Xometry (XMTR) Q3 2025: Marketplace Gross Margin Jumps 210bps on AI-Powered Expansion
Xometry’s Q3 saw marketplace gross margin climb 210 basis points, signaling the compounding impact of its AI-driven model and network effects. The company’s asset-light, digital marketplace is scaling rapidly even as the broader manufacturing sector contracts, with enterprise and international expansion emerging as key levers. Management’s raised outlook and product roadmap signal confidence in sustained outperformance, but ongoing investments and supplier services drag warrant close monitoring.
Summary
- Marketplace Margin Expansion: AI-driven pricing and supplier matching continue to widen gross margin leverage.
- Enterprise and International Scale: Large account adoption and global expansion underpin robust active buyer growth.
- Investment-Fueled Growth Trajectory: Product launches and R&D spend position Xometry for durable 20%+ growth into 2026.
Performance Analysis
Xometry delivered a record Q3, with revenue and gross profit growth outpacing even optimistic expectations. Marketplace revenue, which now constitutes the overwhelming majority of total sales, accelerated to 31% year-over-year growth, while supplier services remained a small and declining share. The standout metric was marketplace gross margin, which expanded by 210 basis points to 35.7%, driven by continual improvements in AI-powered pricing, matching algorithms, and scale-driven efficiencies. Gross profit dollars grew even faster than revenue, underscoring the operating leverage inherent in Xometry’s platform model.
Active buyer growth of 21% and a 9% increase in revenue per buyer reflect both new customer acquisition and deeper enterprise penetration. Accounts spending over $50,000 increased 14%, and those over $500,000 showed even stronger momentum, highlighting the company’s success with large, sticky customers. Operating expenses grew at a much slower rate than revenue, with disciplined sales and marketing spend and increased automation driving adjusted EBITDA to $6.1 million, a sharp turnaround from losses last year. Cash flow was positive, and capital allocation remained focused on technology investment.
- Marketplace Revenue Dominance: $167 million in marketplace revenue dwarfs the $14.1 million from supplier services, confirming the company’s strategic focus.
- Operating Leverage Emerges: Non-GAAP operating expenses rose just 17% versus 28% revenue growth, with sales and marketing declining as a share of revenue.
- Cash Flow and CapEx Discipline: Positive operating cash flow and targeted CapEx support continued product and AI investment without straining liquidity.
While supplier services remain a drag, the core marketplace is compounding growth and profitability, validating the digital platform thesis even in a tough macro environment.
Executive Commentary
"Our marketplace sits at the intersection of manufacturing, AI, and technology, and we are excited about digitizing custom manufacturing as we accelerate platform innovation."
Randy Altshuler, Chief Executive Officer
"Xometry is becoming their digital rails in this massively fragmented and largely offline 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."
James Milne, Chief Financial Officer
Strategic Positioning
1. AI-Driven Marketplace Model
Xometry’s core value proposition rests on its AI-native platform, which continuously optimizes pricing, supplier selection, and buyer matching. The company’s AI algorithms have driven marketplace gross margin from 25% four years ago to nearly 36% today, with each incremental data point reinforcing the platform’s competitive moat. This self-reinforcing loop underpins both margin expansion and customer retention.
2. Enterprise and Product-Led Expansion
Enterprise accounts are emerging as a primary growth engine, with large customers increasingly embedding Xometry into their workflows via TeamSpace (collaborative procurement tool) and ERP (Enterprise Resource Planning) integrations. New product launches—such as AutoQuote for injection molding and the WorkCenter mobile app—are deepening engagement on both the buyer and supplier sides, expanding wallet share and reducing friction.
3. International Growth Opportunity
International markets are scaling rapidly, now at a $120 million run rate from just $1 million in 2020. Management sees the potential for international to drive 30% to 40% of total marketplace revenue over time, supported by product localization, expanded materials and processes, and early traction in Europe and Asia.
4. Asset-Light Operating Model
Xometry’s asset-light approach minimizes capital intensity and enables rapid scaling. The company leverages a network of over 4,500 suppliers, allowing buyers to diversify risk and manufacturers to maximize utilization. This structure supports both margin expansion and resilience in volatile macro conditions.
5. Data and Ecosystem Flywheel
Each new buyer, supplier, and transaction enriches Xometry’s data advantage, powering better AI predictions and supplier matching. The launch of dynamic ad-serving on ThomasNet (supplier advertising platform) and natural language search further integrates the ecosystem, promising higher engagement and monetization over time.
Key Considerations
Xometry’s Q3 underscores the strategic leverage of its AI-powered, digital-first marketplace in a sector still early in its digital transformation. Investors should weigh the compounding benefits of network effects and data scale against the execution risks of rapid expansion.
Key Considerations:
- AI and Automation as Differentiators: Continuous investment in AI and workflow automation is driving both gross margin gains and customer stickiness.
- Enterprise Account Upsell: Tools like TeamSpace and ERP punch-outs are embedding Xometry deeper into large customer procurement processes, increasing wallet share and retention.
- Supplier Services Drag: The legacy ThomasNet ad business remains a headwind, but new dynamic ad tech could revive engagement and monetization longer term.
- International Upside vs. Execution Risk: Rapid global scaling presents a major opportunity, but also introduces operational complexity and longer investment cycles.
Risks
Xometry’s performance is closely tied to continued adoption by enterprise buyers and successful international execution. Supplier services revenue remains under pressure, and ongoing macro uncertainty in manufacturing could impact buyer demand or slow wallet share gains. Heavy investment in R&D and product rollout may compress margins if top-line growth slows. The company’s reliance on AI and data scale also exposes it to competitive and regulatory risks related to technology and privacy.
Forward Outlook
For Q4 2025, Xometry guided to:
- Revenue of $182 to $184 million (23% to 24% YoY growth)
- Marketplace growth of 25% to 27% YoY
- Adjusted EBITDA of $6 to $7 million
For full-year 2025, management raised guidance:
- Marketplace growth of 27% to 28% (up from at least 23% to 24%)
- Total revenue of $676 to $678 million
- Adjusted EBITDA of $16 to $17 million
Management emphasized ongoing strength in Q4, robust demand in the marketplace, and confidence in sustaining at least 20% total revenue growth in 2026, driven by enterprise expansion, international scaling, and continued product innovation.
- Macro environment remains a watchpoint, but guidance assumes no improvement from current conditions.
- CapEx expected at $8 to $9 million in Q4, focused on software and technology enablement.
Takeaways
Q3 validates Xometry’s strategy of leveraging AI and network effects to drive profitable, compounding growth in custom manufacturing.
- Compounding Platform Effects: Each quarter of AI-driven improvements and network expansion powers the next, with gross margin and buyer engagement both rising.
- Enterprise and International as Growth Levers: Large account adoption and international scaling are now central to the growth narrative, with product innovation accelerating adoption.
- Investment and Execution Balance: Investors should monitor whether the pace of investment in R&D and new products continues to deliver operating leverage, especially as the company targets $1 billion in revenue and beyond.
Conclusion
Xometry’s Q3 results showcase a business compounding value through AI, digital workflow integration, and network scale. The company’s raised outlook and continued product innovation point to durable growth, but execution on international expansion and the legacy supplier services turnaround remain key watchpoints for investors.
Industry Read-Through
Xometry’s accelerating marketplace growth and gross margin expansion highlight the disruptive potential of AI-powered, asset-light platforms in legacy manufacturing sectors. The company’s ability to gain share during a manufacturing downturn suggests digital procurement and supply chain resilience are becoming must-haves for industrial buyers. Competitors in custom manufacturing, industrial marketplaces, and supplier advertising face mounting pressure to digitize, automate, and integrate AI or risk margin erosion and share loss. The read-through extends to any B2B vertical where fragmented supply meets digital aggregation and data-driven optimization.