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Xometry (XMTR +5%) caught our attention this morning. There is not any news out, but the stock has been showing good momentum since its Q3 report in early November. The stock is trading at a new 52-week high today, so we wanted to take closer look to see what it driving the stock higher.

• This operator of an AI-powered online marketplace connecting buyers with suppliers of manufacturing services sees manufacturing as a massive, highly fragmented, and regionalized industry in need of efficiency. Xometry believes the industry is poised for increased digitization. Also, small- to medium-sized manufacturers face barriers to entry as they have to compete with larger manufacturers. Xometry sees an opportunity to help these smaller companies with their materials, financing and advertising.
• Xometry made its IPO debut pretty recently, in June 2021. Since going public, it has grown its revenue and gross margin rapidly. It has also gotten closer and closer to being adjusted EBITDA positive, which the company expects to accomplish in Q4. Annual revenue in recent years has grown impressively. Analysts expect 2024 revenue to come in around $543 mln then grow to $647 mln in 2025.
• The company has expanded its networks of both buyers and suppliers. It has also grown gross margin for its marketplace segment. When Xometry went public, gross margin was about 23.5% for marketplace and that increased to 33.6% in Q3. As such, even as it has grown revenue strongly, at very significant rates, the gross profit has actually grown even faster.
• Xometry is increasingly embedded in its customer supply chains, digitizing inefficient and cumbersome processes. Also, international growth has been a key catalyst. In Q3, international revenue grew 55% yr/yr, driven by strong growth in Europe. It is now approaching a $100 mln annual run rate vs $2 mln in 2020. Currently, 19% of total marketplace revenue is international and Xometry believes it can get that up to 30-40%, which is consistent with many other global online marketplaces.
• What really stands out is that Xometry has grown strongly despite a weak industrial macro picture. ISM data has been in contraction for 23 of the past 24 months. Despite that, Xometry posted 19% yr/yr revenue growth in Q3 to $141.7 mln. The company achieved this because it believes it is clearly gaining market share. Another factor is that awareness is still relatively small. However, that is changing as demonstrated by its customer growth.
• Another tailwind has been concerns about supply chains. With tariffs and geopolitical tensions, many customers have concerns about supply chains, particularly in Asia. Xometry helps by being in 16 localized marketplaces, including the US, Europe, Asia. If customers are looking to ensure that they can deliver their product to their end customers, Xometry Marketplace is a good way to protect their supply chain at no cost. Xometry gives them that redundancy and security that they need.

Overall, Xometry appears to be hitting more radar screens since its Q3 report. Analysts had been expecting a loss, but the company surprised the market with its first profitable quarter as a public company. That Xometry has been able to grow nicely despite a contracting industrial market is pretty impressive. And the potential upheaval of supply chains caused by tariffs should fuel more interest from customers.