Xometry (XMTR) Q2 2025: AI Marketplace Margin Climbs 190bps as Enterprise Adoption Accelerates
Xometry’s Q2 delivered record gross margins, propelled by AI-powered marketplace efficiency and deepening enterprise penetration. The company’s asset-light model demonstrated strong operating leverage, while management raised full-year growth guidance amid ongoing macro caution. With robust product innovation and enterprise integration, Xometry is reinforcing its moat in digital custom manufacturing.
Summary
- Marketplace Margin Expansion: AI-driven pricing and selection algorithms fueled record margin improvement.
- Enterprise Integration Momentum: Cloud-based Teamspace and ERP integrations are embedding Xometry deeper with large buyers.
- Guidance Lift Despite Macro Caution: Management raised growth outlook, reflecting durable share gains over market cycles.
Performance Analysis
Xometry’s Q2 results reflected a step-function in both scale and profitability, with marketplace revenue growth outpacing overall company growth and gross margin hitting a record high. The company’s asset-light marketplace, a platform that matches buyers and suppliers for custom manufacturing jobs, continues to gain share in a fragmented industry. Marketplace revenue, which comprises the vast majority of total revenue, grew robustly, supported by a 22% increase in active buyers and a 4% rise in revenue per active buyer, signaling traction with both new and existing enterprise customers. Supplier services, a smaller segment focused on advertising and marketing solutions, remained stable as Xometry prepares for upcoming product upgrades.
Gross margin expansion was the standout metric, with marketplace gross margin up 190 basis points year over year, driven by advances in AI-powered pricing and sourcing. Operating leverage was evident as non-GAAP operating expenses rose at less than half the pace of revenue, resulting in a $6.6 million year-over-year improvement in adjusted EBITDA. International revenue growth outpaced the US, with Europe highlighted as a key driver. The company’s cash position remains solid following a convertible debt refinancing, and Xometry expects continued capex discipline as it invests primarily in software and platform innovation.
- AI-Driven Margin Gains: Marketplace gross margin reached a record 35.4%, up sharply year over year.
- Enterprise Account Growth: Accounts spending $50,000+ annually rose 15%, expanding the high-value customer base.
- Operating Expense Leverage: Sales, marketing, and G&A as a percentage of revenue declined, supporting EBITDA improvement.
Xometry’s results highlight the compounding effect of AI and network scale, with each quarter’s data and product rollouts driving incremental efficiency and buyer/supplier value. Management’s confidence was reflected in a raised full-year growth outlook, even as guidance remains tempered by macro uncertainty.
Executive Commentary
"Expanding marketplace gross margin underscores the value we're creating with our AI powered marketplace. Our efficacy and competitive mode continues to increase as we grow our networks of buyers and suppliers and gain more data to continuously train our algorithms."
Randy Altshuler, Chief Executive Officer
"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."
James Milne, Chief Financial Officer
Strategic Positioning
1. AI as the Core Marketplace Differentiator
Xometry’s moat is increasingly defined by its AI-powered pricing, selection, and sourcing algorithms, which continuously learn from growing transaction data. This enables dynamic, instant quoting and supplier matching, reducing friction for buyers and improving supplier utilization. The company’s ability to rapidly ingest and process customer and order data is driving both margin expansion and buyer retention, particularly among large enterprise accounts.
2. Enterprise Land-and-Expand Execution
Enterprise integration is emerging as a key growth flywheel, with Teamspace (collaborative project management for buyers) and ERP (Enterprise Resource Planning) integrations embedding Xometry within customer procurement workflows. These tools make Xometry a sticky partner, as evidenced by the win of a major European aerospace account and the rising number of high-spend enterprise customers. This land-and-expand approach is designed to increase share of wallet and deepen supply chain integration over time.
3. Product Innovation and Global Expansion
Rapid product rollout is extending Xometry’s platform reach, with recent launches in instant quoting for new materials, 2D/3D drawing integration, and mobile supplier tools. International growth, particularly in Europe, is being driven by localized features and new enterprise capabilities. The platform’s extensibility across verticals and geographies positions Xometry to capture secular digital adoption trends in custom manufacturing.
4. Asset-Light Model and Supplier Value Proposition
Xometry’s asset-light marketplace model minimizes capital intensity, allowing for scalable growth and high cash flow conversion. Suppliers benefit from digital access to global demand, operational software, and fintech tools, which improve utilization and profitability. This dual-sided value proposition underpins network effects and competitive resilience.
Key Considerations
Q2 demonstrates Xometry’s ability to compound marketplace scale, AI-driven efficiency, and enterprise sales execution, positioning the company for durable share gains even in a muted macro environment.
Key Considerations:
- Marketplace Margin Sustainability: Continued AI improvements are critical to maintaining and expanding gross margin leadership.
- Enterprise Account Penetration: Deeper workflow integration and ERP adoption will determine long-term wallet share and stickiness.
- Product Velocity: Ongoing rollout of instant quoting, mobile supplier tools, and advanced analytics must keep pace with buyer and supplier needs.
- International Growth Leverage: Success in Europe and other regions hinges on localized product fit and enterprise wins.
- Macro Sensitivity: Despite strong execution, management remains cautious on manufacturing sector headwinds and does not bake in macro improvement.
Risks
Xometry’s primary risks stem from macroeconomic volatility in manufacturing demand, competitive pressure from both legacy procurement channels and emerging digital platforms, and the need to sustain rapid product innovation. Tariff fluctuations and global trade dynamics can impact pricing algorithms and supplier network efficiency. The company’s guidance remains conservative, reflecting ongoing caution around industrial sector softness and buyer sentiment.
Forward Outlook
For Q3 2025, Xometry guided to:
- Revenue of $167 to $169 million, representing 18 to 19% YoY growth
- Marketplace growth of 20 to 22% YoY
- Adjusted EBITDA of $4 to $5 million
For full-year 2025, management raised guidance:
- Marketplace growth of 23 to 24% (previously at least 22%)
- Overall revenue growth of at least 20%
- Incremental adjusted EBITDA margin of approximately 21%
Management highlighted:
- Strong Q3 start, but guidance remains tempered by macro caution
- Ongoing product innovation and enterprise sales momentum as key growth drivers
Takeaways
Xometry’s Q2 results reinforce its position as the leading digital marketplace for custom manufacturing, with AI-driven margin expansion and enterprise integration as core levers. The company’s asset-light model and network effects are compounding, but vigilance is warranted given sector volatility.
- AI and Network Scale: Margin expansion and buyer/supplier value are compounding as data and transactions grow, supporting durable business model advantages.
- Enterprise and Product Innovation: Workflow integration and rapid product rollout are driving deeper customer relationships and expanding addressable market.
- Macro Watchpoint: Investors should monitor industrial demand signals, as guidance remains cautious and upside could materialize if sector conditions improve.
Conclusion
Xometry’s execution in Q2 2025 validates its AI-powered marketplace strategy, with record margin gains and expanding enterprise adoption. While macro uncertainty persists, the company’s technology investments and disciplined capital allocation position it for continued outperformance as digital procurement accelerates across manufacturing verticals.
Industry Read-Through
Xometry’s results provide a clear signal that digital transformation in manufacturing procurement is accelerating, even as broader industrial activity remains muted. The success of instant quoting, AI-driven sourcing, and enterprise workflow integration highlights the growing demand for efficiency, transparency, and resiliency in supply chains. Sector peers and legacy players will need to adapt to rising buyer expectations for speed and flexibility, while digital-first competitors must match Xometry’s pace of product innovation and network scale. The asset-light, data-driven marketplace model is proving resilient and scalable in the face of macro headwinds, setting a new bar for custom manufacturing platforms globally.