Laser company nLIGHT (NASDAQ: LASR) announced better-than-expected revenue in Q3 2026, with sales up 10.5% year on year to $73.76 million. On top of that, next quarter’s revenue guidance ($87 million at the midpoint) was surprisingly good and 18.5% above what analysts were expecting. Its non-GAAP profit of $0.16 per share was significantly above analysts’ consensus estimates.

Is now the time to buy LASR? Find out in our full research report (it’s free for active Edge members).

StockStory’s take

nLIGHT’s third quarter results were well received by the market, reflecting both top-line growth and improved profitability metrics compared to expectations. Management credited robust demand across defense and space, as well as advanced manufacturing, for the company’s performance, despite ongoing supply chain constraints. CEO Scott Keeney highlighted that the business achieved record product gross margins, stating, “demand for our products remains strong across our defense and space and advanced manufacturing markets,” while emphasizing continued progress on key defense contracts and the company’s efforts to strengthen its supply chain.

Looking ahead, nLIGHT’s guidance is underpinned by strong order momentum and a growing opportunity pipeline in directed energy and advanced manufacturing. Management indicated that investments in manufacturing capacity and supply chain resilience are expected to support further growth. CFO Joe Corso noted that both defense and advanced manufacturing segments are set to expand, with product gross margins expected to remain “comfortably above 40%.” Management also pointed to the anticipated conversion of deferred revenue once supply constraints ease, positioning the company for a solid start to the next year.

Key insights from management’s remarks

Management attributed the quarter’s outperformance to expanding defense contracts, ongoing investments in supply chain resilience, and a strategic exit from commoditized industrial segments.

• Defense contract momentum: nLIGHT’s leadership cited continued progress on major defense programs such as the Joint Laser Weapon System (JLWS), which has transitioned the company from a component supplier to a system-level partner. This shift was described as a key driver for expanding the company’s role in the defense sector.
• Product portfolio shift: The decision to exit legacy cutting and welding markets, which had become commoditized due to competition from China, allowed nLIGHT to refocus resources on higher-value defense, space, and advanced manufacturing segments. Management stated this was crucial for long-term growth and profitability.
• Supply chain adaptation: The company accelerated supply chain diversification, including reshoring manufacturing, qualifying alternative suppliers, and ending all operations in China. These actions were described as necessary to mitigate ongoing supply constraints, particularly in optical components.
• Gross margin improvement: Record product gross margins were achieved, supported by favorable product mix, improved factory utilization, and lower tariff-related costs. Management described 40%+ product gross margin as a sustainable new level, even as some one-time benefits in Q3 are not expected to repeat.
• Inventory build and demand visibility: Inventory levels increased as part of a deliberate strategy to secure materials and support anticipated growth. Management emphasized the importance of maintaining inventory to meet strong backlog and pent-up demand, particularly for advanced manufacturing products.

Drivers of future performance

nLIGHT’s outlook is anchored on expanding defense deployments, further supply chain stabilization, and a continued focus on high-margin product segments.

• Directed energy deployment: Management anticipates the transition of directed energy laser technology from development to operational use, especially through programs like JLWS, will drive revenue growth and broaden the company’s market opportunity over the coming quarters.
• Supply chain resilience: Continued investment in supply chain diversification and inventory management is expected to support higher production volumes and reduce risks of future shipment delays. The company believes that these efforts will enable them to fulfill pent-up demand and improve delivery reliability.
• Advanced manufacturing rebound: The exit from low-margin industrial segments is expected to allow for expansion in advanced manufacturing applications such as additive manufacturing and semiconductor processing. Management highlighted that this strategic focus should sustain gross margins above 40% and provide a more stable and profitable revenue base.

Catalysts in upcoming quarters

Looking forward, the StockStory team will be monitoring (1) the pace at which nLIGHT can resolve supply chain bottlenecks and convert deferred orders into revenue, (2) continued progress and expansion of major defense contracts such as JLWS, and (3) the impact of strategic exits from commoditized markets on overall profitability. Execution on manufacturing investments and the ability to sustain product gross margins above 40% will also serve as key performance indicators.

nLIGHT currently trades at $34.87, up from $29.34 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

Stocks that trumped tariffs

ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.

Find out which stocks our AI platform is flagging this week. See this week’s Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.