On Tuesday, shares of Velo3D Inc. (NASDAQ: VELO) climbed significantly, reflecting investor optimism after news broke regarding a pivotal contract secured by its manufacturing partner, Mears Machine Corporation. The partnership stems from a recently announced long-term supply agreement between Mears Machine and a major original equipment manufacturer (OEM) within the U.S. defense sector. This multi-year contract encompasses the production of critical hardware components tailored for existing defense products as well as a new airframe platform, underlining a strategic alignment that is expected to drive material revenue and operational growth.
The 10-year engagement positions Mears Machine as a core strategic supplier, with forecasts indicating revenue generation near $100 million during the initial three-year period. Furthermore, the agreement extends to opportunities for ongoing production and maintenance activities beyond the initial timeframe, suggesting a sustained partnership that could underpin stable cash flows.
Mears Machine's manufacturing capabilities are enhanced by a suite of four Velo3D Sapphire XC large platform Laser Powder Bed Printers, state-of-the-art equipment that facilitates the production of complex components meeting stringent defense standards. To support the anticipated operational scale and ensure efficient program execution, Mears Machine has initiated recruitment efforts aimed at expanding its workforce in both manufacturing and operational domains.
In a broader context, Velo3D has been gaining traction through its involvement in various significant defense and aerospace initiatives. Late last year, on December 22, the company announced it had secured a $32.6 million contract from the Department of War under the umbrella of Project FORGE, signaling governmental confidence in Velo3D's additive manufacturing solutions.
Moreover, the company announced a collaboration with Momentus Inc. on January 5, efforts which involved the development of a 3D-printed fuel tank designed explicitly for space testing purposes. This joint endeavor highlights Velo3D's adaptability and expanding reach within the demanding aerospace manufacturing space.
Shortly thereafter, on January 13, Velo3D formalized a Cooperative Research and Development Agreement (CRADA) with the U.S. Army's DEVCOM Ground Vehicle Systems Center. This strategic partnership further emphasizes the company’s growing footprint in supplying cutting-edge manufacturing solutions to military ground vehicle programs.
Market participants have been closely monitoring Velo3D as the company approaches its next earnings release, scheduled for February 26. Analyst projections currently include an estimated earnings per share (EPS) loss of 50 cents and expected revenue of approximately $8.5 million, setting a cautious tone as investors digest recent operational developments and contract activity.
Reflecting the positive contract announcements and expanding defense industry collaborations, Velo3D's stock price was up 21.28% to $13.21 at the time of publication on Tuesday, according to Benzinga Pro data. This price movement underscores the market's recognition of the company's potential to leverage its proprietary manufacturing technology to capture substantial defense sector demand.
The recent contract award to Mears Machine represents a tangible validation of Velo3D's strategic manufacturing ecosystem, highlighting the synergistic value created through its technology platforms and partner network. The integration of advanced additive manufacturing techniques, notably via the Sapphire XC printers, enables the production of high-complexity parts that meet rigorous defense specifications. This technological advantage is a critical enabler of the sustained program execution envisioned by the multi-year agreement.
Operational scalability supported by ongoing hiring initiatives at Mears Machine indicates confidence in the sustained ramp-up of production requirements aligned with the contract's scope. Such workforce expansion is a critical factor in maintaining throughput, quality standards, and delivery timelines, all of which are essential to fulfilling the obligations stipulated by the defense OEM.
Velo3D’s demonstrated capabilities in additive manufacturing, combined with its strategic partnerships and recent contract wins, situate the company to potentially benefit from ongoing modernization efforts within the defense manufacturing sector. The interplay between its proprietary technologies and established partners like Mears Machine is fostering an integrated production environment aimed at meeting complex aerospace and defense hardware demands.
Investors and industry observers will be watching the upcoming earnings release closely, evaluating Velo3D's financial performance in relation to the contracts secured and projected production milestones. The reported EPS loss and revenue estimates suggest that while the company is still in a developmental and investment phase, the forward-looking contract revenue and partnerships bear potential implications for longer-term revenue growth and margin expansion.
This recent stock surge reflects a market re-rating based on the strategic developments cementing Velo3D's role in advanced defense manufacturing. However, uncertainties regarding execution timelines, contract fulfillment, and broader demand dynamics remain important considerations for investors assessing the company’s outlook.