Kornit Digital (KRNT) Q1 2025: Recurring Revenue Surges to 80% as Apollo and AIC Drive Apparel Supply Chain Shift

May 14, 2025 | By EarningsIQ Research

Kornit Digital’s Q1 2025 results reveal a business in the midst of a supply chain revolution, with recurring revenue now exceeding 80% of total sales and the Apollo system unlocking mass production for digital print. While macro headwinds delayed some system placements, Kornit’s technology and business model are positioned at the intersection of regulatory disruption and industry transformation, setting the stage for accelerated growth in the second half of the year.

Summary

• Recurring Revenue Model Accelerates: Over 80% of revenue now comes from recurring or highly predictable streams.
• Mass Production Adoption Expands: Apollo system placements and AIC contracts attract new screen printer customers.
• Industry Disruption Creates Tailwinds: Regulatory and tariff shifts drive apparel brands to near-shore, on-demand production.

Performance Analysis

Kornit delivered Q1 results in line with guidance, with revenue of $46.5 million and an adjusted EBITDA margin of negative 8.4%. The quarter was marked by a continued pivot toward recurring revenue, as the all-inclusive click (AIC), printing-as-a-service model, and consumables drove a stable base of contracted income. AIC annual recurring revenue (ARR) reached $14.5 million, a milestone reflecting multi-year customer commitments and a growing pipeline.

Gross margin improved to 45.2%, up substantially year-over-year, aided by operational efficiencies and a one-time materials recovery effort. Operating expenses remained tightly controlled, down slightly from the prior year, and operating cash flow was positive at $5.8 million. Kornit completed its $75 million accelerated share repurchase and remains well-capitalized with $513 million in cash and equivalents.

• Impression Growth Signals Utilization: Trailing 12-month impressions reached a record 222 million, up 10% year-over-year, reflecting stronger system usage and digital adoption.
• System Mix Shifts to Mass Production: Apollo and Max technology systems increasingly serve longer-run, higher-volume jobs, capturing share from analog screen printing.
• Service Revenue Declines: Lower Atlas Max upgrade volumes were partly offset by Max Plus upgrades, which carry a lower average selling price.

While macro uncertainty delayed some system purchases, Kornit’s pipeline is increasingly weighted toward net new customers, especially screen printers transitioning to digital. Management expects a stronger second half, with Apollo shipments and AIC revenue ramping into peak production cycles.

Executive Commentary

Strategic Positioning

1. Mass Production Disruption With Apollo Platform

The Apollo system, Kornit’s flagship for high-volume digital printing, is breaking into mass production segments previously dominated by analog screen printing. Customers report Apollo is replacing multiple carousel presses and reducing labor by 15 to 20 headcount per system, delivering both cost and operational efficiencies. Net new customers, especially traditional screen printers, now make up the majority of the Apollo pipeline, validating the system’s economics and scalability for runs of thousands of units—an inflection point for digital adoption in mainstream apparel manufacturing.

2. AIC Model Drives Predictable, Recurring Revenue

The all-inclusive click (AIC) model, which bundles systems, consumables, and service into multi-year contracts, is gaining traction and lowering the barrier to digital adoption. ARR from AIC contracts reached $14.5 million, and management expects meaningful AIC revenue growth in the second half of 2025. This shift aligns Kornit’s success with customer production volumes and supports a more resilient, partnership-driven business model.

3. Regulatory and Tariff Tailwinds Accelerate Near-Shoring

Recent U.S. trade policy changes, including new tariffs and the closure of the de minimis loophole for sub-$800 imports, are forcing brands to rethink global supply chains. Kornit, with manufacturing largely based in Israel and minimal exposure to China, is positioned as a solution provider for brands seeking to localize production and reduce inventory risk. Early customer feedback indicates increased U.S. activity and demand for near-shore fulfillment, with partnerships such as MAS ACME validating Kornit’s platform for time-sensitive, high-volume runs.

4. Ecosystem Partnerships Expand Demand Generation

Strategic partnerships with platforms like Guten and MAS ACME are connecting demand generators with Kornit’s fulfillment network, increasing system utilization and recurring impressions. Adoption is also growing across digital-native platforms and major online retailers, expanding Kornit’s reach into new channels and geographies.

5. Capital Allocation Remains Disciplined

With $513 million in cash and a completed $75 million share repurchase, Kornit has flexibility to invest in AIC scaling, strategic acquisitions, and further share buybacks. The company continues to balance organic growth investments with potential M&A, while maintaining a focus on operational efficiency.

Key Considerations

Kornit’s Q1 2025 results highlight a company at the center of apparel’s digital and supply chain transformation, with a business model increasingly anchored in recurring revenue and strategic partnerships. The ability to capture mass production runs, combined with regulatory tailwinds, positions Kornit for long-term share gains.

Key Considerations:

• Pipeline Quality Shifts: Net new customers, especially analog screen printers, are driving Apollo and AIC adoption, diversifying Kornit’s customer base.
• Macro Delays Offset by Second Half Ramp: Some system placements were delayed in Q1, but management expects a back-half weighted shipment schedule as customers prepare for peak season.
• Recurring Revenue Stability: Over 80% of revenue is now predictable, reducing earnings volatility and supporting long-term planning.
• Regulatory Shifts Create Urgency: Tariff and de minimis changes are accelerating the move to local, on-demand production, aligning with Kornit’s value proposition.
• Capital Allocation Flexibility: Strong balance sheet enables continued investment in AIC, acquisitions, and shareholder returns.

Risks

Macro uncertainty and elongated sales cycles remain headwinds, with some large system placements delayed rather than canceled. Execution risk exists in scaling the Apollo and AIC models, especially as competitors may attempt to replicate the printing-as-a-service approach. Regulatory changes could also introduce cost volatility, though Kornit’s Israel-based manufacturing mitigates direct tariff exposure. A slower-than-expected ramp in mass production adoption or a reversal in near-shoring trends could dampen growth prospects.

Forward Outlook

For Q2 2025, Kornit guided to:

• Revenue between $49 million and $55 million
• Adjusted EBITDA margin between negative 4% and positive 4%

For full-year 2025, management maintained its outlook for:

• Revenue growth, adjusted EBITDA profitability, and positive operating cash flow

Management emphasized a stronger second half, with Apollo shipments and AIC revenue expected to ramp ahead of peak production cycles. The company also highlighted continued discipline on costs and capital allocation, with the remaining $17 million of the buyback program to be deployed in the near term.

• Second half to benefit from higher Apollo placements and AIC contract execution
• Regulatory and demand shifts expected to accelerate near-shore adoption

Takeaways

Kornit’s strategic pivot toward recurring revenue and mass production digital printing is gaining traction, with regulatory shifts accelerating industry adoption. The company’s ability to capture new screen printer customers and expand ecosystem partnerships underpins a more resilient, scalable business model.

• Recurring Revenue Foundation: Over 80% of sales are now recurring or highly predictable, anchoring future growth and reducing volatility.
• Apollo and AIC Drive New Customer Acquisition: Net new screen printer customers are validating Kornit’s economics and expanding addressable market.
• Watch for H2 Acceleration: Investors should monitor Apollo placement cadence, AIC revenue recognition, and continued regulatory tailwinds as key drivers into 2025 and beyond.

Conclusion

Kornit Digital’s Q1 2025 performance demonstrates a company executing on a multi-year transformation, with a robust recurring revenue base and clear momentum in mass production digital printing. While macro and regulatory uncertainty persist, Kornit’s strategic positioning and operational discipline set the stage for accelerated growth in the coming quarters.

Industry Read-Through

Kornit’s results underscore an accelerating shift in apparel and textile supply chains toward near-shore, on-demand, and sustainable production models. Regulatory catalysts, such as tariffs and de minimis closure, are forcing brands to localize manufacturing and adopt digital solutions. Platform models like AIC, which bundle hardware, consumables, and service into predictable contracts, may become a template for capital-intensive equipment providers across industrials and packaging. Competitors must invest in ecosystem connectivity and recurring revenue streams or risk ceding share to agile, digitally native players.

KRNT Industrials Printing Recurring Revenue Digital Transformation Apparel On-Demand Tariffs