sales?

Thanks for the question. I will say on the first part around various different tiers, as you know, we don't necessarily disclose that. But I will say when you're growing at 45% year-over-year, really all boats are actually driving in the same direction and at the same pace. So we're actually seeing the true value of a marketplace play out here where customers, depending on their price sensitivity, their urgency can actually choose between I want it in 1 day or 2 days, we in fact launched the ability to ship orders the same day in a couple of categories, which is really, really exciting.

So the expedite definition, we are redefining ourselves. But also there are customers, of course, who are very, very price sensitive. And with the continued investments in the sourcing markets like India and Vietnam, we are continuing to take that head on and actually capture all of that share as well. So truly to me, that growth numbers that you see is not concentrating one way or the other, but actually helping us capture both ends of the market very, very well. And then you're absolutely spot on, as growth picks up in EMEA and the conversations around focusing on manufacturing again starts to pick up, we see that same trend happen in Europe, and that's why we are ready with our playbook to drive those conversations.

Your last question comes from the line of Ygal Arounian with Wedbush.

I just wanted to -- I guess, a question on the gross margins that were slightly lower year-over-year here in 2Q and then you talked about expectations to improve over the second half. I know you have the AI models driving better pricing over time. Is that what's driving the improvement in -- over the course of the rest of the year? Are there other factors? I just want to understand the components of gross margin through this year?

And then on the guidance also for the rest of the year and as we look into next year, is there any Siemens component in the guidance for this year? And how are we thinking about the contributions as we get into next year? Any updates on that at all?

Thanks for the question. Let me start, and then I'll hand it over to James. I think the continued gross margin expansion into our target range of 35% to 40%, that is indeed driven by our confidence in the AI models and the continuous improvement that we are seeing them drive not just on one metric, but across the board. I mean you saw those models have now helped us improve growth rate from 20 points or so from 20-something last year to 25% this year. But the same thing we expect and we are seeing, in fact, Q3 has started really strong and all of the same indicators, we are seeing them trend really, really well. So we feel very, very positive about making that commitment for the rest of the year. James?

Yes. Thanks, Sanjeev. And yes, very pleased with the start. In fact, marketplace gross margin over the first half is up about 100 basis points. We've got a long track record here of more data, more suppliers, more orders. And now with the improving AI models working across the whole marketplace, I think as Sanjeev said, gives us good confidence in continuing to progress in that 35% to 40% range over time.

In terms of -- on the guidance you're asking about Siemens, I think there is some slightly more product-related costs within our second half guidance. It's embedded in there. And so that -- in terms of the work that the teams are doing as we build for operating impact in '27.

This concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

All right. Good morning, good afternoon, everyone. Thanks for joining. Cory Carpenter, Internet analyst at JPMorgan. Pleased to have the full Xometry team with us here today, the outgoing soon-to-be Exec Chair, Randy, the incoming CEO, Sanjeev; and CFO, James. Thanks for joining us.

Thanks, Cory. Great to be here.

Great to be here.

All right. So I'll sprinkle questions across the group. But to start, I think, Randy, for you, just to level set for everyone on the line in the room, just maybe start off with a high-level overview of the business and the problem that Xometry is solving.

Yes. So Xometry is the leading AI native marketplace for custom manufacturing. So custom manufacturing is a huge industry, hundreds and hundreds of billions of dollars, heavily fragmented with millions of buyers and millions of suppliers, and it's largely been undigitized. So it's been manual and offline.

We created a marketplace to bring together buyers and suppliers, and we use AI to create pricing for both buyers and suppliers and to optimize the match. We -- I co-founded the company in 2013. We've been growing rapidly. JPMorgan helped take us public in 2021, and we had -- things are going great. We had an accelerated growth in our last quarter.

Great. And then, Sanjeev, maybe for you, you're getting set to take over the CEO role, I think, in a few weeks. Obviously, you've been with the company for a while. So before we dive into the business, I thought it would be helpful just for investors to hear a bit on your background and your priorities as incoming CEO.

Thank you. I joined early last year, I came in with most of my experience around scaling larger high-growth opportunities in companies that are around the e-commerce topic and/or around logistics and supply chain with experience at Wayfair and McKinsey being the 2 prominent ones. To me, we've said this before, the destination is not changing. The person on the seat is changing as far as the CEO transition is considered.

So our priorities that we've actually been talking about for a good part of last year around product-led growth, around making sure that we continue to deepen our data and AI moat, continuing to drive category and enterprise experiences and then international growth, they all remain the same. I think we are continuing to make sure that the momentum on all of those areas continues to pick up, and we have more opportunities to deliver.

So Randy, you alluded to this in your first answer, just the manufacturing industry, it's obviously massive. I think you said hundreds of billions, but maybe put a finer point on that. How do you think about the addressable market and just where the industry is at in terms of online penetration?

Yes. So I think if you take a step back in manufacturing, we put it into sort of 2 big -- maybe 3 big buckets. One bucket is contract manufacturing. So that's when you're making millions and millions of something that is a very efficient, low-margin industry, mature industry. The second would be off-the-shelf parts. So common parts if you buy, that's also where you see e-commerce players like a Grainger or Fastenal, folks like that, MSCs of the world. And then you have the custom parts.

So think about an aerospace company, a medical device company, a robotics company that's making parts that are specific for their product. That's also a huge industry. But because it's custom manufacturing, it's not a commoditized product. It has turned into a very fragmented industry with every manufacturer being good at a very specific thing. And the long tail of the Internet hasn't really touched custom manufacturing because it's hard to figure out who's good at what and who is the right person to choose at a given time.

So because of this, it has remained offline. And what is the choice? What does the customer usually do? They go to their local manufacturer or they go to the manufacturer who they know. That may not be the best manufacturer for that particular order, but that's all they know. And then the supplier lives and dies with their local customers.

So if you're in Houston, Texas, you're going to be about oil and gas or if you're in Southfield, Michigan, you're going to be about automotive. Even if there's a great aerospace customer in Southern California who's desperate for your capacity and your capabilities, you wouldn't know about that because this is custom. So that's where AI is so important to bring it together. We've got lots of -- we'll talk about this later on, our proprietary algorithms and data, and that's enabling us to actually then create a lot more efficiency and transparency for both the buyer and the suppliers. It's one of these rare marketplaces where it's a win for both sides.

So a lot of disruption in the supply chains globally in recent years, tariffs, geopolitical conflicts. How is that impacting or is that accelerating the shift to digital? And how is that impacting buyer behavior in your business?

Yes. So what's interesting is over the last couple of years, it's changed just recently, but manufacturing has been in decline, like the overall market has declined. And again, just to put that in perspective, it is a huge market. So Cory, I didn't quite answer your question before about how -- what percentage of the market is digitized, a very small portion of it in terms of the supply chain.

We've still been growing at a very robust rate because we're taking market share as people understand that digital makes a lot of sense. And when you think about our customers, they're buying so many other things digitally that, of course, manufacturing should be the same way. When you see all these supply chain shocks, whether it's COVID or it's geopolitical issues or wars, et cetera, that just reinforces for people the need to have resilient supply chains to have ones that they can make changes. So if you're sourcing in a particular part of the world and something happens there, how do I quickly switch or diversify so I can protect my end customers.

And of course, Xometry being natively digital, having these supply chains in the United States, but also around the world, giving customers that flexibility becomes a logical choice for them. So I think it becomes a flight to, hey, where can I get the best resiliency? And as we've grown as a company and matured, where is the safest choice. And more and more, we're that choice.

So just on competition, I think that's a question we get a lot from investors. I mean off-line is clearly the biggest competitor still. But what does the competitive environment look like on the digital side? And just as we think longer term, is the competitive intensity increasing? Or is this more of a winner take all or take most type of market?

You want to...

Sure. I can take that. I would say just to put a number on the percentage of market that's online, we believe less than 1% is. So off-line fragmented job shop around the corner, that's 99% of where custom manufacturing happens today. And so there's a lot of headroom, we believe, for the online penetration to even get to the numbers that you typically see in e-commerce. That said, from a digital online marketplace perspective, if you look around, you'll see there's a combination of manufacturers with some online capabilities.

There are some really, really small online marketplaces as well. The key differentiator in my mind is it happens in all network-based flywheel businesses where data is at the core and the more data you collect, the better your flywheel works. So in our case, we've been around for over a decade, AI native from day 1. So our focus was always in making sure our data was structured such that we can continue to build on that flywheel.

And so at this point, we believe we have enough data for millions and millions of parts that we've produced and the lead time models that we've built, we recently said that we updated our lead time models to now use 4x the data sets that we used to before. We believe that, that's just going to continue to accelerate our ability to take more and more market share.

So you may have kind of answered this next question with that one. But just with all the focus on AI, investors are looking at every company trying to think about what's the disruption risk. So as we think about your moat, why is the Xometry marketplace not something that could be like vibe coded overnight?

It's a really important question. I think one that a lot of us have answered about every possible Internet business that we see out there or SaaS business. For us, if you look at the core AI models that we have, which is our pricing models, our manufacturing models and our supplier network and how we manage that, those models are built on files provided by our customer, which is a custom part for that particular customer. Those are converted into geometric data that's based on our algorithm.

And that data is retained in our tooling until the manufactured product is given to the customer, so it gets augmented by manufacturability information. That data, that proprietary data sits with us. That's not something that's available in a public domain. You can't go write -- get an LLM to get you data that would convert that into a price, a price that the LLM will guarantee to manufacture that product at the margins that we deliver. So our view is very clearly what sits with us in our core AI data models is all proprietary data. You can, of course, write an LLM, but likely it will point you back to coming to Xometry to get a manufacturer and to get it made.

Great. Okay. So I want to talk about your partnership you announced at earnings a few weeks ago, a strategic partnership with Siemens and embed Xometry directly into Siemens Xcelerator and a couple of other things. Could you just help us understand the scope of this partnership and how transformational you think it could be for the company?

I can start and Randy, feel free to join in. We think that partnership is completely transformative, one of a kind that we've not done ourselves before, but also nobody else has done in the market. So typically, the way getting price in a design tool today, so think about the top CAD tooling that exists out there, only 3 or 4 super large players, the way that pricing works today is that once you're done designing your file, you either mail it to a provider, the offline provider you're talking about to get a price or you actually download an add-on, one of them would be Xometry, install it on your local software and then actually try to get your price through that.

As you can imagine, in today's age of cybersecurity and the confidentiality that every customer in the company wants to maintain, it is generally an act of Congress to get a third-party add-on approved by your IT team to go be installed behind your firewall, right? Typically, it's not happening. So what Siemens partnership that we are doing is completely changing it by converting our core AI model into a native of the software. So in the future, when their design center software used by engineers for CAD tooling. When that ships, in built with it would be an AXC for Xometry.

So as an engineer, as you're designing your tool, you could get a price that Xometry will guarantee to manufacture it if you so wish to place your order right then or if you plan to make 4 or 5 changes right there to see what the price changes, you get real-time in the native tool feedback without having to go to your IT team to get an approval to install anything, without your file and your confidentiality ever leaving your system. And so therefore, this is a game changer because it just completely changes the way you get price and the way you are able to maintain security and confidentiality.

Of course, we've -- that's one big thing that we are excited about in the partnership. The other thing that we are working with them is on the supply frame business that they have, which is a business in which they take the bill of materials from companies and help price those for them to show what opportunity exists to address cost in those bill of materials. We can provide both custom part pricing in that through our custom marketplace, but we also have a services business, the e-commerce business, which actually has lots of off-the-shelf partner information. We can help them with those data points as well. So 1 design center, 2 supply frame. And then finally, the third part of that partnership is to integrate all of the information and updates straight into their PLM.

So technically, the Siemens Designcenter and PLM user never really has to leave their ecosystem and still be able to get the entire value of Xometry for us. We think it's super exciting because it changes the way customers buy, but it opens up a whole new channel for us in terms of marketing and getting more customers.

For the tech investor, I'll bucket myself in that crowd, who may be less familiar with Siemens, maybe give us a sense of their size and scope in the market? And then what does the kind of integration road map look like in terms of getting the product live?

So Siemens overall is in multiple different domains. The specific business that we're speaking to here is the one that's focused on digital industry software. And the aim of that digital industry software is to truly aggregate capabilities around manufacturing and design, so that they have tooling from CAD design to life cycle management and the ability to actually push that orders into the manufacturers back end. So it's all around digital software...

And it's Siemens, it's huge. I mean it's I think the leading industrial software company, and you're talking millions of users that use Siemens software. And just to put that perspective, we're very proud of last quarter. We had, obviously, a number -- highest number of users we've ever had, but also a record net add quarter-over-quarter since, I think, 9 quarters, we're at 85,000 users. So just going back to Sanjeev's excitement and all of our excitement about this, this has a chance to really be a big multiplier when you look at their installed base. It's much larger than ours. And it's -- they're a big player.

I'm actually going to jump. So Randy, I think one of the questions a couple or at 4Q earnings when you announced the transition to Exec Chair is, is Randy going to be doing? I think we now know what you've been doing. I guess as we look forward, where do you see potential for more -- how many -- how much more partnership opportunities are there? Is there any sort of exclusivity element to this we should be aware of?

Yes. So we have a very special relationship with Siemens, but that doesn't prevent us from building other relationships. And we think just as you said, Cory, I'm not riding up in the sunset. I'm the Executive Chairman. I'm still very, very engaged with Xometry. Obviously, Sanjeev is running the business as our CEO. But there are lots of other partnership opportunities, lots of other places around the ecosystem, and we are actively working on that.

So we think that Xometry has the opportunity to become that rail that's connecting buyers and suppliers that's helping in this digitization, getting to that final part of that digital thread to actual procurement and delivery, and there's lots of players in there. And so we think there's lots of opportunities to build those, and this is how we are working on those.

And that's where you're spending your time.

That's where we're spending the time.

So marketplace revenue is accelerated 3 quarters in a row, I mean, in a pretty meaningful way from 20% to close to 40%. What do you attribute this to? How do you think about the sustainability of this growth trajectory?

And even the covers [indiscernible], but Sanjeev joined us in January of last year, and he has been running a large portion of the business ever since. I think as he talked about, he brought this this is why we wanted Sanjeev as our next CEO, this product-led growth mentality. We've really leaned into that. And so when you look at the number of product releases we've had, the enhancements we've made in our buyer and supplier experience, that has accelerated at a pace that we never had at Xometry. Lots of marketing innovation. We've made lots of great changes.

So I think you're seeing proof of that, and that's why you're seeing that acceleration that's been happening now quarterly. And it's just the right way to go. And when you think about such a large TAM and going back to our penetration still so small, the way to do that at scale and to accelerate is through the product. And we're getting there in large part because of Sanjeev's leadership.

And also, we did bring in some other folks together with Sanjeev that he had worked with that had similar experience in scale businesses. Very proud of where we've gotten with Xometry. But as we get [indiscernible] quickly to $1 billion and beyond of run rate. We needed people who have been there, done that and done $10 billion and more than that. We've got many more people in the organization now for that, and that's helping us accelerate.

Yes. And I'd just add like the revenue -- the buyer -- the active buyer growth we saw has been accelerating as well. So that was our highest net adds for a couple of years. And so that's driving 20%, and that's on the back of what Randy was talking about, all the product innovation, the marketing improvements and go-to-market. We also saw revenue per buyer grow at an accelerated rate as well at 17% year-over-year.

And I think I'd line that up with all of the great initiatives on enterprise and all the progress we've been making there. We're penetrating more and more accounts. We -- at the end of last year, we had more than 140 with $500,000 or more on the platform. So we're seeing the continued acceleration both on the buyers and on the revenue per buyer as well as then international growing at an accelerated pace, too in the quarter of 42%. So these are all core initiatives that we've been driving, increasingly driven by our pace of product innovation.

Sanjeev, maybe you could talk about some of the products that you've rolled out that have had the biggest impact and then what you can tell us about the road map as well.

We continue to focus on changing the way the experiences of all of our customers are happening, right? So to me, one of the fundamental beliefs of the product road map has been that nobody wants clunky B2B software anymore. In your B2B buying experiences, everybody now wants to have the same seamless experience of a B2B engine. So just like you and I buy on Amazon, and we feel comfortable that the experience that we find the product easily, that the buying will be instant, then the follow-up will be super.

We believe that's where all of the B2B softwares are going. And in general, the e-commerce experience, everybody instantly expects it to be tomorrow. So I think we are building towards that. We've had some fantastic launches. So you heard about the injection molding, auto coating capability that we launched earlier last year, where we've now added 6 more materials. We've increased the number of coating capabilities such that we saw 15% more quoting in that interaction. And as you know, injection molding is a big, big TAM in our space. So we continue to focus on driving product capabilities to drive category expansion, customer experiences and buyer experience and partner experiences.

And then very recently, we spoke about the depth of the data models that we are working on. So increasing our lead time model, having it used 4x the data points to actually drive more accuracy, but that accuracy is also leading to us launching things like 1-day shipping. So now you can actually get a custom part uploaded today and have it shipped to you tomorrow. So we'll continue to drive selection, speed and pricing through all of these new innovations that you'll see, but lots of exciting things to come.

So I want to talk about enterprise for a bit. I mean one of the debates for years, I feel like, was the prototype versus largest production run. It's been less of a debate in recent quarters. But the enterprise business has clearly been a growth driver for you and the numbers you've given keep going higher in terms of how you're defining how big a customer can get. So could you just talk about what's working on the enterprise side and how you've been able to get that deeper penetration?

Maybe, James, why don't you give the stats and then Sanjeev and I can give the commentary around.

Yes. Yes. So on the enterprise, as we talked about, we've got over $50,000 accounts are at the top of the enterprise funnel, and that's been growing very healthily over the last few years. But what we've been talking about last year and this year was those accounts over 500,000. They've been growing more than 40%. We had 100 at the end of '24 and over 140 at the end of '26.

And we think that all of those have the capability, have the capacity to do $10 million plus and really putting out $1 billion-plus target that we see on enterprise in the next few years. And we had, at the end of last year, 4 of those accounts be over $10 million. So we've been making a lot of really great traction within the business.

Yes. And just to frame up those companies, so -- and as James has said, we've been raising the bar of what we consider successful accounts, 50,000 went public, now $500,000. Now we've got that $10 million bogey. People often ask us, is $10 million a lot. These companies are some of the biggest companies in the world, $10 million. We're proud of $10 million, but it's also a sad number, my 19-year-old say, like they're a much bigger number. These are companies, some of them are spending billions of dollars of manufacturing. And our slice of it going back to the TAM could be hundreds of millions of that.

So one of the things that's been helping us on the enterprise side is, first of all, we've got a great sales team there, a great sales leader. We made a change a couple of years ago and really pivoted and started changing our sales team to orient more towards enterprise, but there's also been -- and this is what's been critical, a lot of technology releases that we've done that have speeded up that growth. And I'll mention one, then I'll hand it over to Sanjeev.

We added something called Teamspace. And this enabled -- so historically, in the beginning, Xometry was more of a one-to-one experience between one buyer and Xometry. So you're understandably going to be buying single parts. As Xometry was growing, we're doing more assemblies. As we're getting more enterprise customers, they're saying, "Hey, we've got teams of people working on this. There's multiple parts involved. There's multiple assemblies. I need that procurement, I need that purchasing. I need to have all these different people involved." We came out with Teamspace. Since our launch, we've had thousands and thousands of teams launched. And so that's been a key software launch that's helped us grow within our enterprises.

And again, I think enterprise, as you know, is a B2B business that doesn't shop on a website, right? You have to be present in the journey where they're actually doing their shopping. So Design and Siemens is one example of that, but then you push that forward, integrations into ERP tooling, availability of punch-out solutions, that's been the other focus. So for us, the enterprise pie is not limited to what we can get somebody to come to our site, but we are making a very concentrated effort to be present in their journeys, whether it's design or procurement and making sure that we are actually forefront in the recognition that they have there.

So I want to come back to international. James, you called it out as a growth driver earlier. Maybe give us a sense of your footprint today on the international side. And then I think the Siemens partnership, they're certainly a global company. So how could that help with your international expansion?

Yes. So enterprise grew 42% year-over-year in the first quarter. So we really love that growth. We think we're still early in the opportunity. We made progress getting to $100 million-plus run rate internationally faster than in the U.S. And what's really exciting as well is we're seeing very similar buyer and supplier demands and expectations of what a digital marketplace needs to look like. And we're seeing similar unit economics with the gross margin. So we're in -- we have 18 different languages across Europe and Asia.

We've been taking learnings from the U.S. and being able to pull those into Europe, such as Teamspace. We've also launched injection molding, auto quoting in Europe, too. So these things will be much -- help us on that journey to getting over the long term, this marketplace to be consistent with other marketplaces, sort of 30% to 40% of the total revenue. Siemens is a very global company. I think a great partner for us for all the reasons we've said, but particularly from an international perspective as well and it helps on that journey of continuing to increase our awareness and our buyer penetration as we grow.

And I think the exciting thing about the international growth has really primarily been EMEA that's been driving that. We are now, as we've indicated, beginning to get more and more traction in Asia. So I think you have -- obviously, those markets independent could be both huge and are comparable to the United States. I think as we're getting both of those cranking, not just EMEA, that could, to James' point, get us faster to that 30% to 40% number that we think ultimately international be as a mix of the overall revenue of the company. So...

If anyone has a question, by the way, feel free to raise your hands, otherwise I will keep going. I think this is for you, James. So you raised your revenue outlook quite materially last quarter, but it does still imply a slowdown in growth in the back half of the year. So maybe could you just talk about your assumptions that are embedded in the guide around macro, around Siemens? And are you seeing any change in demand? Or how should we think about that?

Yes. We had a fantastic first quarter, and it's just been seeing the acceleration over the last few quarters, and those trends have continued to remain strong into Q2. The Siemens partnership is really exciting. I think it has a lot of potential in it. It's not in our guidance, not in our numbers for '26. So I think we'll come back as the milestones are hit to update you on that as we go.

As you say, Cory, we significantly raised our revenue growth. We're now looking at 27% to 28% for the year from an initial look of around 21%. That's just really reflecting the robust Q1. We raised Q2, and it does imply higher growth in the second half as well. So we're excited about those trends. And there's nothing one-off to call out in terms of what happened last year or as we think about the year ahead. So it's really about the drivers we've been talking about, the strategic drivers, the product-driven growth, the strength in enterprise and in international. And I think we couldn't be more excited about the long-term opportunity here.

Yes. I think just as we publicly said when we released earnings recently, Q2 has started strong, and we'll look at the second half of the year as we report to Q2, we'll give updates. People can look at our history. We've been -- I think we've been good at updating that, and we've seen acceleration. And so more good things to come.

So I think another -- we've talked about a few of the investor debates over the years. I think the last one we haven't hit on is marketplace gross margin. I think it's fair to say when we went public, there was probably skepticism that you'd hit your 35% to 40%. Actually, I think it was lower. I think you raised it.

30% to 35% initially.

Target. You're at the low end of the upwardly revised target now. So my question is, what's driven the expansion that you think investors may have underestimated or missed? And how should we think about the gross margin trajectory in the coming years?

I mean this really is a data AI-driven solution here, and data is the key. So we've got these algorithms, these proprietary algorithms to continue to enhance those algorithms and expand those algorithms. They need data. This is custom manufacturing. So what we've always explained to people is as we get more data, we're going to be more accurate and that will enable us to improve those gross margins.

And that is, in fact, what's happened. And then likewise, as we expand the size of our network, that will also help with that. And as we get deeper -- being embedded deeper within our manufacturers. So when you sort of see those different factors coming together, you've been seeing our gross margin improve. As you alluded to, Cory, we went public, we were at 25% in '21. Last year, we had almost 35% gross margin for the year, I think 34.7% or something. So -- and it's been steadily growing every year, 100-plus basis points.

So as we get more data, as our networks continue to expand, we expect to continue to see year-over-year improvement in those gross margins. This is, again, such an inefficient market, opaque market. We have such a large opportunity. And again, it's providing value for both the buyer and the supplier. That's what makes me -- I think our team is so excited. We're creating so much value here for both sides, that's special. You don't see that in a lot of marketplaces or a lot of businesses, frankly.

So James, you've talked about 20% incremental margins is like your target as you scale to the $1 billion of revenue. Why is that the right level for the business? And then is that the right level? Does that change with the Siemens partnership or as you scale about, you're getting close to that $1 billion mark?

We are. And yes, we've delivered about approximately 20% or above incremental adjusted EBITDA over the last 3 years. And it's really a calibration that reflects a balance leaning into the growth as we scale the platform, thinking about initiatives like international, but also demonstrating the scalability of the platform as we increase the gross margin and as we're able to get leverage more in OpEx. We have some segmentation between U.S. and international.

So I think when you break that apart, you can see how consistently we've also grown the U.S. business and seen better than 20% improvement there while making a careful investment on the international side to scale that being at an earlier stage. So I think as we scale to $1 billion and above, I think that continued progress on U.S., scaling of international and as we find abilities using automation, AI in our teams to get -- help us reduce our cost to serve and our cost of sales as we scale on the journey that we've been in.

I think where Siemens comes in is that like other major initiatives, they help us tap into that TAM. As Sanjeev was talking about, we're only at 1%, so -- or less than. So there's a lot of growth ahead of us. And as we do that, finding efficient ways to go to market and get our awareness out there, Siemens is a great example of that where the economics should be very similar on a revenue and gross margin, but the cost to serve should be significantly lower. And I think I would line that up with other major initiatives such as injection molding, international, all things that have a lot of opportunity and revenue runway ahead of them that can help us scale profitably.

Yes. So just to put it, our incremental margins -- contribution margins from -- at same business could be another accelerator of our overall profitability.

I thought we had too many questions, but we actually have 3 minutes left for the last question. So I'm going to -- maybe this is actually for everyone. Everyone has a minute. So just to wrap up high level. So maybe you can each give the one thing you're kind of most excited about that no one is talking about today, but you think could really be transformative for the business in the next year or 3 ahead.

Okay. I would say one of the most important things that I'm excited about is the data depth and the moat we have there. If you think about the Siemens partnership, one of the core anchors for that in my mind is the core AI models that we have and the proprietary data that sits there. Of all of the things that we can do with other conversations and models to launch, that data can be used to actually further increase collaborations, offerings, ability to actually drive more traction in new customers and categories. I think that to me is the really cool part of our business. That's not something we talk about enough.

I'm going to give 2 things. One is just -- I'm very excited about just going back to what we're seeing in this quarter and our overall outlook, the underlying metrics in our business are strong. There's no like we're seeing broad-based growth across industries, across customer segments. So this is exciting. You're just seeing more and more people coming to us, all those different metrics that build up to ultimately your revenue. So I'm excited about how that trend is continuing and even accelerating.

I think the one thing that people don't understand is the journey from quoting to delivery, that is a difficult journey to conquer. And we are very methodically and very smartly conquering that each step of the way and creating a digital journey, removing friction, making it easier for both the buyer and the supplier. That's a huge moat. It's -- each part of that is not trivial and each of that adds up to successful delivery. And I think we're doing a great job in getting -- and providing that for customers, and that is a huge -- going back to the data point that Sanjeev made about competitive moat, just being able to do that is also a huge competitive moat.

Unlike B2C marketplaces where you've got 1,000 people that are crowding in and quickly get this is a hard market to get into. And by us conquering all these different things, we are making this really formidable position for us and preventing other people from conquering us and taking over.

Yes. I think the final thing I'd add is just the growth of the supplier network. And I think the asset that we have that's hugely valuable there as buyers look for unmatched speed and capacity resilience across the globe. We've been building up this network, the certifications, the sophistication, the quality and building on Sanjeev, that workflow and data that can go from design to manufacture as we help our suppliers get -- read more signals and get more data there, we can match better and better to the optimal supplier and it will be a great experience for them, great job for them, profitable job for them and it meets the needs of the buyer and Xometry is able to accrete value from that.

Great. We'll leave it there. Thank you all.

Thank you. Thank you.

Good day, and thank you for standing by. Welcome to Xometry's Quarter 1 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Shawn Milne, Vice President of Investor Relations. Shawn, go ahead.

Good morning, and thank you for joining us on Xometry's Q1 2026 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Miln, our Chief Financial Officer.

During today's call, we will review our financial results for the first quarter of 2026 and discuss our guidance for the second quarter and full year 2026. During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-Q for the quarter ended March 31, 2026. We caution you not to place undue reliance on forward statements or undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations. We'd also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of the non-GAAP measures, please refer to our earnings press release distributed today and our investor presentation, both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website.

With that, I'd like to turn the call over to Randy.

Thanks, Shawn. Good morning, and thank you for joining our Q1 2026 earnings call. Our accelerating growth and record Q1 results demonstrate the success of our AI-native marketplace in the massive, complex and highly fragmented custom manufacturing market. The record performance we are reporting today reflects the investments and changes we've been making in our product, technology and go-to-market strategies.

Q1 was a record quarter for Xometry across many fronts, including revenue, gross profit and adjusted EBITDA. Q1 revenue growth accelerated, increasing 36% year-over-year, a 600 basis point acceleration from Q4, driven by 40% Marketplace growth through our expanding networks of buyers and suppliers and increasing wallet share. Alongside strong enterprise growth, we are seeing improving broad-based strength across the marketplace driven by our product initiatives.

Q1 net adds were strong and we grew active buyers 20% year-over-year. We expect continued strong growth ahead as we further tap into this largely off-line market. Q1 adjusted EBITDA increased to $10.5 million, an improvement of $10.4 million year-over-year as we deliver expanding margins on top of accelerated growth.

In addition to our record financial results, today, we announced a strategic partnership with Siemens, the world's leading industrial software company, who is embedding Xometry's AI capabilities natively into Siemens Xcelerator and investing $50 million in Xometry Class A common stock to back that conviction. By natively integrating Xometry's marketplace capabilities directly into Siemens integrated design to manufacturing software ecosystem, including the Siemens Design Center, this partnership puts Xometry's manufacturability, pricing and sourcing intelligence in front of Siemens' global customer base at the moment design decisions are made. Through this embedded experience, engineers will receive real-time feedback on design feasibility, manufacturing options, pricing and lead times directly within their existing design workflow. They can also seamlessly place and track orders through to delivery. The result is a continuous digital thread from design decision to delivered part.

Xometry is uniquely equipped to power this partnership with over a decade of proprietary transactional data, real-world manufacturer feedback and closed-loop production outcomes across our global supplier network. These serve as the foundation of our manufacturability, pricing and sourcing intelligence, and they are what makes this experience possible at scale. In addition to the Siemens Design Center integration, the partnership will include the integration of Thomas, Xometry's North American industrial sourcing network with Siemens Supplyframe to bring deep design to sourcing intelligence for both electronic and mechanical components to completely source the bill of materials for Siemens customers.

As Xometry's enterprise installed base deepens with more accounts embedding us into their core engineering and procurement workflows, the Siemens partnership extends that intelligence upstream into the design environment itself, helping teams move from digital intent to physical production with fewer handoffs and greater transparency. And this also accelerates the expansion of Xometry's installed base in the process.

Together, this strategic partnership will accelerate our collective penetration of the massive, highly fragmented custom manufacturing market with Siemens global platform extending Xometry's reach across all commercial markets. Our teams are actively working on the integration road map, and we look forward to sharing milestones as the partnership develops. We're thrilled to be working with Siemens to further strengthen the design digital thread.

For those new to our story, Xometry has operated as an AI-native marketplace since its inception with data science, machine learning and core AI models integrated into operations. Xometry's core AI models, which manage the custom orders to part manufacturing journey are trained on proprietary transactional data. Xometry's proprietary pricing and sourcing models are embedded directly within live marketplace transactions, integrating digital quoting, supplier selection, production performance and delivery outcomes into a closed-loop learning system. Each completed order strengthens future predictions, increasing accuracy, speed and reliability across the network.

By embedding design to fulfillment intelligence directly into engineers' workflows, Xometry reduces information asymmetry in manufacturing procurement and is transforming what has historically been a fragmented manual coordination problem into a scalable competitive advantage ground in both digital intelligence and physical world execution.

Our strong Q1 financial results marked 3 consecutive quarters of accelerating revenue growth and 4 quarters of increasing EBITDA margins. At the same time, we've invested in and strengthened our platforms to deliver robust secular growth and expanding profitability in the coming years. We're off to a strong start in Q2, and we expect robust growth to continue in 2026, which James will discuss later in the call.

I will now turn it over to our President and incoming CEO, Sanjeev Singh Sahni, to discuss some of the initiatives that are driving our strong growth and increasing profitability.

Thanks, Randy, and good morning. The strong Q1 results we are reporting today are direct evidence that the product-led strategy formulated last year is working. This quarter validates our strategic thesis and marks the clear acceleration of our path to a new trajectory.

We are defining the e-commerce playbook in custom manufacturing and raising the experience bar for buyers and suppliers everywhere. Our teams are beginning to inflect the growth curve and build a path to this new trajectory. Today, I will focus on sharing some developments from our strategic elements focused on our proprietary and core AI models, e-commerce marketplace experience and expansive supplier network.

Our new strategic partnership with Siemens is very exciting as it will help us serve ever more engineers and transform their buying journeys. The Siemens partnership is a strong external proof point that our core AI models are becoming the infrastructure for how the industrial world designs and sources parts.

In Q1, we made significant progress on proprietary core AI models. Our proprietary intelligence is crucial for creating value across the entire marketplace. Our strategy over the past year has been to establish our core AI models as the differentiators. They are the reason why Xometry continues to take significant market share.

Our models are laser-focused on improving pricing, speed and selection for both buyers and suppliers. The ability to translate a decade plus of proprietary data into immediate operating leverage and long-term Marketplace growth is what underpins our confidence in accelerating the move to the next S-curve of growth.

First, we launched a new enterprise machine lead time model that represents a significant expansion of Xometry's predictive intelligence capabilities. The new lead time model represents a significant expansion of Xometry's predictive intelligence capabilities, leading to a superior prediction accuracy for custom model parts. Enabled by the scale of performance data from the global supplier network, the model enhances operational throughput by driving a reduction in standard lead time offerings and expanding rapid delivery to facilitate 1-day lead times across a growing catalog of materials and geometries.

Our updated model leverages a training data set 4x larger than its predecessor and now integrates critical factors like specialized certifications, new materials and advanced finishing options. Enterprise customers are not experimenting with us anymore. They are expanding.

Second, we shaped several new journeys on our e-commerce marketplace experience. Our customer and supplier online journeys are rapidly defining the e-commerce playbook in custom manufacturing. One of our core beliefs and something I feel strongly about is that the B2B buying experience in manufacturing should be every bit as good as what people experience in their personal lives on Amazon, Wayfair, or Alibaba.

The days of clunky B2B procurement software, multistep checkout processes and waiting for days for an e-mail code are simply over. What we are seeing is a generational shift in who is making manufacturing purchasing decisions. The engineers, procurement buyers and supply chain lead roles are now full of dynamic digitally native individuals. They expect the same frictionless journey at work that they have in their personal lives. And when they find that Xometry can deliver to that, they become Xometry champions inside their organizations. That's true whether they are at a Fortune 500 company or a high-growth start-up.

With our focus on improving the customer journeys on the platform, we introduced 2 features. First, we launched the Name Your Part feature, which enables customers to match their internal name conventions to what they have on Xometry, creating a unified part and SKU-like structure on our platform. This is an important feature that is already reducing buyer friction and substantially simplifying the reordering process. We can see in recent activity in Teamspace, the name your Part feature is gaining traction as Xometry becomes increasingly part of customers' bill of materials. Second, we enriched our pricing models to include greater personalization of customer pricing. We enhanced the dynamic pricing logic that powers the pricing intelligence layer of our Instant Quoting Engine. We see this drive higher conversions, balance margin outcomes and drive higher overall growth while enabling better outcome for our customers.

In Q1, we continued to improve our injection molding offering in the U.S., adding 6 new materials and 3 additional finishes to give buyers greater choice and selection, increasing instant coding of injection molding parts by over 15%. Xometry's proprietary AI-powered platform manages the full cycle of injection molding needs from instant quoting to delivery and reordering in one of the largest custom manufacturing markets in the U.S. The platform enables a spectrum of injection molding options from prototype and low-volume bridge tooling to high-volume multi-cavity production tooling in approximately 50 different materials, colors and finishes.

Finally, we are ever more focused on expanding our global supplier network and improving supplier experience. Our global supply network of approximately 5,000 suppliers is a significant strategic advantage, giving buyers unmatched speed, capacity and resilience, allowing for immediate scaling and offering sourcing flexibility across 50 countries on 4 continents. We continue to add more suppliers with higher levels of specialized certifications to support the growing needs of customers in specific industries. In 2025, demand for certified manufacturing surged with jobs requiring certifications increasing 35% on our platform.

For our suppliers, we continue on improving their experience through new technology and tools in Workcenter, including the recent release of on-platform communications. By centralizing job-related communications directly within Workcenter, we are shifting more engagement online, improving visibility and further reducing friction for our suppliers. Insights we draw from suppliers' interactions on our platform give us significant sourcing insights to drive margin outcomes. This quarter confirms our strategic path and the power of our AI-driven flywheel.

As I prepare to take on the CEO role in July, I'm very excited about the trajectory ahead. And I look forward to leading Xometry through its next product-led growth curve that we have already embarked on.

I will now turn the call over to James, for a more detailed review of Q1 and our business outlook.

Thanks, Sanjeev, and good morning, everyone. Our results for Q1 underscore the continued scaling and increasing efficiency of our marketplace, driving both accelerated growth and expanding profitability. Revenue growth increased for the third quarter in a row, and Marketplace gross profit dollars saw even faster growth, exceeding 50% year-over-year. This accelerating top line was paired with yet another quarter of improved adjusted EBITDA profit margins. These achievements demonstrate that our Marketplace is becoming the essential infrastructure for a predominantly offline and fragmented industry.

Q1 revenue grew 36% year-over-year to $205 million, a 600 basis point sequential acceleration from Q4. Q1 Marketplace revenue was $191 million and services revenue was $13.8 million. Q1 Marketplace revenue increased 40% year-over-year, a 700 basis point acceleration from Q4, driven by strong execution, expansion of buyer and supplier networks as we continue to capture significant market share. Q1 active buyers increased 20% year-over-year to 85,581 with a net addition of 3,760 active buyers, the highest number of net adds in 9 quarters. Strong Q1 net additions were driven by our product-led growth strategy and efficient corporate marketing initiatives. Q1 Marketplace revenue per active buyer increased a robust 17% year-over-year, primarily due to increasing wallet share.

We view accounts with at least $50,000 spend at the top of the enterprise funnel. In Q1, the number of accounts with last 12-month spend of at least $50,000 on our platform increased 21% year-over-year to 1,864 with a strong net adds of 104. Enterprise investments continue to show strong returns. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue. Services revenue was roughly flat quarter-over-quarter as we stabilize the core advertising business. We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions.

Q1 gross profit was $78.5 million, an increase of 39% year-over-year. Q1 gross margin for Marketplace was 34.7%, an increase of 290 basis points year-over-year. Q1 Marketplace gross profit dollars increased a robust 53% year-over-year. We are focused on driving Marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. Our commitment to strong discipline and rigor in capital and resource allocation across all teams while continuing to invest in growth initiatives is reflected in our Q1 operating costs.

Total non-GAAP operating expenses for Q1 were $68.2 million, a 21% increase year-over-year, a rate significantly lower than our revenue growth. In Q1, sales and marketing decreased 110 basis points year-over-year to 14.2% of revenue. This reflects improving enterprise sales execution and disciplined advertising spend. Marketplace advertising spend was a record low 3.9% of Marketplace revenue, down 60 basis points year-over-year as we delivered accelerating growth and expanding profitability. In Q1, operations and support decreased 70 basis points year-over-year to 8.2% of revenue. We are focused on driving increasing automation with AI across operations and support.

Q1 adjusted EBITDA was $10.5 million compared with $0.1 million in Q1 2025. Q1 adjusted EBITDA improved $10.4 million year-over-year, driven by strong growth in revenue, gross profit and operating efficiencies. Alongside accelerating revenue growth, we delivered expanded adjusted EBITDA margin of 5.1% compared with 4.4% in Q4 2025. Q1 U.S. segment adjusted EBITDA was $13.3 million, a $10.3 million improvement year-over-year. Q1 U.S. segment adjusted EBITDA margin was 7.7% compared to 2.4% a year ago, driven by expanding gross profit and strong operating expense leverage. Our International segment adjusted EBITDA loss was $2.8 million in Q1 2026 or 8% of revenue, a 400 basis point improvement from a loss of 12% in Q1 2025. We expect continued improvement in International segment operating leverage in 2026.

At the end of the first quarter, cash and cash equivalents and marketable securities were $224 million. We generated $14.6 million in operating cash flow and $4.8 million in free cash flow in Q1 2026, driven by strong operating leverage and working capital efficiency. In the first quarter, we invested $10.6 million in cash CapEx, almost entirely software-related, reflecting our technology investments in the platform and accelerating product rollouts. We are focused on improving cash flow conversion given our asset-light model and limited capital spending.

Our disciplined execution has led to strong revenue and gross profit growth in our AI-native marketplace, coupled with significant operating leverage and increased operating cash flow generation. We are focused on strategically balancing future investment with a relentless pursuit of operating leverage, given the vast market opportunity and our low penetration rates. As we rapidly approach a $1 billion run rate, we have a clear trajectory for improving adjusted EBITDA margins while sustaining our investment in growth.

Now moving on to guidance. We are raising our outlook for the year. For the second quarter, we expect revenue in the range of $214 million to $216 million or 32% to 33% growth year-over-year. We expect Q2 Marketplace growth to be approximately 35% to 36% year-over-year, driven by ongoing momentum from our growth initiatives. We expect Q2 services revenue to be largely flat quarter-over-quarter as we continue to work through the transition of the recently launched Thomas ad serving platform and search upgrades.

In Q2, we expect adjusted EBITDA of $11 million to $12 million compared to $3.9 million in Q2 2025. For the full year 2026, we are raising our revenue growth outlook to at least 27% to 28% from 21%, driven by approximately 30% Marketplace growth. We expect 2026 Marketplace gross margins to be higher than 2025 as each quarter of growth and technological advancement incrementally fuels margin performance. For 2026, we expect services approximately flat year-over-year with modest growth in the second half of the year as we expect that revenue in the second half begins to increase quarter-over-quarter. For the full year 2026, we expect incremental adjusted EBITDA margins of at least 20%.

Before we open it up for questions, I want to recognize our team. The results we've discussed today reflect their execution, and I'm equally excited for what those results make possible going forward. We have real momentum, a large market in front of us and a team that has demonstrated it can deliver. That combination gives us genuine confidence in what's ahead.

With that, operator, can you please open up the call for questions?

Our first question comes from Cory Carpenter of JPMorgan.

I wanted to ask about the Siemens partnership, in particular, maybe for some of us more on the Internet side, less familiar. Could you just help us frame how meaningful is this for you? Kind of what exposure does this get you that you did not have before? And then how should we expect it to layer in some of the KPIs like active buyers in the coming quarters?

This is Randy, and thanks for joining. And I'll jump in and maybe our President and incoming CEO, Sanjeev, will join as well. So we think, this is a big deal. I mean, Siemens is the leading industrial software company globally. It has millions of users. As you know, we have 85,000 active buyers. So their user base dwarfs ours, and we are embedding directly into their PLM and CAD software. So right where we want to capture the engineers and the procurement people, that is Siemens business. This will extend our reach into -- globally, it will extend our reach into all different sectors across different industries. So it could be a very big deal for us.

I think from a KPI perspective, just as I alluded to, with millions of users, it could really boost up significantly our active buyer count. So lots of good things. And it also can improve our profitability as you can think we're capturing these -- these are Siemens customers. Logically, our sales and marketing spend will be dramatically less here as we're getting them here natively into their software.

Just to add on to that, I think, Cory, the way to think about this opportunity is that we are truly integrating directly into the Siemens software as a native embedded solution deployed within their SaaS and on-prem premises environments, which means real-time data connectivity to the engineer who is designing their product and being able to price it right there in their flow. So without having to break their flow, they would be able to get pricing on parts from Xometry, which would be a very, very big improvement to the user experience and their ability to move from price to placing the order very seamlessly, something that does not exist today at all.

Our next question comes from Brian Drab of William Blair.

Randy, congratulations and congrats to the whole team, but well, what an accomplishment. I wanted to just follow up on the Siemens question. So first of all, can you talk about how that business is going to be structured in terms of margins for you? I know you just said it's going to require less selling and marketing. But Siemens is obviously kind of acting sort of like a distributor, you're using their platform, and they're going to take some value. But the sales through that platform, you're saying should be accretive to overall EBITDA margin. Is that right?

So Brian, we're going to monetize. We're going to -- the gross margins that those should be very similar, Brian, to what we see today. We'll also be recognizing revenue similar to what we're seeing today. And as we said, we'll have less OpEx associated with it. So we think from an incremental margins from this revenue should be more profitable.

In terms of recent performance in the first quarter, have you seen or can you talk about in any more detail, strength relatively across different end markets like aerospace, space defense, I imagine, continues to be very strong, or is it just broad-based? And then are you seeing any benefit to your business from the disruption to the global supply chains related to the war et cetera.

Yes, absolutely. So I think, first of all, like we really saw growth across all of our industries, Brian. It was very broad-based, which is very exciting for us across many different customer segments. And I think we -- certainly, the macro has been improving. The ISM data, manufacturing data has been improving. But in general, we just continue to gain more and more market share, and that's been a big driver of our growth.

I think when you think about all the disruptions that have happened now for years since COVID, I think it just underscores to buyers the need for resilient supply chains, the need for digital supply chain flexibility, and that's what Xometry is. It enables people instantly to source from different regions, make changes. We strongly believe this is the future of manufacturing supply chains and we're the leader in it. And so I think that's just helping us gain more and more adoption by users and more and more market share.

I was just going to build on that. I mean, what Randy was saying, you saw accelerated net adds on the buyers, accelerated net adds on our accounts over 50,000, continued success on the enterprise front as well as continued success on the product-led strategy. So creating a broad-based offering and building out broad-based momentum.

Can I ask just one more quick one? So there was, I think, some anxiety on the call last time with the report because of the succession of Sanjeev coming in. Randy, you said very clearly, I'm not really going anywhere. I'm going to be working on some significant partnerships. Now that's materialized. We know exactly what you're talking about in terms of a partnership. My question is, are there -- you used the term partnerships, plural. Is this a sign of potential further -- is this indication of like other partnerships that we could see down the road?

Yes. I mean, absolutely. Look, first, we're building a very special partnership with Siemens, a very unique one. So we're excited and grateful for that. But we're certainly hopeful that there'll be other partnerships, Brian, to say, down the road. And I'm excited to focus my time on those and assist Sanjeev here, who's been crucial to building this partnership as well as our execution.

As James said, this is really about our product. I mean, Siemens is excited about our product, integrating our product. This just validates our product-led growth strategy that Sanjeev, since he joined us last year has been leading and where we go in the future. But certainly, more good stuff to come and hopefully more partnerships, but love the unique one that we built, special one that we built with Siemens.

Yes. And I think it really validates the custom manufacturing TAM that we see, $275 billion. These are the sorts of relationships that we want as the infrastructure, as the platform for custom manufacturing to be able to accelerate our growth and continue to execute really well on the product, improve that and get in front of more buyers and more suppliers.

Our next question comes from Andrew Boone of Citizens Bank.

Can we double-click on active buyer? It was the strongest net adds in 2 years. Can you help us understand that outperformance? And then how should we think about that going forward? And then as we think about AI just in terms of a bigger picture view as a tool that you guys are now inserting across the business. Can you talk about this very specifically within the Instant Quote engine? What is that unlocked in terms of accuracy or any other benefits you guys want to highlight as we think about the evolution of what Instant Quote can be?

Yes. I'll start with the active buyers and then hand over to Sanjeev to talk about the AI integration and what that means. So look, I think -- and I appreciate, Andrew, pointing out, this is the biggest add that we've had for 2 years.

I think you can expect to see more exciting numbers from the add perspective as we continue to further develop our technology platform to be more personalization as we extend the reach through our product and through our marketing, we're getting broader adoption. Partnerships certainly like the one, the unique one we're building with Siemens here will accelerate that. And I think the other great thing is not only did we have record net adds the last 2 years, but we grew the spend per buyer as well. I think that grew 17% year-over-year. So that's also an indication not only we're getting more buyers, but our share of wallet is increasing. And that's -- we think there's opportunity to continue to grow that share even as we grow that number of active buyers.

Yes. I would also say, Andrew, Shawn -- you can see in the slide in the deck that we grew the active buyer number was strong. At the same time, the ad spend as a percent of Marketplace revenue declined 50 basis points year-over-year.

Andrew, to your question on AI and what we're continuing to do there and how we're embedding the Instant Quoting Engine. As you can see, I think part of our focus with the product-led growth has been to double down on the predictive intelligence capabilities that our proprietary AI model brings to us.

I mentioned on the call that over the last several cycles, we've been focused on improving and expanding the model itself. Our updated model leverages the training data set, which is now 4x larger than its predecessor and even integrates new factors that actually help us price better, be more specific to new materials, even have advanced finishing options, which we continue to see more and more of as a need from our customers. Truly, I think this is most exciting for our enterprise customers whose needs are super expansive, but also to make sure that they now can come to us with a trust that we'll be able to deliver irrespective of the need.

Our next question comes from Greg Palm of Craig-Hallum.

Yes, I'd like to offer my congratulations on basically all the above as well. I wanted to maybe go back to the Siemens announcement. I don't know if you can give us just a little bit of background on sort of kind of how that came about mostly from their end. I'm also a little bit confused and it looks like a great deal for you, but what's kind of in it for them? And I mean, as I think about them and their global sort of installed base and exposure, I mean, do you think this could be a good really helpful catalyst to accelerate growth internationally?

Yes. So look, I think we're building something very special with Siemens, and I think that's going to give their users a very unique opportunity to access our data to improve their intelligence in terms of pricing and sourcing. It's being built natively within the Siemens system. So it is very special and unique. And I think that will be a huge value add for the Siemens users. I think as you said, it obviously, Greg, is great for us and they do have a massive user installed base, obviously much, much larger than ours, and it is truly global. And as we've talked about and as you can see in the press release, this is a global rollout that we expect. So this should help us not only here in the United States, but across all of our regions. So very exciting.

Greg, to your question specifically on how it helps them. This is Sanjeev. Very specifically, if you think about it, this actually embeds the entire Xometry experience within the Siemens platform, which means that the Siemens user actually never has to leave the Siemens platform to actually price the part and then track the journey of the part being manufactured and delivered to them, which is going to be very unique and puts them also in a very different category compared to any of the other competitors that they face off on a daily basis in the spaces of CAD and PLM. Now being able to make sure that their engineers and the users have a very unique journey, we think is a true differentiator for them as well.

I guess I'm looking or thinking about the full year guide, in light of what's going on in the macro, given the Siemens partnership. I mean, the full year guide based on what you've done in Q1 and the guide Q2, I mean, implies not just a pretty big deceleration in Marketplace growth in the second half but implies a major deceleration in net adds. It implies no growth in revenue per buyer. So I guess I'm just asking in light of all of that, maybe it's just conservatism. There's still a lot of year left, but just wanted to get your quick thoughts on that as well.

Yes. Let me just -- first of all, our guide doesn't include anything about Siemens at all. So let's just -- that is not baked into our numbers. And as that partnership develops, we'll certainly update and if that impacts or when it impacts our numbers, we'll certainly share that. I think just to level set here, we did raise our guidance in Q2 or implied guidance pretty significantly here the 32% to 33% growth. And our guidance also -- and that includes -- that 35% to 36% Marketplace growth in Q2.

Our guidance also implies higher growth in the second half of the year, higher than the guidance that we just gave about 1.5 months ago. And I just want to say that the trends remain strong. We have started Q2 very strong. And so as things continue, we will continue to update as we've done all along. But so far, the trends remain strong. And again, we've raised our guidance not only for Q2, but for the second half of the year as well.

Just build, Greg, I think we're really excited. I mean, I think now at 27% to 28% for the full year, that's an acceleration from 2025 growth of 26%. So another year of Marketplace growth of 30%, which is what we did last year. We're excited about the trends we see, very excited about this relationship with Siemens.

I'll just note as well that there's a couple of slides in the earnings presentation on Siemens. So you can reference those as well as you're digging in here. And I think the strength in the product road map, the strength in enterprise, what that does is says in terms of the opportunity ahead of us, the TAM that we have to penetrate, we still feel very early. There's a lot of opportunity ahead. But when it comes to guidance, it's still early in the year, and we'll update you as we go through.

Yes. I mean, just to be clear, we're not seeing anything that would imply deceleration, but we're being smart here.

Yes, makes sense. We'll be looking forward to those updated guidance metrics throughout the year.

Our next question comes from Troy Jensen of Cantor Fitzgerald.

First off, congrats on the great results. I guess I also want to dive in a little bit on Siemens. I think you hit on it a little bit, but just to confirm, there's no exclusivity associated with this and you guys would be able to do similar stuff with like an Autodesk and SolidWorks?

Yes. We're building something -- thanks for joining us. So we're building something special and unique and proprietary with Siemens. So that relationship is. But we will continue to work with other companies, other beyond companies and others. But I just want to say what we've done with Siemens is very unique and special to them.

The $50 million investment, was that something that happened after the quarter closed? Or can you just touch on it a little bit more?

Yes, that's after the quarter closed. So it will be -- you'll see it in the Q as a subsequent event.

James, just maybe one for you, if I could throw it in quick. What revenue level do you think you need to reach like an EBITDA breakeven for your international business?

Yes. I mean, I think we're there overall globally. I don't think -- we're not going to guide to that on a segment basis. We're really pleased with the progress we're making. As you know as well, we were free cash flow positive in the quarter and we're getting close to the level which we mentioned last quarter in terms of where we think that that's sustainable at $225 million a quarter in revenue. I think we're really excited about the growth opportunity in international and seeing the margin continue to improve. So we think those losses will continue to improve as the year goes on.

I am showing no further questions at this time. I would now -- I would like to thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Xometry Fourth Quarter 2020 Earnings Conference Call [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host for today, Shawn Milne, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on Xometry's Q4 and Full Year 2025 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Milne, our Chief Financial Officer. During today's call, we will review our financial results for the fourth quarter and full year 2025 and discuss our guidance for the first quarter and full year 2026.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2025.

We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations. We'd also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as remains to evaluate period-to-period comparisons.

Non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of these non-GAAP measures, please refer to our earnings press release distributed today and in our investor presentation both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website. With that, I'd like to turn the call over to Randy.

Thanks, John. Good morning, and thank you for joining our Q4 2025 earnings call. Our record Q4 quarter and record full year 2025 and powerfully demonstrate the success of our AI native marketplace in the massive, complex and highly fragmented custom manufacturing market. Our revenue growth and profitability accelerated as 2025 progress, we are encouraged by our strong start to 2026. Alongside reporting record financial results, today, we announced the planned transition in Xometry's leadership. Effective July 1, 2026, and I will transition to become the Executive Chair of the Board; and Sanjeev Singh sane, Xomitry's current President will become Chief Executive Officer.

This transition is a result of a deliberate long-term succession process with our Board, and we are aligned in our conviction that Sanjiv is the right leader for our next chapter. Together with Laurence Sure, I cofounded Xometry in 2013 and with a mission to make the world's manufacturing capacity accessible to all by digitizing the VaaS, highly fragmented custom manufacturing work. We stayed true to that vision from the start. -- and that consistency is now delivering scale and accelerating growth and profitability. I'm proud that in 2025, our marketplace serves over 80,000 active buyers around the world.

The record performance we are reporting today and the momentum that built throughout 2025 and is carrying into the first quarter of 2026, reflects the investments and changes we've been making in our product technology and go-to-market strategies and leadership. As we continue to lean into product-led growth, I've decided that this is the right time to hand over the leadership of Xometry to Sanjiv. Sanjeev has been my close partner since he joined in January of last year and has held the operational mandate for our global teams.

During his tenure, Sanjeev has been instrumental to Xometry's accelerated revenue growth and expanded profitability while further deepening our suite of advanced technology and AI capabilities across the business. Sanjiv's track record at Xometry, and his background of driving global growth, innovation and scale with large global marketplaces makes him the right leader to drive our next stage of innovation and profitable growth.

Sanjeev has done a terrific job as our President and I expect that we will continue to outperform as our CEO. In my new role as Executive Chair and as the largest individual long-term shareholder, I will remain closely involved in the company's future focusing on strategic growth initiatives and key corporate partnerships. In short, I'm not going anywhere. While this transition will be a milestone for zometry, as always, our focus remains on executing the significant opportunity in front of us. It is a pivotal time in manufacturing driven by accelerating digital transformation, increasing customer demands for speed and transparency, rapid AI-driven innovation, and the crucial need for resilient supply chains, including the push towards reshoring.

This new era necessitates resilient digital workflows and robust supplier networks. Xometry's AI native marketplace is digitizing how custom manufacturing is price, source and fulfilled by replacing manual legacy processes. Our networks of buyers and suppliers alongside the proprietary data they generate through their interactions in our marketplace, continue to grow and create increasing network effects. Over the last year, we've accelerated our product development to meet these increasing expectations and requirements of custom manufacturing buyers.

We have enhanced flexibility in manufacturing selection by expanding the portfolio of high-performance manufacturing materials and certifications who rapidly innovating sectors across all end markets, Xometry provides a secure certified platform that facilitates AI-enabled sourcing with improved visibility into qualified domestic suppliers to meet the growing need for speed, scale and compliance. As I said earlier, Q4 was a record quarter for Xometry across many fronts, including revenue, gross profit and adjusted EBITDA. Q4 revenue growth accelerated, increasing 30% year-over-year, driven by 33% marketplace growth through our expanding network of buyers and suppliers and deepening enterprise engagement.

Q4 marketplace gross margin expanded 80 basis points year-over-year to 35.3%. The expansion of our marketplace gross margin underscores the significant economic value generated by our AI native marketplace. Our competitive moat continues to increase as we grow our network of buyers and suppliers and gain more data to continuously train our algorithms. This continuous improvement has driven substantial and steady growth in our marketplace gross margins moving from 25% 4 years ago to approximately 35% in 2025. Enterprise growth remained robust in Q4, finishing off a strong 2025 as revenue from marketplace accounts with last 12-month spend of at least $500,000 increased by over 40% year-over-year. We are focused on driving further penetration in our largest accounts, each with an estimated potential spend that lease $10 million annually.

In 2025, we ended with 4 accounts with at least $10 million of spend driven by strong execution from sales in our technology solutions and an acceleration in large multiyear production programs across key end markets. Our strong Q4 financial results cap a transformative year for Xometry as we delivered accelerating revenue growth and 4 consecutive quarters of positive and increasing EBITDA margins.

At the same time, we invested in and strengthened our platforms to deliver robust secular growth and expanding profitability in the coming years. We're off to a strong start in Q1 and expect robust growth to continue in 2026, which James will discuss later in the call. I will now turn it over to our President, Sanjeev Singh Sane to discuss some of the initiatives that are driving our strong growth and increasing profitability.

Thanks, Andy, and good morning. I'm honored and excited to step into the CEO role at Xometry on July 1. We -- under Andy's leadership, Xometry has been defined by a singular unwavering mission to make the world's manufacturing capacity accessible to us. I look forward to working closely with Randy and our talented global team to accelerate our product-led growth and further cement Xometry as the essential marketplace for the custom manufacturing industry. Reflecting on the past year, I continue to be impressed by our large market opportunity, and long runway of growth ahead as we increasingly become a product-led company.

We are focused on key growth initiatives, including expanding our marketplace offerings, driving structural growth for enterprise accounts, and building out our global supplier network. Let me start by talking about expanding marketplace offerings. In 2025, Xometry accelerated the pace of innovation enabling better pricing, speed and selection for our buyers and finding the optimal match for suppliers in our network. Xometry launched auto codes for injection molding services in the U.S. and Europe providing customers immediate access to pricing and lead time estimates for 1 of the most critical production processes and 1 of the largest categories in customer manufacturing.

We expanded our marketplace capabilities, including AI-powered design for manufacturing, or DFM, which utilizes machine learning and automated algorithms to identify and correct reduction issues early in the design phase. We recently added the ability to interpret technical drawings within our AI DFM, further enhancing our proprietary data set. In Q4, we added a portfolio of high-performance materials for additive manufacturing technologies to the U.S. marketplace. These materials are critical for advanced applications in aerospace, defense and medical device industries.

Additionally, we introduced a preferred subprocess feature for CNC machining. Also in 2025, we launched our highly successful team space feature in the EU. Team space continues to scale with over 11,000 teams created globally since launch. Additionally, Xometry EU launched its sports library, simplifying how customers manage and reuse part data across projects. The EU parts library consolidates their clients' entire upload artistry into a single filterable interface, enabling users to quickly reorder previously quoted or produced parts.

In 2026, our focus remains on key marketplace expansion efforts. These include: first, increasing our marketplace offerings. In injection molding, we will expand our capabilities, further enhancing the buyer experience and growing the associated supplier network. Also, we will continue to add material and finish offerings enabling us to service more complex and production scale programs; second, continuing to advance our pricing intelligence, including more personalized pricing based on customer context and order characteristics.

Third, further raising the bar to deliver a world-class e-commerce experience through deeper integration of automated DFM analysis and AI-assisted customer and supplier workflows. One of the key drivers of accelerating growth of our marketplace has been our ability to drive structural enterprise growth. As Randy mentioned, we delivered strong enterprise growth in 2025 with 40% plus revenue growth from our larger customers.

Xometry is becoming more embedded within the enterprise customer workflows, which in turn drives larger and more predictable spend. In 2025, and we ended with 4 accounts with at least $10 million spend, driven by strong execution from sales and the efficacy of our technology solutions. We expect more accounts to join the $10 million-plus threshold in 2026 driven in part by many multiyear production programs across key end markets. In 2026, we are focusing on driving further structural enterprise adoption through deeply embedded sales and marketing motions and increasing use of technology solutions, including team space and ERP procurement integrations.

Now let me talk about our Thomas Industrial sourcing platform. We made significant progress in 2025, modernizing our Thomas platform so we can return to growth. Thomas is a leading digital platform connecting industrial buyers with over 500,000 listed North American suppliers. Thomas supports manufacturers, distributors and service providers with tools and resources to drive business growth. In Q4, we launched a new dynamic ad serving model and Palmer Smart Search setting the stage for a completely new experience on the Thomas platform.

We are pleased with the early results from the Thomas platform. in 2026. Thomas is focused on improving how buyers and suppliers interact across the Thomas network by allowing the buyers to describe requirements more naturally and quickly to find local suppliers. We will improve search results relevance and help our advertisers better access the extensive demand on Thomas. To continue to grow Thomas awareness, we are strengthening the Thomas brand with a new marketing campaign.

Finally, we are focused on expanding our global supplier network and improving the supplier experience. Our global supplier network of approximately 5,000 active suppliers is a significant strategic advantage, giving buyers unmatched speed, capacity and resilience, allowing for immediate scaling and offering sourcing flexibility across 50 countries on 4 continents. In the U.S., we expanded our supplier base with a focus on larger suppliers with key quality certifications to ensure the needs of our enterprise customers.

Globally, we expanded our sourcing network to include more suppliers in Europe, India, China and Turkey. In 2025, we launched the new WorkCenter mobile app to improve supplier experience and engagement. The WorkCenter platform is Xometry's proprietary all-in quote-to-cash solution, enabling its partners to source and consolidate work, manage operations, monitor performance and secure cash flow. By providing easier access to the job board and job management, we expect to drive increasing supplier engagement.

In 2026, we will continue to strengthen marketplace density by enhancing supplier matching precision and expanding network depth across geographies, and and capabilities, especially in India. We will further increase the choice of processes and lead time from suppliers across the world. In 2026, we have an exciting road map of updates and new features for our WorkCenter mobile app, including improving usability by enhancing how users review, jobs and desires.

There's much more to come in the following months as we focus on further improving buyer and supplier experiences and expanding our platforms. As Randy mentioned, our momentum remained strong in Q1, we expect robust profitable growth to continue in 2026, given strong demand on our marketplace and our product road map. I will now turn the call over to James for a more detailed review of Q4 and our business outlook.

Thanks, Sanjiv, and good morning, everyone. Having worked closely with Randy over the past 2 years, I've seen firsthand how his and Laurence's vision have translated into the rapidly growing profitable business we are reporting today. I would like to thank Randy for leading the company to where we are today and setting Xometry up for our next chapter. Looking ahead, I speak for the entire executive team when I say we welcome the opportunity to work alongside Sanjeev to accelerate our momentum.

He has been a disciplined partner in driving our 2025 performance, and we are excited to continue to scale the business toward our long-term targets under Sanjeev's leadership. Turning now to our financial results. So much we had an excellent Q4 marked by accelerating revenue growth and a significant increase in marketplace gross profit. This performance highlights the real-time responsiveness of our marketplace to customer demand and solidify Xometry's position as the digital rails for the largely offline and fragmented custom manufacturing industry.

As we progress towards $1 billion in revenue, we anticipate continuous improvements in profitability alongside ongoing investment in our growth initiatives. 2025 was a standout year for Xometry, as we accelerated annual revenue growth 800 basis points to 26%, further expanded marketplace gross margin by 120 basis points and delivered full year profitability with $18.5 million in adjusted EBITDA compared to a loss of $9.7 million in 2024.

At the same time, investments in our platforms have positioned us for robust secular growth and increased profitability in the coming years. In Q4, revenue grew 30% year-over-year to more than $192 million a 200 basis point sequential acceleration from Q3. Q4 Marketplace revenue was $178 million, and supplier services revenue was $13.9 million. Q4 Marketplace revenue increased 33% year-over-year, driven by strong execution, expansion of buyer and supplier networks and growth with larger accounts.

Marketplace growth was robust across many verticals, including aerospace and defense, electronics and semiconductors, energy and automotive. Q4 active buyers increased 20% year-over-year to 81,821, with a net addition of 3,539 active buyers, driven by efficient corporate marketing initiatives. Q4 Marketplace revenue per active buyer increased 11% year-over-year, primarily due to strong enterprise growth. We view accounts with at least $50,000 spend at the top of the enterprise funnel.

In Q4, the number of accounts with last 12 months spend of at least $50,000 on our platform increased 18% year-over-year to 1,760. Enterprise investments continue to show returns with strong revenue growth from marketplace accounts, ending 2025 with over 140 accounts with last 12-month spend of at least $500,000. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue.

Services revenue declined approximately 1% quarter-over-quarter as we have largely stabilized the core advertising business. We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions. Q4 gross profit was $75.2 million, an increase of 27% year-over-year, with gross margin of 39.1%. Q4 gross margin for Marketplace was 35.3% and an increase of 80 basis points year-over-year.

Q4 Marketplace gross profit dollars increased a robust 36% year-over-year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. The growth in our marketplace gross margin underscores the significant value our AI native marketplace is providing. Moving on to Q4 operating costs. Q4 total non-GAAP operating expenses were $67 million, increasing 15% year-over-year. demonstrating strong leverage by growing at half the rate of our revenue growth.

We are applying strong discipline and rigor to our capital and resource allocation across teams while investing in our growth initiatives. In Q4, sales and marketing decreased 20 basis points year-over-year to 15.6% of revenue. Marketplace advertising spend was 5.2% of Marketplace revenue, which was down 40 basis points year-over-year as we delivered accelerating growth and expanding profitability. In Q4, Operations and support decreased 80 basis points year-over-year to 8.1% of revenue.

We are focused on driving increasing automation with AI across operations and support. Q4 adjusted EBITDA was $8.4 million, an increase of $7.3 million year-over-year driven by strong growth in revenue, gross profit and operating efficiencies. In 2025, we delivered our target of approximately 20% incremental adjusted EBITDA margin. In Q4, our U.S. segment adjusted EBITDA was $10.8 million or 6.8% adjusted EBITDA margin, a $6.8 million improvement year-over-year driven by expanding gross profit and strong operating expense leverage.

Our International segment adjusted EBITDA loss was $2.4 million in Q4 2025. And a $0.5 million improvement from a loss of $3 million in Q4 of 2024. We expect continued improvement in International segment operating leverage in 2026. At the end of the fourth quarter, cash and cash equivalents and marketable securities were $219 million. We generated $6.1 million in operating cash flow in 2025 driven by strong operating leverage and focus on working capital efficiency. In the fourth quarter, we invested $10.3 million in CapEx, almost entirely software related reflecting our technology investments in the platform and accelerating product rollouts.

We are focused on improving working capital efficiency and cash flow conversion given our asset-light model and limited capital spending. Throughout 2025, our AI native marketplace delivered strong revenue and gross profit growth, along with significant operating leverage, showcasing our disciplined execution. As we progress towards $1 billion in revenue, we anticipate to continue to deliver at least 20% incremental adjusted EBITDA leverage annually. Given the vast market opportunity and our low penetration rates, -- we will continue to strategically balance future investment with the relentless pursuit of operating leverage.

Now moving on to guidance. For the first quarter, we expect revenue in the range of $187 million to $189 million or 24% to 25% growth year-over-year. We expect Q1 marketplace growth to be approximately 27% to 28% year-over-year. As Randy mentioned, trends remained strong in Q1, even as we are mindful of the uncertain macro environment. We expect Q1 services revenue to be largely flat quarter-over-quarter as we work through the transition of the recently launched Thomas ad serving platform and search upgrades.

In Q1, we expect adjusted EBITDA of $6.5 million to $7.5 million compared to roughly breakeven in Q1 of 2025. In Q1, we expect stock-based compensation expenses, including related payroll taxes to be approximately $11 million or approximately 6% of revenue. For the full year 2026, we expect at least 21% revenue growth, driven by our Q1 outlook and at least 20% growth in Q2 to Q4. Our guide for the year reflects us continuing to be mindful of the uncertain macro environment. We expect 2026 marketplace gross margin to be higher than 2025, as each quarter of growth and technological advancement incrementally fuels performance in the subsequent quarters.

For 2026, we expect services revenue approximately flat year-over-year with modest growth in the second half of the year. For the full year 2026, we expect incremental adjusted EBITDA margins of at least 20%. I want to close by thanking our dedicated Xometry team members worldwide, whose tireless commitment, professionalism and passion are instrumental to our continued success. We are incredibly proud of our shared accomplishments and look forward to continuing to revolutionize the manufacturing industry together. With that, operator, can you please open up the call for questions.

[Operator Instructions] And our first question coming from the line of Cory Carpenter with JPMorgan.

Maybe, Randy, 1 for you and 1 for you, Sanjeev. Randy, could you just expand a bit on why now for the CEO change? Why was this the right time for you? And where do you expect to focus your time -- and then Sanjeev, look, clearly a ton in the product pipeline that you're -- but maybe could you just talk about what are you most excited about? Or what initiatives do you think could have the most meaningful impact on growth this year? .

Great. Well, Cory, Look, while this is news today, this transition is the result of the deliberate succession process and as we undergo this transition, and I think it's important to remember that even though we're changing the first in the seat, and I'm sitting right next to right here, we're not changing the destination on the math. And my commitment to Xometry is a stronger as ever.

And the timing of this transition is deliberate, and it reflects the trend of our position. With the record 2025 results, we're on a clear increasingly profitable trajectory, making this the ideal window for a leadership transition later this year on July 1. And these results, frankly, from last year and the momentum we're seeing in the first quarter this year reflect the impact of Sanjeev's leadership and its focus on product line growth, which have been key components of our recent success.

And as the largest individual long-term shareholder here, I'm not going anywhere, as you ask how we remain deeply involved in our future, specifically driving our strategic growth initiatives and corporate partnerships. I plan developing across industry initiatives from a strategic vantage point. Specifically, where Xometry has a significant opportunity become the essential platform for the industry is rapidly moving towards a digital first AI-powered model. And we are very uniquely positioned, and I think there's a lot of strategic partnerships we can build based on that.

Executing on those initiatives, which are driving significant market share gains in this massive, fragmented market is really critical for our growth ongoing. We expect the pace of new product introductions to continue in '26 as we further expand the marketplace menu, setting up the continued growth in wallet share. We are focused on both initiatives across the board, including expanding our marketplace offering, driving structural growth for enterprise accounts and building out our global supply network.

As I have grown and scaled marketplaces in my career, I have seen how the financial models are inherently attractive. Network effects that build competitive modes are able to generate increasing value as the companies grow. As the last few years have demonstrated, we've been able to reaccelerate growth while continuing to improve gross margins and deliver at least 20% incremental adjusted EBITDA margins. As Xoemtry scales, I expect that we will be able to continue to demonstrate consistently strong leverage, delivering increasing profitability and cash flow.

And our next question coming from the line of Andrew Boone with Citizens.

You guys printed a really strong 4Q with acceleration. As I look at the guidance for 1Q '26 and then 2026 in total, it implies a deceleration. Can you just speak to that? Is that conservatism? Is there something from macro that you guys are seeing? Or anything else that you want to highlight there? And then as I think about the pacing of international investments, you guys talked about improvement for 2026. Can you guys just elaborate on that in terms of what our expectations should be as we think about the path to profitability for international?

Yes. This is Randy Andrew, and thank you for the question. Let me just start by saying we have a lot of momentum. We've mentioned, I think, a couple of times in the crib and we raised sort of the guidance for Q1. So Q1 has started very strong. I think we are mindful of the macro, so that's why. But just to be clear, we also raised our guidance for the year as well.

So as the year progresses, and hopefully, we keep the momentum, we'll continue to update. But so far, there's been no change, lots of strong momentum and we're hopeful and confident that will continue throughout the year.

Yes. Andrew, this is James. Just to build on that. I think as you point out, Q4 was a great quarter seeing marketplace growth accelerated to 33% year-over-year. I think that does really reflect the progress the team are making, particularly this -- the enterprise growth we've been driving becoming more embedded in those workflows with our largest customers, seen as enterprise accounts more than 500,000 grow to more than $140 million, seeing the revenue per buyer up 11% year-over-year and seeing the traction that we're making there is really encouraging.

And behind that is also the product-led initiatives. And we really feel like we've taking significant share here. I think as we look forward, Andrew, you said like we always are mindful of that macro environment. We control what we can control. I think we're very pleased with being able to increase the outlook for Q1 here and for the year ahead. And I think as we go through each quarter, we'll be able to continue to give you updates as we move forward. The second question, was that international

International profitability.

Yes. And so on that too, I'm really pleased with the overall opportunity and performance we had in international. What we've talked about before is the unit economics that we're seeing the gross margin, the gross cap structure are very similar internationally as we see in the U.S. And as we penetrate deeper into different international markets, really see very common use cases and needs for our buyers and a common opportunity for us to take advantage of our marketplace offering for our suppliers.

So I think that over the long term, certainly continue to feel very strongly about international being able to grow into a larger part of our business, going up to 30% to 40%. And I think over time show very similar economics and so it's great to see the U.S. leading the way and getting to nearly 7% adjusted EBITDA margin here. And I think we'll continue to just balance those choices on profitability and growth as we continue to grow the international business.

Our next question in queue coming from the line of Brian Drab with William Blair.

Randy, congratulations on the decision. And it's been an amazing run so far. I was wondering if you -- 1 thing that stood out, and I'm joining the call late, but 1 thing that stood out was the slide showing what you're doing with some of the larger customers and how fast those customer counts are growing and the revenue with those customers are growing. You now have 4 customers over $10 million in revenue.

Can you talk about what you're doing and specifically, as you can for those customers and how you're having success whether it's like working yourself into the bill of materials for production runs, ERP systems, et cetera, to build those big customers because it looks like it's really happening.

Yes, Brian, thank you. And I think larger customers and as we talked about, we've got that -- a bunch of these customers now that we think have a $10 million spend we're probably got them now, we've got the 10 -- I don't know Prim,youheard that. If you joined the call where you have over 140 customers now that have more than 500,000 LTM Sanitas. That's up from 40% from last year when we had 100. So that's been growing rapidly. .

And there's a couple of keys to that. It starts with the technology. We are embedded more and more in the workflow, and we're embedded in their supply chain. Our punch outs or integrations with their ERP and their purchasing systems are instrumental in that. So that just makes us part of what they're doing every day. Then you layer on top of that, the improvement that we're continuously make in the team space, which has been a terrific product for us. And team space also lend itself to larger products, projects.

As we talked about, we have more and more multiyear projects with these customers team space helps facilitate that, and we're constantly adding features to that and enhancing that. So that's that product-led growth. And then marrying that of the investments that we've been making in the last couple of years in our in our sales force and our go-to-market, and now we're going that also with you making changes in the marketing side as well. sector joined us the beginning of last year as our new CMO. So all those things are coming together to build out those longer customers.

For those types of customers, is the work very -- has it varied across your different process offerings? Or does it -- do they focus typically on one?

No, it's -- Barry. And I think, Brian, a couple -- that slide was intended to show a couple of things. First of all, that our platform is extensible. We're in multiple different industries. We have strength in many industries. Number two, would also, if you go through it, like we're doing multiple different processes as well. So that's 1 of the advantages of a marketplace and our platform. It's extensible. And also, we can continue that, and we mentioned that certain new processes, the instinct for injection on that we had at the end of last year in the U.S. and we had Europe, the new materials, all that's adding to more one-stop shopping. .

I did want to mention 1 more thing, Brian, which is the macro is shaky, there's a lot of noise out there. There is a flight to reliability and security and safety and the nonentry platform provides that, particularly as a public company with their transparency, with the systems we have in place, the security we have in place, for larger customers, that is very important as they think about ensuring that they can deliver to their own customers, they want a partner that can make that happen in our platform as that partner.

And then just lastly on this topic, and then I'll pass it on. The next Slide 11 shows the different -- I like these slides that you show different work that you're doing for some major customers. I don't know if those are the same customers? I imagine there is some overlap between these slides. These are probably customers that are at least 2 and or 50,000 with you.

But for the customers that you're doing the $10 million in revenue with. Are those customers that are generally doing production work with you, low volume production and you're in the bill of materials or it's just recurring production that you're involved in? Or is it just a ton of development work? Or is it both?

It's certainly more heavily weighted towards production, Brian, and we are increasingly in the bound just as you develop your to the bond Absolutely. .

Our next question coming from the line of Eric Sheridan with Goldman Sachs. .

I wanted to build on sort of a couple of the answers you've given so far. When you think about the verticalization of the platform today, what are you seeing as the biggest tailwind to growth on an industry vertical standpoint today? And how are you thinking about continuing to maintain or build on some of that operating momentum in certain industry verticals. And which ones do you feel you're under indexed to today? And what do you think you need to do in terms of changing some of the indexing across some industry verticals or maybe you feel are more opportunity sets looking longer term?

Yes. Look, I think, Eric, as I mentioned earlier, we are pretty well diversified across multiple verticals, and that's the advantage of our technology platform is extensible. And so when you see the growth that we're getting, it's across multiple industries. So I would say there's 1 vertical versus another. I think overall, and this is, for me, 1 of the most exciting things about odometry and -- and while -- why we're going to have durable enduring large growth for many years to come, we're underpenetrating the overall market.

The TAM is huge, and I'm super proud of the results that we have, but we should be -- continue to grow super well for a long time with Vettam is massive out there. And look, I think there is definitely a trend towards digitization, more and more people are using AI-powered models as the leader in that as we can get the word out, more and more companies are -- that the tailwind is people realize this is a better solution.

People want resilient supply chains, people want it to be digital. People want to have the way technology available to them and we're at that intersection of many of them between manufacturing and technology between design and delivery, and we play that key role. So the more we get that word out, the more that we can build these integrations, and this is 1 of the many things that Sanjeev is bringing to the table, you'll continue to see that growth continue and hopefully even accelerate.

Eric, Randy just to add, I think as we build out our global supply network, the enterprise capabilities that we have across multiple verticals are a important added value that we bring, whether that's in aerospace or cybersecurity and defense and medical and then having the work center platform, being able to whatever the vertical will be able to put up these jobs to the optimal supplier, the best match who has the capabilities can deliver quality that us continuing to build on that performance across all of these categories to Randy's point, cases penetrate, where we still have a lot of opportunity ahead.

Our next question coming from the line of Ron Josey with Citi.

Randy, congrats on Sanjeev, looking forward to working more closely with you. I wanted to ask a little bit as a follow-up to Eric's question here, just the brand awareness amongst your buyer base. Randy, you just talked about the TAM being so large and we're just sort of getting started on getting to buyers. So talk just about brand awareness what Xometry is offering, particularly as sales and marketing spend. I think that accelerated in the quarter. And so just talk to us about how you balance, call it, overall profitability in sales and marketing with building that awareness and then, James, as we think about 2026 and the 20% incremental adjusted EBITDA margins, I believe that's consistent with 25. I'd love to hear your thoughts about how the management team is balancing incremental investments, which is overall greater EBITDA as we do get to the scale or are we just super early given the size of the TAM.

So let me tackle it and Sanjeev and James will jump in. So let me just start by saying, look, there's a pool of millions of buyers and we are balancing the profitability and making sure we've got profitable growth in marketing. We've got some good slides here that shows that -- that's becoming more and more efficient as we've been going on. So I'd say we are -- we've got robust growth. And as we talked about, Q1 has started very strong as well. But there certainly is a balance between growth and profitability, and we're trying to optimize for both that 20% incremental profitability.

So I think we have a long way to go on the awareness side. We're making good strides. But again, that's where you should expect to see durable long-term growth year after year from us. as more and more people learn about us, it's also where the technology is critical. And by integrating by the time channels be becoming embedded in the workflows, as Brian mentioned earlier, being part of, as Frank Gran mentioned earlier, being part of Xometry material that enables you, without spending marketing dollars to get much greater awareness within your customer base.

And in these large customers, these 10 million plus customers that we now have in the 500,000-plus, it's great next step to hit that milestone. Those are key ways to get out because those companies have often tens of thousands of employees and desperate in different locations. The more we can be embedded in their systems that gets you like free advertising free building and particularly as I mentioned earlier, as more and more customers are in this environment, looking for resilient supply chains and more maturity and reliability that also helps to drive more people to our platform.

Let me just add a couple to that on. As you know, geometry has been an AI-native marketplace for inception. So the use of data science, machine learning and foundational models has been key. But even as the AI overviews and AI-enabled answer and answer the optimization engines or GEOs are gaining scale. We actually think of them as a new organic channel for brand messaging and awareness. We are investing AI marketing capabilities internally, but continuing to strengthen where we are with those efforts.

In fact, we believe that we are very well positioned to take advantage of this change in how people search because we've been known to create high-quality content and expertise across multiple different categories that we operate in. So I think with new opportunities with answer engines and AI views, we actually are using them to drive some of that message.

And Ron, on the investment and profitability question, over the last 2 years, you've seen us reaccelerate growth and deliver our full year adjusted EBITDA profitability and incremental margins of 20% and more. Actually, we've actually delivered those incremental margins over the last 3 years. So I think that is helping really demonstrate very tangibly the leverage that we see in the marketplace model. To your point, I think it is still very early. There's still a huge opportunity ahead.

We're very focused on giving some guideposts here as we scale to $1 billion to continue to deliver at least 20% incremental adjusted EBITDA even as we continue to invest in those growth initiatives, the advantage of being an asset-light model with strong cash flow conversion from adjusted EBITDA means that as we continue to grow here and approach $1 billion, we'll be seeing that come through both in adjusted EBITDA and in the cash flow.

And I think that gives us a lot of optionality as we think about the capital allocation and the opportunities ahead to really further scale the business. So it won't always be leaning quarter-to-quarter, but certainly, you've seen us demonstrate this over the last few years, and I think we continue to expect to do that on our up to $1 billion head.

Our next question coming from the line of Greg Palm with Craig.

Congrats on the results. And obviously, to Randy and Sanjeev congrats on the planned transition here. I wanted to maybe start with a macro question because there is some thought that we may actually see a broader rebound in manufacturing this year. It's been a while since we've kind of had that. Number one, have you seen any change in, call it, supplier behavior on a year-to-date basis relative to last year or the last few years? And just in terms of the marketplace overall, what kind of impacts what that might have both on revenue and also from a gross margin standpoint, if we did see -- call it, a rebounding manufacturing market and thus, maybe a byproduct with some tighter capacity industry-wide?

Yes. So just to start, I think it's been business as usual. And I would be clear, I don't think our results are the beneficiary of any sort of pull forward or anything tariff related, et cetera, I think it's just as we've been gaining more and more market share as we become more and more band our customers, more people are looking for digital solutions that helped us and so we haven't seen any change from a macro perspective. I think, as we gave our guidance this year, we mentioned we are mindful of the macro, but if there was an upturn in macro, that would absolutely be a tailwind for us.

It would be helpful for us. I think the improvement in our margins reflects our approach. We're training our models. Our algorithms are improving as we get more and more data, we get more and more accurate. And as we grow those networks to buyers and suppliers, that -- the data -- those networks, that's what's enabling us to grow our gross merchants, and we've been doing that very steadily and consistently year-over-year since we went public.

So I think you should expect, as James said, in 2026, for our gross margins to be higher than they were in 2025. We're excited for Q1 gross margins to be higher year-over-year and sequentially. And I think if we do get a tailwind from a favorable macro, that will only be helping us even not only growth side, but also on the bottom line as well.

Makes sense. And then I wanted to just follow up on the cohort analysis because there's some interesting stuff there. In terms of the makeup of those $10 million accounts. I just want to be clear, are they doing -- is it a quantity or quality, like are they doing a lot more projects? Or are they doing bigger, higher value? And in terms of like how these accounts are serviced from an account manager standpoint, anything differently in terms of how that started and has evolved through that relationship that maybe you can use to push more accounts into this specific cohort.

So a couple of things. So there's certainly with those larger accounts, there's more and more production work. So there's certainly larger projects as we sort of talked about earlier, there is overall more volume. And I think so you also see the number of users that we've got in those accounts. So it's a combination, but certainly large care projects are helping there. And then we're built into -- and Brian mentioned earlier, we're built in to build materials. So that's like that creates a lot of stickiness or if you become the go-to for certain parts of that customer for a long time. .

And again, those technology innovations help a lot with this. I think it's -- as we -- as you asking about what's the key to those larger accounts. they'll start small, where we get the awareness I think particularly these integrations being embedded in their workflows and in their technology, that has been critical to the growth. And then -- and when you get those technology lock-ins, that makes it very sticky. It makes it easier for the customer to default to you and it provides additional learnings particularly in those larger customers across a bigger base because these are large companies.

So those things really help. We also have, obviously, as you can imagine, our sales force, we've got a tiered sales force like a lot of other companies. So in terms of account management, you've kind of got some different motions there, too. But it's really the technology that's the critical element that it helps that happen.

Our next question coming from the line Josh Chen with UBS.

Congrats, Randy, Sanjeev, on the transitions. Maybe just 2 quick questions from me. Number one, on obviously, very strong demand from customers. I guess, how do you feel about your momentum adding active suppliers are you concentrated more on larger suppliers, so maybe the count doesn't matter quite as much? And then second question is, as you continue to grow EBITDA, what are your thoughts about potentially getting to a breakeven free cash flow at some point in the near future.

Thanks for the question, Josh, it's Sanjeev. Let me take the first part. I think -- as you mentioned, I think suppliers growth is a key element of continue to drive the marketplace growth. As you mentioned, we have close to 5,000 suppliers overall and system balances, how we do margins across your suppliers, so continuing to grow both sides of the marketplace is equally important to us across those spaces. But yes, as we think about the ongoing growth in the large enterprise accounts and the kind of needs they have, we continue to make sure that in our network, we not only have suppliers that are capable of delivering those large programs, but also have the right certifications and and requirements that are needed to meet the quality certifications of that customer.

And so therefore, balancing the network for both size, breadth and depth, so size in terms of number breadth in terms of geographical trend where we want to make sure that we can service the customer needs from anywhere in the globe and then depth in terms of processes that they can service for us remains critical, and we continue to invest in there.

Josh, on cash flow. So good question. I think you've already seen us go positive or very close to positive on a couple of quarters in the last year. So generally, an asset-light model with good cash conversion, cash flow is coming after adjusted EBITDA. So we had our first full year of adjusted EBITDA profitability $18.5 million. So as we expect, over the last -- over the next year, we'll start getting to sustainable free cash flow positive as well as we continue to grow.

Just to put a little bit more framing around that. I think CapEx, operational cash flow last year was actually positive at $6 million. We have been investing in our product-led strategy and so you've seen a that was $10.3 million in the quarter. I think if we assume a similar sort of percentage of revenue in the year ahead at around 6%, then when we hit the $225 million quarterly run rate I would expect to be free cash flow positive on a sustainable basis.

Our next question comes from the line of Matt Swanson with RBC Capital Markets.

We've touched on this in a couple of different parts, but I wanted to focus a little bit more on the work center mobile app and just kind of what benefits that might give you from the competitive environment of just making it easier to work with for suppliers. They obviously have a limited number of hours every day the machines can be running. How does that kind of help to make sure that they're running Xometry projects? .

Thanks for that question, Jon. I think the work center mobile app is proving to be a substantial lock-in with our partners and suppliers across the globe. The advantages that we see are across 3 different interactions that those partners and suppliers have. One is on the job board itself, which is accepting the job and we offer them a lot of the suppliers are not always in front of their computer to be able to actually accept jobs and the flexibility that our mobile app provides them to be able to accept a job where they might be actually at a machine and/or they might be away from their desk at home, given the size and scale of some of the suppliers that the huge benefit just to get started.

The second 1 is around management of the job itself and I think the big advantage there is as they work through those jobs, they want to make sure that they are able to provide us with most timely inputs, both in terms of updates on the job, but also questions that might arise during manufacturing, so improving the analysis around the DFM piece that we were talking about before. So it acts as a mechanism for us to get real-time data back from the manufacturing flows coming back into our models and helping us improve those. And then finally, of course, managing their own cash flows. As you can imagine, a lot of these suppliers are trying to balance lots of jobs that they have, like you mentioned, but also trying to manage the outcomes for the business. So this has been the 3 areas of engagement that we continue to see increase.

I appreciate that. I know there's been a lot of questions on the large customer front because these are some impressive numbers. So you guys delivered -- but I guess what I was wondering is when you're thinking about how customers go from $50,000 to $500,000 to $10 million, are there any internal metrics that you look at that kind of signal people are starting to upsize, have you seen any correlation with like the further spreading out of team space or anything else that kind of gives you more confidence that the enterprise momentum we've seen in '25 will kind of continue to build in 2026.

I think it starts with those customers, we have a pretty good idea or estimate of what their total spend is. So it just starts qualifying that these companies can send $10 million plus with us. And I think if we ever share the names of you who those customers are, they're spending many multiples more than that $10 million. So even if we have a modest share of their total spend, that is a very achievable number. So it just starts with that. And again, because of our platform, it's very extensible.

You can imagine that it's relevant -- it's relative to a lot of industries, and there's lots of big customers they're buying billions of dollars of custom manufacturing a lot more than that. So it starts with just that qualification. I think as you sort of correctly sort of alluded to, as we get more and more buyers who are adopting the platform as more and more teams are created because that's the way for customers to invite their colleagues to join and use the platform. That's obviously a great signal.

And then as we get traction with our integrations with the punch outs get embedded in become included in those bonds, those are also great signals. But these are customers that clearly are spending the money. It's our job to show them is the best solution and then and that's why we're seeing momentum there. We would expect that number to us to grow every year in that group of 500,000 plus to grow as well. Lots more to go.

There are no further questions in the queue at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.

Hi, and welcome to Xometry's Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to VP of Investor Relations, Shawn Milne.

Good morning, and thank you for joining us on Xometry's Q3 2025 Earnings Call. Joining me are Randy Altschuler, our Chief Executive Officer; Sanjeev Singh Sahni, our President; and James Miln, our Chief Financial Officer. During today's call, we will review our financial results for the third quarter 2025 and discuss our guidance for the fourth quarter and full year 2025.

During today's call, we will make forward-looking statements, including statements related to the expected performance of our business, future financial results, strategy, long-term growth and overall future prospects. Such statements may be identified by terms such as believe, expect, intend and may. These statements are subject to risks and uncertainties, which could cause them to differ materially from actual results.

Information concerning those risks is available in our earnings press release distributed before the market opened today and in our filings with the U.S. Securities and Exchange Commission, including our Form 10-Q for the quarter ended September 30, 2025.

We caution you not to place undue reliance on forward-looking statements and undertake no duty or obligation to update any forward-looking statements as a result of new information, future events or changes in our expectations. We'd also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures internally for financial and operating decision-making purposes and as a means to evaluate period-to-period comparisons.

Non-GAAP financial measures are presented in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with U.S. GAAP. To see the reconciliation of these non-GAAP measures, please refer to our earnings press release distributed today and our investor presentation, both of which are available on the Investors section of our website at investors.xometry.com. A replay of today's call will also be posted on our website.

With that, I'd like to turn the call over to Randy.

Thanks, Shawn. Good morning, and thank you for joining our Q3 2025 earnings call. Our Q3 performance powerfully demonstrates the success of our purposely built marketplace model in this massive and highly fragmented custom manufacturing market. We are proving that a superior experience for both buyers and suppliers, fueled by the power of marketplace dynamics is delivering sustainable growth and value.

Our marketplace structure is a key differentiator, powering our industry-leading growth and significant adoption amongst our customers and suppliers. Our marketplace sits at the intersection of manufacturing, AI and technology, and we are excited about digitizing custom manufacturing as we accelerate platform innovation.

Q3 was a record quarter for Xometry across many fronts, including revenue, gross profit, marketplace gross margin and adjusted EBITDA. Q3 revenue growth accelerated, increasing 28% year-over-year to $181 million. Marketplace growth accelerated, increasing 31% year-over-year, driven by our rapidly expanding networks of buyers and suppliers and deepening enterprise engagement.

We are delivering this level of growth in an ongoing manufacturing contraction, underscoring our significant market share gains. We're off to a strong start in Q4, and we're again raising our full year marketplace growth outlook, which James will discuss later in the call.

Powered by improving AI pricing and selection algorithms, we drove a 210 basis points increase in marketplace gross margin year-over-year in Q3, driving 40% growth in marketplace gross profit, expanding marketplace gross margin underscores the value we're creating with our AI-powered marketplace.

Our efficacy and competitive moat continues to increase as we grow our networks of buyers and suppliers and gain more data to continuously train our algorithms. This has driven significant and steady increases in our marketplace gross margins from the 25% level 4 years ago to 35.7% in Q3 of this year.

Each quarter of growth and improvements in our technology helps to incrementally power the quarters that follow. Our results in Q3 and year-to-date marked strong progress on our mission to become the de facto digital rails in custom manufacturing. Alongside strong financial results, we are making investments that will pay off in years to come as we drive innovation across our global marketplaces and supplier networks.

Our President, Sanjeev Singh Sahni, has accelerated our product development efforts to embed technology and an expanding suite of AI capabilities across the organization. We continue to win, especially with larger customers as we improve price, speed and selection on the marketplace. In early Q4, we launched auto-quote for injection molding services in the United States, following a launch earlier this year in Europe. Xometry's new auto-quoting capability simplifies the injection molding manufacturing process, providing a seamless digital experience to enable customers to move quickly from design to finished part.

The platform enables a spectrum of injection molding options from prototype and low-volume bridge tooling to high-volume multi-cavity production tooling in over 35 different materials, colors and finishes. We advanced our AI-powered design for manufacturing capabilities, expanding our automated extraction engine that interprets technical drawings and CAD files. This enhancement improves the accuracy of our quotes and supplier matching, further reducing friction and improving the buyer experience.

For our customers, we're increasing supply chain resilience and agility by offering access to a diverse expanding global manufacturing network of over 4,500 active suppliers. This allows buyers to instantly diversify their supplier base, reducing dependence on a single source or region and enhancing overall resilience.

In Q3, we continue to expand our global network and our global sourcing efforts and flexible asset-light model are resonating with customers given the rapidly changing global trade environment. We're delivering a scalable enterprise offering through tools like Teamspace and ERP integrations to become more embedded in customer workflows, reducing buyer friction and expanding wallet share in these large accounts.

Our technology initiatives, combined with our enterprise sales efforts are powering our land-and-expand strategy. In Q3, a U.S. aerospace company faced a major production challenge, needing complex tight tolerance components on an aggressive time line with limited supplier options. This company turned to the Xometry marketplace as a trusted partner capable of delivering precision, speed and reliability.

Based on the success of this program, Xometry quickly expanded to other divisions within the company, becoming a preferred manufacturing partner for rapid production. In Europe, a medical device manufacturer partnered with Xometry to accelerate production of precision components for its next-generation surgical systems.

What began with CNC machined and 3D printed parts evolved into multiple high-volume production programs, including injection molded assemblies for other advanced equipment. By leveraging the Xometry marketplace, the customer was able to innovate faster and drive scale in the competitive medical technology market. These are good examples of enterprise customers we believe can generate $10 million plus in annual revenue.

For our suppliers, our marketplace is driving increasing value, enabling them to sell their capacity digitally, unlock access to global demand and increase asset utilization and profitability through our Workcenter platform. In early Q4, we launched the new Workcenter mobile app. The Workcenter platform is Xometry's proprietary all-in-one quote-to-cash solution, enabling its partners to source and consolidate work, manage operations, monitor performance and secure cash flow.

This powerful new tool is designed to help suppliers within the Xometry partner network manage job offers, production workflows and shop performance anytime, anywhere. By providing easier access to the job board and job management, we expect to drive increasing supplier engagement. Additionally, the new app provides for better communication flow to ensure that partners are quickly informed of critical updates and job opportunities.

The app also enables seamless data capture through photos, certifications and status updates to improve accuracy and get information flowing quickly, delivering greater quality, transparency and responsiveness to customers. We expect that the Workcenter app will deepen supplier engagement and enhance our data to further support marketplace gross margin expansion and improve the buyer and supplier experience.

For Thomas, in Q3, we launched our new dynamic ad serving technology and began selling on a new platform for new customers. The new pay-for-performance platform enables advertisers to set budgets, better define their target audience, maximize ad effectiveness and improve ROI tracking. While still early, we are pleased how the platform is functioning, and we're pleased with the initial sales efforts.

We expect the new technology will increase advertising penetration and engagement. In Q4, we will further integrate our new natural language search experience to improve buyer engagement as search results are more relevant. There's much more to come in the following months on the innovation front as we focus on further improving buyer and supplier experience and expanding our platforms.

Our momentum remains strong in Q4. We're raising our 2025 revenue growth outlook given robust demand in our marketplace and the strong execution of our teams. We expect strong secular growth to continue in 2026 and in coming years as we rapidly scale to $1 billion plus.

I will now turn the call over to James for a more detailed review of Q3 and our business outlook.

Thanks, Randy, and good morning, everyone. Q3 was a great quarter for Xometry, delivering accelerating revenue growth, robust expansion in marketplace gross margin and significant adjusted EBITDA leverage as our marketplace responds to customers' needs in real time.

Xometry is becoming their digital rails in this massively fragmented and largely off-line custom manufacturing market. As we scale towards $1 billion of revenue, we expect to deliver improving profitability even as we continue to invest in our growth initiatives.

Q3 revenue increased 28% year-over-year to $181 million, driven by strong marketplace growth. Q3 marketplace revenue was $167 million and supplier services revenue was $14.1 million. Q3 marketplace revenue increased 31% year-over-year, a 500 basis points acceleration from Q2, driven by strong execution, expansion of buyer and supplier networks and growth with larger accounts as we continue to capture significant market share.

Marketplace growth was robust across many verticals, including semiconductors and energy, aerospace and defense and automotive. Q3 active buyers increased 21% year-over-year to 78,282 with a net addition of 3,505 active buyers. Q3 marketplace revenue per active buyer increased 9% year-over-year, primarily due to strong enterprise growth and efficient corporate marketing initiatives in the U.S.

In Q3, the number of accounts with last 12-month spend of at least $50,000 on our platform increased 14% year-over-year to 1,724, an increase of 71 from Q2 of 2025. We view accounts with at least $50,000 spend at the top of the enterprise funnel. We expect to continue to grow this base of accounts over time.

Enterprise investments continue to show returns with strong revenue growth in Q3 for marketplace accounts with last 12-month spend of at least $500,000. Our enterprise strategy focuses on our largest accounts, which we believe each have $10 million plus in potential annual account revenue. Supplier services revenue declined approximately 1% quarter-over-quarter as we have largely stabilized the core advertising business.

We are focused on improving engagement and monetization on the platform, which remains a leader in industrial sourcing, supplier selection and digital marketing solutions. Q3 gross profit was $72 million, an increase of 29% year-over-year with gross margin of 39.9%. Q3 gross margin for Marketplace was 35.7%, an increase of 210 basis points year-over-year.

Q3 gross profit dollars increased a robust 40% year-over-year. We are focused on driving marketplace gross profit dollar growth through the combination of top line growth and gross margin expansion. We continue to adjust our pricing to reflect changing tariffs and our AI cost algorithms update regularly to reflect changes in our supplier network.

Moving on to Q3 operating costs. Q3 total non-GAAP operating expenses increased 17% year-over-year to $66.1 million, well below revenue growth. We are applying strong discipline and rigor to our capital and resource allocation across teams while investing in our growth initiatives. In Q3, sales and marketing decreased 140 basis points year-over-year to 15.9% of revenue. This reflects improving enterprise sales execution and disciplined advertising spend.

Marketplace advertising spend was 5% of marketplace revenue, which was down 130 basis points year-over-year as we balance growth and profitability. In Q3, operations and support decreased 60 basis points year-over-year to 8.2% of revenue. We are focused on driving increasing automation with AI across operations and support. Q3 adjusted EBITDA was $6.1 million compared with a loss of $0.6 million in Q3 2024.

Q3 adjusted EBITDA improved $6.8 million year-over-year, driven by strong growth in revenue, gross profit and operating efficiencies. Year-to-date, we have delivered approximately 21% incremental adjusted EBITDA margin, primarily driven by strong marketplace gross margin expansion.

In Q3, our U.S. segment adjusted EBITDA was $10.3 million or 6.8% adjusted EBITDA margin, a $9 million improvement year-over-year, driven by expanding gross profit and strong operating expense leverage, particularly in sales and marketing. Our International segment adjusted EBITDA loss was $4.2 million in Q3 2025 compared with $2 million in Q3 2024, driven in part by our investments to drive further global scale.

We expect improved International segment operating leverage in Q4. At the end of the third quarter, cash and cash equivalents and marketable securities were $225 million, decreasing approximately $1 million from Q2 2025. Driven by strong operating leverage and focus on working capital efficiency, we generated $5.8 million in operating cash flow in Q3.

We invested $7.4 million in CapEx, primarily software related, reflecting our technology investments in the platform and accelerating product rollouts shared earlier by Randy. We are focused on improving working capital efficiency and cash flow conversion given our asset-light model and limited capital spending.

We expect CapEx to be approximately $8 million to $9 million in Q4 2025. Q3 demonstrates the ability of our AI-powered marketplace to deliver strong revenue and gross profit growth and operating leverage as we remain disciplined in our execution. As we scale towards $1 billion of revenue, we expect approximately 20% plus incremental adjusted EBITDA leverage on an annual basis.

Given our large market opportunity and low penetration rates, we will continue to balance investing in the future with driving operating leverage.

Now moving on to guidance. For the fourth quarter, we expect revenue in the range of $182 million to $184 million or 23% to 24% growth year-over-year. We expect Q4 marketplace growth to be approximately 25% to 27% year-over-year. As Randy mentioned, trends remain strong in Q4 even as we are mindful of the uncertain macro environment.

We expect Q4 supplier services revenue to decrease approximately 4% year-over-year as we work through the transition of the recently launched Thomas Ad serving platform. In Q4, we expect adjusted EBITDA of $6 million to $7 million compared to $1 million in Q4 2024. In Q4, we expect stock-based compensation expenses, including related payroll taxes, to be approximately $11 million or approximately 6% of revenue.

For the full year 2025, we are raising our marketplace growth outlook from our previous guidance of at least 23% to 24% to 27% to 28% growth. We continue to expect the supplier services to be down approximately 5% year-over-year. This results in our revenue outlook for the full year rising to $676 million to $678 million.

For the full year 2025, we are raising our adjusted EBITDA guidance to $16 million to $17 million. As we look ahead, we believe that our growth initiatives can continue to drive at least 20% total revenue growth in 2026, given the large fragmented market opportunity, our initiatives to expand wallet share with strategic accounts and further international expansion, while we remain mindful of the macro environment.

I want to close by thanking our dedicated Xometry team members around the world. Their commitment to our buyers and suppliers is instrumental to our continued growth and core to our mission of making the world's manufacturing capacity accessible to all.

With that, operator, can you please open up the call for questions?

[Operator Instructions] Our first question comes from the line of Andrew Boone of Citizens.

You guys just talked about the 20% growth for 2026. Can you help us by unpacking that a little bit? Can you talk about kind of the assumptions that are underlying that, whether there are any macro assumptions that are embedded within kind of the 20% growth overall or whether that's really idiosyncratic drivers that can power growth next year kind of regardless of the situation?

Andrew, it's James. Thanks for the question. We're really obviously very happy with the performance that we're seeing this year, Marketplace growth of 31% in the third quarter. That's really being driven by the growth initiatives that we've been very consistently driving across enterprise, across scaling our network of buyers and suppliers and improving the technology of the platform as well.

So we're seeing it broad-based at the moment across multiple processes across our broad diversity of categories. So as we're working on our plans for 2026, we wanted to give some view as to -- of our confidence in the consistency of that growth at a 20% plus level. We'll clearly come back with the Q4 earnings with more details on guidance for 2026. So we just wanted to give you a bit of a framework of how to think about that for next year.

Yes. And Andrew, it's Shawn. And if you just think about the underpinnings of your model heading into 2026, we continue to drive strong active buyer growth, and you see strong revenue per buyer growth, too. So those are some of the underpinnings of the model driving the 20% plus into '26.

Yes. And I think also just to jump in, it's Randy. We are always mindful of the macro. So we didn't assume any improvement in that next year. This is really about Xometry continuing to gain market share and control our own faith. And that's what's driving our assumptions here.

And then the Workcenter mobile app feels like a large unlock as you guys simplify kind of the process for kind of your stakeholders that are clearly the underneath driver of operations to drive the platform. Can you just double-click in terms of what the unlock is in terms of creating that mobile experience and how people are using it and helping to unlock kind of more demand across the platform?

This is Sanjeev Sahni. Let me start by talking about our AI efforts. As you know, we've been an AI-native company from the beginning. AI has been part of our DNA, whether it's data science, machine learning or deep learning models, we've always had those as core to our way of working and scaling the customer and partner experience.

We launched the Workcenter mobile app in the U.S. for our large and expanding partner base truly to drive that customer and supplier experience because we really believe as partners adopt a more friendly way of giving us data about their orders, sharing updates on quality control, sharing updates on dispatch, sharing updates on which job they like, which job they don't. We get deeper into engagement with them and are able to help them manage their business, help them manage time lines and quality for our customers.

This is just the beginning of a series of AI-enabled tools that we continue to launch and scale. As you know, our focus has been on deploying that towards pricing, speed and selection as a core theme on where our efforts go. And so this cycle, this was our effort in driving speed and continuing to scale that with our partners.

Our next question comes from the line of Brian Drab of William Blair.

First, I was wondering if you could just talk a little bit more about some of the changes that you're making within the team, some of the additions, Sanjeev, I know you've talked a lot about adding talent and technical capabilities. Can you talk about the importance of that and how that's going to help you get to this $1 billion revenue level and beyond?

Thank you for the question. Again, I think we are seeing very strong success in attracting top talents from some of the best tech companies in the world. As part of our efforts, we want to make sure that we continue to deliver on the strong pipeline of tech outcomes for our customers and partners, like Randy already mentioned, this cycle, we launched auto-quoting for injection, molding, offering that we think will significantly expand our marketplace menu.

Injection molding, as you know, is a very, very large category. And this is one where we've launched auto-quoting by building on our experience in the offline where we've now got a set of buyers, suppliers, we've got models that have been refined and now driving technology behind those models helps us bring it to the customer in an online platform, which they can easily adopt and help us drive significantly higher market share.

But again, going back to what I was saying before, our AI efforts are truly around price selection speed. So if you think about price, we've been continuing to test behavior-based models. We've been trying to test various sortations on our site, which you can see when it comes to selection, I just mentioned injection molding and then speed, the Workcenter and mobile app.

So across areas, including Thomasnet, where we've launched dynamic ad serving technology, this is becoming a truly product-led, product-driven organization with our CTO, Vaidy and his team now in their 6 months in the organization.

Okay. And then can I ask a much more near-term question. And looking at the guidance and the step function increase that you have from second quarter to third quarter, so you're up almost $20 million in revenue from second quarter to third quarter and then modeling just a couple of million increase sequentially into the fourth quarter.

How are you thinking about that guidance? And what have you -- have you seen anything in the first 5 weeks of the quarter? Is there anything beyond kind of typical holiday seasonality that you're thinking about?

Yes. Thanks, Brian. So again, I think, as you know, really great performance in Q3 here on -- even despite an uneven manufacturing environment, Xometry is executing really well. Across enterprise, we're seeing a lot of strength, broad-based across the accounts.

We're seeing, we believe, strong wallet share gains, revenue per buyer being up 9%. We've seen strong growth across processes from CNC to sheet to additive. I think as we look into the guide, as usual, we take into account those trends we're seeing in the business, which we're very pleased about as well as the risks given the uncertain manufacturing environment.

And so with overall marketplace revenue growth over the year now at 27% to 28% plus on the basis of that strong active buyer growth as well, really pleased with what we're seeing. And just as I said, that all builds into the guidance that we give.

Yes. And Brian, it's Randy. Just add a couple of things. We were very clear, both in my remarks and James' remarks, Q4 is off to a strong start. So as we talked about when we entered Q3, we had momentum there.

We are seeing continued momentum here in Q4. And we -- that's -- I think our strongest guide this year in terms of year-over-year growth is the guide that we're giving for this fourth quarter. So we just continue to be mindful of the macro, but we have a lot of momentum.

Our next question comes from the line of Matt Swanson of RBC Capital Markets.

This is Simran on for Matt Swanson. Congrats on a great quarter. To start, could you just double-click on the trends that you've been seeing in enterprise and Teamspace and how we should think about that opportunity continuing to grow throughout 2026?

Yes. Just to reiterate, enterprise are customers that we think have had more than $500,000 of spend, and that number grew rapidly last year in terms of their year-over-year in 2020. That number grew -- the revenue generated by them grew rapidly. So there's a couple of things. And in this quarter, you're also seeing our revenue per buyers increased 9% year-over-year.

And in part, that is as our enterprise customers are leaning more and more in. There's a couple of technology things that are making that happen. First, widespread adoption of Teamspace by those enterprise customers, and we continue to enhance Teamspace, and that's giving us more traction. Our punchouts, so our integration with our enterprise customers' ERP systems that's also accelerating.

So accelerating adoption of Teamspace, of our ERP punchouts. And then our enterprise sales motion, we've been talking about that. We've been investing in our enterprise sales team. So when you bring that all in, that's resulting in greater traction with those enterprise customers, which is in part reflected by that 9% growth in buyer spend quarter-over-quarter -- year-over-year, sorry, year-over-year.

I would just add, I think we're really -- Xometry is purpose-built for sort of the industry trends that we're seeing now, the move towards supply chain resiliency, importance of getting agility and speed to market and really being able to access technology and supply chain.

And I think that, that's what the team has built for many years and is behind our initiatives. And again, it's consistent in terms of how we'll be growing ahead into 2026.

That makes sense. That's really helpful. And then with the new product launches in the EU, can you just remind us how you're thinking about international expansion and those investments heading into next year?

This is James. I mean I'll kick off. I think international, we're very pleased with the performance that we've had there over the years, continuing to see that grow and scale. In the quarter, we're up 23% year-over-year. And we really think there's a lot of opportunity here given the large and highly fragmented markets that there are, not just in the U.S. but in Europe and in Asia.

We had the recent launch of Teamspace that's been going well. We've also been expanding that marketplace more materials, more processes, more quoting possibilities. We're very pleased to see the injection molding order quoting coming to the U.S. after we were able to first launch that in Europe.

So this combination of the market opportunity, again, with the Xometry solution and product road map gives us a lot of confidence and able to continue to see that grow. And as we said before, we believe that could be 30% to 40% of Xometry over time.

Yes. And just to remind everybody, in 2020, our international revenue was approximately $1 million. We've grown that now to $120 million run rate. So just going back to what James said, we expect that to be eventually 30% to 40% of our marketplace revenue and all the trends are moving nicely in that direction.

Our next comes from the line of Greg Palm of Craig-Hallum.

Just thinking back to Q2 and obviously, more so this quarter, but we're not really used to this sort of level of upside on the revenue line. So I'm just curious, like has your visibility changed at all? I'm just kind of curious, as you think back to when you provided guidance last quarter, what changed where you were basically able to outperform by this magnitude?

We continue to see our customers leaning in more and more and adoption of technology tools that we've been investing now for a while, whether it's Teamspace, whether it's Workcenter, it's the punchout integrations, those adoptions are accelerating. And here's the great news, Greg. As we think about the fourth quarter next year, the injection molding and supporting launched this quarter, just launched.

The mobile app for Workcenter is recent. So -- and we've got a product road map chockful of releases that are going to be coming not only in Q4, but also throughout 2026. So I think you'll have seen us continue to gain momentum. And a lot of that is, as we talked about, the investments we've made in AI and technology and that product adoption from our customers is accelerating.

Okay. Awesome. And then just as it relates to Q4, I think it implies an incremental margin for the full year around 20%, which I think is a little bit below what you provided last quarter. Is this just sort of maybe a more near-term expansion in some of these investments that you've alluded to?

I mean, any reason why we wouldn't see incrementals sort of climbing back in the 20s and early '26? Or how are you sort of thinking about that cadence of incremental margins as we progress into next year?

Yes. Thanks, Greg. As we said, we're always about balancing the growth and the profitability. I think when we think about the opportunity ahead for Xometry, it's such a large market that we need to make the right choices to invest in product technology to be able to scale the business.

But we also recognize the importance of delivering profitability and improvement on that along the way. And that's why overall, we've given this framework of 20% at least incremental margins to the bottom line. In the last couple of years, you've seen us do that.

Year-to-date, we're at 21%. I think you're right, if you put in our guide, then we'd be around 20% for the full year. That is an increase in adjusted EBITDA dollars that we're delivering over what we had in the last update.

So we're really pleased with that progression. And I think that that's what we're doing. We're going to continue to balance growth and profitability so that we can grow into this huge opportunity ahead of us.

And here's the great news, Greg, as revenue is accelerating and we've gotten more growth than we've expected, that gives us some optionality to make some investments.

We're obviously, as James said, very focused on profitability as well, but greater growth gives us some options, and we're going to make sure we're taking advantage of that and being smart on both sides of it.

Our next question comes from the line of Ron Josey of Citi.

This is Robert on for Ron. Great to see the active buyers growth up 21% in the quarter. Question is, I guess, how much of this was driven by international expansion given all the improvements that you made with new materials and faster lead times versus an expansion within existing client base?

Robert, this is James. So really pleased with the active buyer growth. I think, in particular, what we're seeing is with a lot of the initiatives that we've been driving both with product and with our marketing teams over the last year, we continue to see success in attracting new buyers to the platform.

I think U.S. enterprise actually has been very strong for us. You've seen that in -- we've called that out in terms of driving the revenue, but it's also been on the active buyer side. And the proposition that we have, again, with these macro trends going on and looking for supply chain resiliency and agility, Xometry is purpose-built for this.

And I think we've been improving our messaging and improving the way that we've been deploying our marketing. So you've actually seen advertising only up modestly year-over-year, and yet we've been continuing to grow our revenue and our active buyers robustly. So it's been strong in U.S. enterprise, but we have a global opportunity as well.

Yes. And just to double-click on what James said, it's Randy. It's really broad-based. So it's our existing accounts, those enterprise customers that are leaning in more and activating more, but it's also attracting new buyers, both here domestically and abroad.

And then on marketplace gross margins, they reached a record this quarter, and they're at 35.7%. And this is the second quarter that they're now well within your long-term target range. So should we consider this as the new sustainable baseline for the marketplace going forward, just given benefits from AI, et cetera?

Yes. I mean I think that what you're seeing is the result, as you said, of the overall continued improvements in our AI price prediction accuracy, the machine learning, the opportunity we have as we scale, we have more data, we have more suppliers, we have more sourcing.

I continue to expect gross margin to be up year-over-year in Q4. We are in that range, 35% to 40%. And so it will always be linear every quarter up and to the right. But I think that we feel that the combination of improving our AI of more data and our sourcing keeps us in that 35% to 40% range.

Yes. I think we're pretty excited that this quarter, not only do we have accelerated marketplace growth, but we actually grew our gross profit dollars in marketplace even faster. So that's a signal that our customers are valuing and our suppliers value the service that we're bringing to them.

Okay. On that note, I think we're going to get going with our next fireside chat. It's my pleasure to welcome the team from Xometry to be part of the conference this year. They've actually been part of this conference every year over the last couple of years. So that's been a great consistency, and we always appreciate it when they come. Randy Altschuler, CEO; James Miln, CFO; also Shawn Milne from the IR team are here as well. Guys, thanks for coming to the conference.

Thanks so much for having us here.

Okay. So I think I always do like to level set a little bit and give you the opportunity. The company has done so many interesting innovative things over the last couple of years. Talk a little bit about the journey the company has been on and sort of reflect back a little bit before we have a lot of questions and a lot of conversations about where we're going over the next couple of years.

Yes. Look, I mean, just first to level set, 2025 has been a strong year for Xometry, where we're seeing accelerated growth and I think that's for a number of reasons. First, we're continuing to penetrate even deeper within our enterprise customers. So when we started Xometry, I'm the co-founder of the business back in 2013. As we're getting awareness now, we obviously started with smaller companies. But as time has developed, we're getting deeper, deeply -- more and more deep embedded with larger customers, these enterprise customers. And that journey has continued. And as we built technology tools to enable us to embed in those customers, plus we've developed a sales team that has expertise in going to market with enterprise customers, those have grown and grown and are fueling our growth, and we expect that trend to continue.

We're also seeing a lot more output from our software development and developing our platform, our user experience, the marketplace, the number of things that we can instantly quote for a customer. So our selection, the different options that we're -- fulfillment options that we're offering, sourcing across the United States, across the world, giving customers that flexibility. So particularly as there's been more and more over the recent years, more and more focus on supply chain resilience, multisourcing, concerns about macro issues, Xometry's marketplace is gaining more and more traction because we provide that to people digitally.

And then also the trend towards digitization. You're seeing more and more -- you've seen that in other industries, but over the last few years and since we started Xometry, that trend has been coming more and more to manufacturing. So again, it's been in so many other industries, but manufacturing largely remains offline. So now that's increasingly -- and AI is just accelerating that push. So for us, AI is valuable in many places, and we use it. We'll talk later about all the different ways that we use AI on our platform, but just the trend towards AI is good for us for both our buyers and our suppliers in manufacturing.

Understood. You recently welcomed a number of new executives into the company. I've also gotten questions from investors that have seen some of those announcements and track such things on LinkedIn. Talk a little bit about who you brought into the organization, why they were the right people and how those individuals align with where you want to go from a priority and a growth standpoint.

Yes. So look, we started the company, me and Lauren Zuriff from zero. So this is a true start-up. And we had a wonderful team of folks that help us get to that $0 to $500 million of revenue. But now as we're accelerating beyond that, we're going to get to that $1 billion mark and beyond, it was a good idea now to bring in a different team that was used to larger marketplaces and had scaled way beyond where we are today because those are the folks that want with next to me to help us inform both our product road map, our sales road map and how we're going to execute.

So we made a lot of changes from our CFO, James Miln, who joined us at the beginning of last year. We brought in a new President from Wayfair, Sanjeev Singh Sahni. We brought in a new CTO, Vaidy; a new CMO, Stephany. So brought in folks. And what do they have all in common? They're from larger companies, ones that have multibillion dollars worth of revenue, companies that have successfully scaled also in relatively short periods of time and companies that have product-led growth. So have sales teams and sales teams are critical, obviously critical, but have product-led growth and that the marketing is layered into helping that journey happen.

So we're very excited about how many people use Xometry today, but there are potentially millions of buyers out there who are buying manufacturing we want our numbers to include those. And this is the right team to help make that happen.

Great. Super interesting. Okay. Let's come back to the marketplace. Continue to put up good strong growth. You had a very good most recent quarter. Talk about the key levers that are driving the momentum around the marketplace and how to think about both sides of the marketplace between buyers and sellers and what some of the building blocks of that momentum are?

I mean, first and foremost, it's our technology that's helped us accelerate growth this year. And when we talked -- when we gave our Q2 numbers, we talked about how Q3 started strong as well. So as we're delivering that product road map, we're getting rewarded for that by our buyers, our customers. And that means, as I mentioned before, it means instantly quoting more things. So at the -- in an instant, I can buy something with more and more complexity. It's talking about offering many different options for customers when they think about sourcing. Again, a lot of trends around, hey, I source internationally, maybe I want to look domestically or I want to source in multiple locations. Can I do that from my computer? Can I do that from my phone? Yes, you can do that with the Xometry marketplace.

So as we're delivering that, then you're getting more and more. Our -- we're embedding more and more within our enterprise customers. So when you think about our -- we talked about that last year, we had over 100 accounts or companies that spent more than $500,000 with us on an LTM basis, and those customers grew 40% last year. Why are they growing 40%? And these are some of the largest companies in the world because they see the value of managing their supply chain, which is vast, with the Xometry marketplace, we're giving them tools to make that easier.

So we're embedding in their procurement software, whether it's Ariba or Coupa, et cetera. So they don't even have to come to the Xometry site to order. Those just reducing friction, making it easier where we have add-ins or plug-ins to their CAD software. So if you're an engineer at one of these large corporations, you can use Xometry's functionality right within the CAD software. So those sorts of deployment of technology are just making it easier for these large enterprise customers to default to using Xometry.

And then finally, our enterprise sales team. We brought in last year, Subir Dutt, who had come from Google and has vast experience on the enterprise side. And so we've been investing in our enterprise sales team. You marry that enterprise sales team with our enterprise technology tools, the overall improvement of our marketplace that's helped us do really well.

Okay. I do want to maybe just follow up quickly on the enterprise and think about one other element. When you think out over the multiple period of time, what are the key unlocks to scale enterprise into a percentage of the mix? Because I think you've talked about this on prior earnings calls, right? It's one thing to be one-off buyers, one-off sellers on each side of the marketplace, building scaled repeat almost always-on business, I think, has been a theme you've talked about. Just talk a little bit about what that might look like from a mix perspective.

Yes. So Xometry started as being a very transactional business for our customers, one-offs looking for us finance on a one-off basis. And the user experience was very one-off. And now over time, we've been doing things that, first of all, enable groups of customers who are working together on entire -- either entire product or an assembly to be able to interact with Xometry. So we launched something called Teamspace a couple of years ago, and that's gained, I think we were past 8,500 teams today. So that enables groups of engineers, groups of procurement people within companies to work with us. And it also enables them to invite other people within the company to join that team.

So it's a great way organically, like when Slack came out and everybody was inviting each other to join Slack, it's the same thing with Teamspace. So that's one thing that's enabled us to get that traction from the enterprise buyers. I talked about those integrations, those punchouts with their ERP systems and the integrations with the CAD files. And then also just the kinds of things people are buying from us. So we've moved from one-off to, hey, I've got a supply chain here. There are certain categories of things that I'm purchasing on a recurring basis. It could be large multiyear contracts. It could also be just an entire category of thing, end-use parts that are critical for the functionality for the success of my own business. I'm going to use the Xometry marketplace to buy those. I'm going to take part of my supply chain and stick it into the Xometry marketplace. That's gaining traction, and that's enabling us to not only grow revenue, but also just become more profitable. You've seen our gross margins spike up nicely. It's just making it easier and easier for our customers to buy and for us to execute.

Okay. And if I can just add in that, like to Randy's point before, so 100 customers over $500,000 spend last year, growing at 40%. We had some case studies that we talked about and show in our investor deck where we have companies in the high single millions of dollars. And we believe that with what Randy outlined and the combination of sales and technology, we can get to $10 million plus in those accounts over time. So I think that there's a really exciting opportunity as we deliver ourselves as a solution beyond just the transaction, but the solution that Xometry provides for this wide range of needs that there are for custom parts.

Okay. I wanted to turn to international. I know you mentioned gross margin there. I do want to come back to that. But before we get there, maybe talk a little bit about international. You've laid out some longer-term targets about where international can get to as a percentage of the mix. You've shown good international results more recently. Talk a little bit about the journey you're on with international and what some of the building blocks you need to put in place to achieve some of those long-term targets on a mix standpoint.

Yes. Just to level set, we started international about 2020, where we had roughly $2 million of revenue. Right now, we're at $100 million plus run rate. So it's grown very nicely over the last few years. And last quarter, we grew, I think, 31% international. And here's what's exciting. So as we -- and we started in Europe, so started in the EU, and we're in the U.K. now, and we're in most countries within the EU. And what's been exciting is the value proposition, our business model that we have in the United States has resonated just as much as in Europe as it does in the U.S. In fact, I think we scaled to over $100 million in revenue internationally faster than we did here in the United States.

So -- and the good thing is also we're able to take our tech stack, and this is what's wonderful about being a technology company. And you'll be able to take that tech stack and you're able to lift that and put that into new geographies. Now you localize it for language and you're going to localize it for particular maybe procurement or payment options that might be specific for a country. And there may be certain materials or other things that are -- but in general, we're able to scale our technology and bring it into these different geographies. And then we expanded a couple of years ago into Asia Pac. We've got our Chinese marketplace. And again, we're localizing it. We've got a WeChat app. You don't have that equivalent in the United States and a lot more usage on mobile than you're going to see in Asia than you might see in other countries. So we eventually expect international to be up to 30% to 40%, right, of our marketplace revenue. And today, I think last quarter, it was in the mid- to high teens.

Yes, it was 18% last quarter. And then just we're in 18 languages, multiple currencies. So the extensibility, as Randy says, of the platform and the validity of the business model being able to apply globally is exciting.

And what's exciting to just add to that is our big customers, most of them are multinational, right? So the ability to offer this solution, and this enables us also to be a bigger part of their overall strategy. If you're in multiple locations, you're in multiple countries, larger companies, in particular, want what's easier. They want great value. They want great delivery. They want reliability. Those things are crucial, but they also want what's easier. If we're that one platform that can help them in many different regions, that's very exciting for them.

I just want to pick up on one point you made there towards the end. When you try to apply your business model to some of these international markets, are there any differences you call out with respect to either unit economics or payback periods or things you think investors should keep in mind in terms of scaling the business, but then also tying it back to the contribution from a profitability standpoint.

Yes. And we have some segment breakout in our financials. And you'll see there in the last quarter, making really -- as we scale the U.S., we're at 5% adjusted EBITDA margin, and we're in investment mode still internationally. But when we look at those unit economics, we're seeing a very similar sort of gross margin profile. In fact, international today is a little higher. And we feel that we're probably ahead of where we were in terms of U.S. in terms of like the revenue pace and the profitability that we're showing. So yes, we think it's very -- we're going to be able to repeat what we've been seeing in the U.S. as we scale further internationally.

Got it. So understood on international. Bringing it back more to the near term, you did outperform on marketplace gross margins this quarter. Talk a little bit about what is embedded in your framework for the business either in the second half of this year or even going out to 2026 in terms of how marketplace gross margins might evolve.

So AI really powers the marketplace and the marketplace gross margin. We hit an all-time high in Q2, 35.4%. That's within the long-term range that we've set of 35% to 40%. And so what's the AI doing? It really is driving our price prediction accuracy and the machine learning with more data and expanding our supplier network helps us match the optimal supplier. And so our system then, as we get all the orders in, we're balancing buyer and supplier pricing and conversion rates over time. So it's not always going to be linear, like every quarter is not always up and to the right. In fact, we made some deliberate investments in the first quarter of this year that helped accelerate the pace of our learning and liquidity in the marketplace.

I think positioned us well for Q2 and well for being able to satisfy global needs and requirements across different geographies. So I think we expect it to continue to improve year-over-year here for '25 and continue to just march within that 35% to 40% long-term range.

Okay. Understood.

Eric, I just want to go back to something when we talk about international. And I think it's important, particularly folks somewhat newer to our story, this Xometry is -- the marketplace is not a unique thing for like it doesn't just resonate in the United States. This is not just a U.S. story. When you think about custom manufacturing, which is a giant market, you have millions of buyers. You have here in the U.S., I think, estimated like 500,000 small manufacturers with an average of less than 20 employees. That is a very similar dynamic you have in most countries around the world. So the idea of creating a digital AI-powered marketplace to connect those buyers and suppliers resonates everywhere because everybody has the same problem. It's off-line. It's -- the pricing is opaque and it's inefficient.

It doesn't matter which country you're in, your ability to speed that up, your ability to create transparency, your ability to have a better outcome, that resonates everywhere. And that's what -- one of the many things I think is so powerful about what we're doing. It is truly a -- it resonates globally.

Okay. No, good clarifying point there. I do want to pivot to supplier services. Maybe just to set the stage, I'll probably have a few follow-ups, but how are you framing the go-forward strategy for the core supplier services portfolio, including Thomasnet?

Yes. So core to our supplier services is advertising. So Thomasnet is sort of the leading search place for folks who are looking to buy industrial goods. So we've got almost 500,000 listed suppliers in Thomasnet, very specific, and it's a company that has a storied history of over 100 years. So if you're looking -- and very broad, much broader than where Xometry is, but soundly in that industrial category. What we've been focusing on is advancing the technology on Thomasnet for both the searcher and for the advertiser. So we talked about last quarter, we've been doing some work on the search end side of things. This quarter, we're beginning to release new things on the advertising side, a new ad server.

And this is going to enable us to increase the penetration we have with our -- with advertisers. So we have, as I mentioned before, over 500,000 or roughly 500,000 listed suppliers. Today, only about 1% of them, circa 5,000 or less than 5,000 of them are actually buying advertising from us. By updating the advertising technology, the ad server, we're going to be able to sell more inventory, more of our ad inventory and make it easier for our advertisers to buy it and to get more value for their money. And then likewise, as we've been improving the search and there's obviously lots of advances in search that are going on. And we're bringing that more modern search technology to Thomas, we're delighting more of the folks who are coming and visiting the demand side. So as we're doing both things, we're optimistic that, that will have benefits and bring Thomas back to growth.

Maybe I'll ask 2 that are sort of double clicks on that. But when you think about the friction holding back advertisers today, what do you see as the friction you're solving for that would create the unlock on the advertiser demand side?

So the advertiser loves Thomas in the sense that it's got this very strong brand. They know that the searches are coming are good searchers, like there's a good -- they can get a good ROI there. but the technology was outdated. And so they're used to Google AdWords and they're spending money in other platforms that just make it a lot easier for them to deploy their dollars and easier for them to pay for performance. I mean, ultimately, that's what people want to do. They pay for performance. So it's important for us to update our technology to give them that option.

Self-service, Thomas was very historically very dependent on a sales team. Obviously, sales team remains important. But how do I just get it done myself? How do I unlock these things myself? So those are the improvements we're making. We're using proven technology to do that. And as I said, those are beginning to be released now. So that will be very helpful just to make it easier for advertisers to engage and get value for their money.

Just to put a finer point on it, when you think about investing in this transition for Thomas, any elements you can help us with in terms of the duration of the investments that need to be made relative to the yield or the output on those investments over the next couple of years?

So yes, I mean, we're doing that within our P&L right now. So within the guidance that we gave. So you can see that we're finding opportunities to find saving in Thomas that we have done over the last couple of years that helps us sort of reinvest those dollars in this opportunity. We'll update you as we go into the new year when we probably get into the heart of the transition. But overall, I think as Randy was saying, what this is really doing, we've got about 80,000 different categories on Thomasnet. And the way -- with legacy technology and more driven manually, that limited how many of those categories in effect, we were selling. And with technology, we can just open that up.

And that spend the investment, it's already been in our numbers. We've been doing this since last year. So it's no big giant number coming up something like that. We've been spending steadily, investing in the business the same way we've been investing in international and some of our other technology initiatives. We're obviously getting more and more profitable to our bottom line, but we're also alongside of that, investing in different exciting options and growing Thomas is one of those. It's almost an 88% or 89% gross margin business. So those investments, we think that we've been, again, doing since last year, we think are very worthwhile.

Okay. And just to put the last point on this before we pivot, play out to the end state, how do we think about the flywheel effect of what can be scaled and deployed at Thomas feeding back to the marketplace years down the road? How do you conceptualize what this looks like in its end state?

Yes. So Thomas has over 1 million registered users, as I mentioned before, been around a long time. There's high awareness in that industrial market of it. Xometry is a younger company with a lot less active buyers today. So the ability to convert some of those Thomas users to be Xometry buyers is very attractive. And as we just make it more -- as we improve the Thomas experience, that will have a knock-on impact of people being able to use the broader Xometry ecosystem. Likewise, as we expand the categories of things that we can instantly quote as we expand the selection on xometry.com, the Thomas suppliers are great providers of those services. So we're a 2-sided marketplace.

We need -- people actually make this stuff. Thomas has got that, and they've got all these other categories already filled out with some wonderful manufacturers. So there's a great synergy there for as well. And then ultimately, when you think about our buyer, we want them to have one shopping cart, whether they buy from Xometry or they want to buy from somebody from directly on Thomas. When you think about marketplaces like Amazon, from Amazon or fulfilled from one of their providers. But it's one shopping cart, one experience, make it really easy, the trust, reliability, those things that you -- that customers want to have, we want to have that one experience for them, be that one-stop shop for them.

Understood. I'll joke that because it's a technology conference, I have to ask about AI. I think I'm contractually obligated to do that. You guys were talking about AI before a lot of other people were talking about AI. You should get a nod in that direction from me because I've known you a long time. Talk a little bit about how AI is at the center of what you do and how AI is sort of a component of a lot of what you're building from a strategic priority standpoint when you think out over the next couple of years.

Yes. So the very heart of one of the key things we do at Xometry is we provide liquidity for buyers and suppliers. We create the price. Now that may seem like a trivial thing because in traditional e-commerce, you're buying things. Of course, there's a price. But in this case, there are no SKUs. It's custom manufacturing. So the customer is asking for something that may have never been produced before. And historically, to get that price has taken days, weeks and it's been very difficult. We use AI, and we've done that from -- as we started the company to actually create that instant price. We also then use the AI to optimize the match between the buyer of the manufacturer and the supplier of the manufacturing.

And then finally, we're using that AI also to give a price for the supplier as well. So we're giving both the buyer and the supplier prices, and we're optimizing that match. And the cool thing is because we're using AI, which learns from data, as we've been getting more and more data, we've been getting smarter and smarter. And that's -- you can see that in our bottom line as our gross margins have been improving over time. But you're also seeing that as -- again, this year as growth has accelerated, you're seeing that we're getting better and better with our pricing, and we're satisfying more of our buyers and our suppliers with that. So that's been the foundation of Xometry. The great news now is we're investing in AI across many parts of our ecosystem.

So we talked about taking important information from drawings that our customers have and extracting those automatically and using that information. And so I mentioned our new President, Sanjeev Singh Sahni and Vaidy, our new CTO. They are very focused on embedding AI and creating benefit for it, both for our customers and suppliers, but also for our own internal operations across our entire ecosystem. So there isn't one group at Xometry right now that's working on embedding AI. It's literally every department within Xometry.

Maybe a follow-up there because this has been a recurring theme of the conference, just elements of deploying AI internally. Like what is your working framework that you provide investors on how AI might either allow you to expand margins and/or fuel further or accelerated growth investments and hold margins as you think out over the next couple of years. Anything there you've got from a framework standpoint?

I mean I'll give -- I think just building on what Randy was saying, I think at the core, it's a core driver of the gross margin. And so that in terms of being smarter about matching the buyer to the supplier and then helping us optimize that, which comes through the gross profit dollars that then we can choose to then be smarter about the pricing, both to the buyer and the supplier and optimize that. And then I think we are very focused, as Randy was saying, on how it can help us on the productivity side across all of our organizations. I think across product and technology, across customer service and even into our G&A functions. And so I think as we look at our incremental -- hitting our incremental margins of 20% incremental EBITDA, that we're excited about what that can allow us to redeploy into investments in the business.

Okay. Understood. Maybe just sticking with you, James, before I bring it home with Randy. Talk a little bit -- we talked about margins. We talked a lot about some of the investments you're making. Talk a little bit about the capital allocation framework that the company operates under, just so you can level set with the investors here.

Yes. Thanks, Eric. So we've been a very exciting time for Xometry as we continue to see great growth. In fact, as Randy said, accelerated growth this year and solidify our profitability. So adjusted EBITDA, we turned profitable when we hit $600 million at the end of last year run rate. We've continued to deliver on that path this year. And what we said is as we scale to $1 billion, we would expect incremental adjusted EBITDA margins of 20%. So I think as we put that through, that means we're closer here to then cash flow positive.

And that puts us in a very strong position as we're seeing robust growth and also improving profitability and cash flow. In fact, we were able to have a very successful refinancing of our convertible debt a few months ago, and that's extended the maturity of most of that debt out to 2030. So that was about liability management in terms of there are a lot of risks in the macro and a lot of variability out there. And we want to be making sure that we are well -- a strong balance sheet as we execute on the organic opportunities that are ahead of us.

I think as we move forward, then part of our strategy will also be as we crystallize what the team can deliver, how can we supplement that maybe with some tuck-in M&A, which with a strong balance sheet of over $200 million in cash today, we're in a good position should we have something to execute on. So I think that, that's how we think about it is we're really focused on scaling to a $1 billion and really to multiple billions after that and generating our own free cash flow.

Great. Okay. Randy, we talked a lot about proof points you've gotten from where the company has been over the last couple of years and some of your key initiatives going forward. Bring it all together, when you think about what you're trying to build for the long term, what would you frame as your 2 or 3 biggest strategic priorities? And how do they come back to things that we can monitor from the outside in that you're sort of going to build, deploy and scale when you think about where you want to take the company?

Look, as I mentioned before, this is a huge space. The total addressable market is gigantic. And every day, we're building that competitive moat with the data that we're gathering, with the networks of buyers and suppliers, with the technology that we're embedding in our customers. Our vision is that in this huge space, if you're a buyer and you want to buy custom manufacturing, your default is to come Xometry because that -- we have the widest selection, we have the most reliable delivery. We have leading prices and lead times, the options, and it's just the simplest way to buy and the most reliable way to buy. And that large companies, in particular, are taking entire portions of their supply chain and utilizing the Xometry marketplace for fulfillment for them.

On the flip side for suppliers that we are the go-to place. Of course, I'm working with the Xometry ecosystem. I'm buying advertising on Thomas. I'm a partner on xometry.com. By the way, I'm sometimes using Xometry for my own orders. It's kind of expanding what I can. And we're -- and with the software, we have something called Teamspace. I mean, at Work Center, we give away free software for our suppliers to operate their businesses. I think about like a Shopify or things like that or what Toast does for restaurants, we give that, that they're using that software to run their entire business, not just the business that they generate from Xometry, but their whole business. And we're giving them really good free software to do that. And so we're -- in some sense, their operating system to grow their business because these businesses want to manufacture. They don't -- if we can get rid of all the noise in the same way, the customer doesn't want friction and noise and they want ease of use.

Our suppliers are manufacturers, they want to make stuff. They want to fulfill orders. The easier we can make it for them, the more that they can grow, the more profitable they can be. And that's at the heart of these small and medium-sized businesses. Their P&L and their business P&L are almost one. And so they want to grow, but they also want to be profitable. We can help make that happen. And as time goes on, I want to make that easier and easier for them.

Okay. Well, we covered a lot of ground. I want to thank both of you guys for being part of the conference again this year. Please join me in thanking Xometry.

Thank you, Eric.