nLIGHT published its second-quarter 2026 report on 6 August 2026. We are writing about it today.
Every figure here was verified against the Form 8-K nLIGHT filed with the SEC on 6 August 2026 under Item 2.02 and Item 9.01, accession number 0001124796-26-000035, and in particular against Exhibit 99.1 furnished with it. Wherever the narrative wording in the release differs from the reconciliation tables at the end of it, I followed the tables. Even so, errors, inaccuracies or omissions are possible, and the figures may change after publication. Spotted something that looks wrong? Write to me and I will correct it.
What the Company Does
nLIGHT makes high-power lasers.
A high-power laser is a light source that concentrates a very large amount of energy into a very narrow beam. In industry it is used to cut, weld and process metal. In microfabrication - working materials at a tiny scale of precision, for example in making electronic components - it is used to remove or shape extremely thin layers. And in defence it is used for directed energy: systems meant to strike a target with a beam of light rather than with a projectile.
The company has two kinds of revenue, and the difference between them is the key to everything else here.
Products - selling lasers and components to customers. This is the larger part, and the faster-growing one.
Advanced Development - development contracts, mainly with defence bodies, where the company is paid for development work rather than for an off-the-shelf product.
One term that recurs through this piece: gross margin. It is what is left of every revenue dollar after the direct cost of producing it. A 40% margin means 40 cents of each dollar remain to cover everything else - research and development, selling, administration. A 5.6% margin, which we will see in a moment, means almost nothing remains.
The company also reports three end markets: Aerospace and Defense, Industrial, and Microfabrication.
The Quarter
| The quarter | A year ago | |
|---|---|---|
| Revenue | $82.591 million | $61.735 million |
| Products revenue | $59.363 million | $40.824 million |
| Advanced Development revenue | $23.228 million | $20.911 million |
| Total gross margin | 31.1% | 29.9% |
| Products gross margin | 41.2% | 38.5% |
| Development gross margin | 5.6% | 13.1% |
| Loss from operations | $3.567 million | $4.236 million |
| Operating margin | (4.4)% | (6.8)% |
| GAAP net loss | $1.339 million | $3.591 million |
| GAAP EPS, basic and diluted | $(0.02) | $(0.07) |
| Adjusted EBITDA | $10.731 million | $5.550 million |
| Non-GAAP net income | $9.624 million | $2.929 million |
| Non-GAAP diluted EPS | $0.15 | $0.06 |
| Stock-based compensation | $10.963 million | $6.371 million |
| Weighted-average shares | 56.983 million | 49.581 million |
Revenue is a company record: $82.591 million, growth of 33.8%. That percentage is the company's own. Products revenue is also a record: $59.363 million, up 45% per the company's own subheadline.
Advanced Development revenue rose far less: from $20.911 million to $23.228 million, growth of 11.1%. I derived that percentage myself from two positive figures in the filing; the company did not state it.
And despite all of that, the quarter ended in a loss. A $3.567 million operating loss and a $1.339 million net loss. Both are smaller than a year ago, but they are still losses - in the highest-revenue quarter in the company's history.
A note on percentages. The company's highlights table prints 15.8% and 62.7% in its change column, beside the operating loss line and the net loss line. Those are percentages computed off a negative base - off a loss - and I am not repeating them here, because in a column that also carries revenue growth they are very easy to read as growth rates. The correct way to say it is simply: the operating loss narrowed from $4.236 million to $3.567 million, and the net loss narrowed from $3.591 million to $1.339 million.
One more figure from the tables, because it matters later: Adjusted EBITDA rose to $10.731 million from $5.550 million, growth of 93.4%, which I computed myself from two positive figures. The company marked that line as not meaningful, while computing percentages on the loss lines where the base actually was negative. That is inconsistent presentation, and it happens to be inconsistent in one direction.
The Headline Says Record. The Guide Says Decline
This is the most important thing in the report, and it is not in the headline.
The company guides to revenue of $63 million to $73 million in the third quarter. The quarter it just reported came in at $82.591 million. So even at the top of the range, revenue falls about 12% sequentially. At the implied midpoint of about $68 million, the fall is about 18%.
The reason appears in the release itself. This is a company statement, not a personal quote from a manager:
"Due to supply chain challenges, nLIGHT's third quarter revenue guidance excludes approximately $17 million of product revenue"
In other words: roughly $17 million of product revenue the company had expected to ship in the third quarter is not in the guide, and it is expected, in the release's words, to be delivered in future quarters.
Three things worth holding about that $17 million. First, it is large: about a quarter of the entire guided midpoint. Second, no quarter is named for its return - only "future quarters". Third, the release does not confirm that the underlying orders hold in full.
And one more part of the guide that does not add up. The release says the midpoint of the revenue range is $70 million. But the midpoint of $63 million to $73 million is $68 million, and the components the release itself gives - about $43 million of Products and about $25 million of Advanced Development - also sum to $68 million. Two separate cross-checks land on $68 million. I am reporting it as written rather than correcting it quietly, but the $70 million in the release looks like an error that flatters the outlook by about $2 million.
The Only Profit in the Report Is Stock Compensation
The company presents non-GAAP net income of $9.624 million. Here is where all of it comes from.
The GAAP net loss was $1.339 million. The only adjustment the company made in the quarter was adding back $10.963 million of stock-based compensation - amortisation of purchased intangibles was zero, and restructuring was zero.
The arithmetic is exactly this: minus $1.339 million plus $10.963 million equals $9.624 million.
Which means without the stock compensation there is no profit here at all, on any basis. That is neither improper nor unusual - many technology companies present such a measure, and the company disclosed the adjustment in full. But when the single adjustment is larger than the profit it creates, that is the whole story rather than a footnote.
And the gap is widening, not narrowing. Stock-based compensation rose 72%, from $6.371 million to $10.963 million, while revenue rose 33.8%. The fastest-growing piece is the stock compensation inside selling, general and administrative expense, which nearly doubled: $7.064 million against $3.939 million.
Two notes on the per-share figures, and both matter.
The first is the share count. The weighted average rose to 56.983 million from 49.581 million, up 14.9%, following a public offering completed in the first half of 2026. On the non-GAAP diluted basis it is 62.308 million shares against 51.154 million. Any year-over-year per-share comparison here is not like-for-like.
The second is a gap between the text and the tables. The narrative gives non-GAAP earnings of $0.17 "per diluted share", but $0.17 is the basic figure in the reconciliation table, and the diluted figure is $0.15. In the same release, the year-ago comparison is described in words as a "non-GAAP net loss of $2.9 million", while the table shows non-GAAP net income of $2.929 million - and the arithmetic confirms the table. Both gaps run in the direction that flatters the company. So I used the tables in both cases.
The part that is collapsing sits in the reconciliation tables, not the highlights
Advanced Development gross margin fell to 5.6% from 13.1% a year ago - a drop of roughly 750 basis points. And more telling: gross profit in that business fell in absolute dollars, to $1.291 million from $2.738 million, even though its revenue rose. The company sold more development work and made less money on it. This is disclosed only in the tables at the end of the release, not in the highlights, and the guide for the coming quarter, a margin of about 8% in that business, says the company does not expect an immediate reversal.
Total Margin Rose, but Not Because the Company Got Better
Total gross margin rose to 31.1% from 29.9%, an improvement of about 120 basis points. It is easy to conclude that manufacturing got more efficient. That is not what happened.
What happened is mix. Products, the higher-margin business, rose to 71.9% of revenue from 66.1% a year ago. When the weight of the more profitable business grows, the blended margin rises even if nothing improved.
And inside the breakdown the picture splits: Products improved genuinely, to 41.2% from 38.5%, about 270 basis points. Development deteriorated sharply. One of the company's two halves got materially worse, and the blended number hides it.
Where the Growth Comes From
From the defence budget, mostly.
| End market | The quarter | A year ago |
|---|---|---|
| Aerospace and Defense | $57.298 million | $40.695 million |
| Microfabrication | $13.251 million | $11.294 million |
| Industrial | $12.042 million | $9.746 million |
Aerospace and Defense is $57.298 million out of $82.591 million, about 69% of revenue (my own calculation from two figures in the filing). It is also the fastest-growing market, at roughly 41%, against roughly 24% in Industrial and roughly 17% in Microfabrication.
Chairman and CEO Scott Keeney addressed that direction explicitly:
"Our pipeline of new opportunities in directed energy continues to expand, with the Department of War's Joint Laser Weapon Systems contract"
The implication for an investor is simple: this is a defence-budget story. When almost 70% of revenue comes from a single end market, and that market also produces most of the growth, the company's results depend on one buyer's procurement decisions more than on anything else.
On the quarter as a whole, Keeney said:
"total revenue, gross margin and Adjusted EBITDA at or above our expectations, driven by continued strength in our key defense and advanced manufacturing markets"
The Cash, the Interest and the Dilution
Cash and cash equivalents stand at $295.761 million, against $98.699 million at the end of 2025. Note that the comparison is to year-end rather than to the year-ago quarter, because that is what the filing provides.
The tripling of cash is a financing event, not an earnings one
Of the increase in cash, $192.194 million is net proceeds from a public offering the company completed in the first half of 2026. At the same time it fully repaid a $20.000 million line of credit, which now stands at zero. That strengthens the balance sheet, and it is not evidence of operating strength.
And the interest on that money has a direct effect on the bottom line. Interest income came to $2.474 million, up 123%. That is larger than the entire net loss of $1.339 million. Without it, the pre-tax loss would have been roughly $3.7 million rather than $1.264 million. In other words, the narrowing of the loss is substantially a treasury outcome rather than an operating one.
The First Half, and the Cash Flow
First-half 2026 revenue came to $162.772 million against $113.403 million a year ago, growth of 43.5% (my calculation, both bases positive). The first-half net loss narrowed to $0.694 million from a loss of $11.684 million.
Operating cash flow swung from a use of $1.405 million in the year-ago half to a source of $30.416 million. That is a real change of direction, and it is worth seeing what it is made of: $21.849 million of it is stock-based compensation, which is a non-cash expense, and a further $9.238 million comes from a build in deferred revenue. Those two items alone account for almost the whole figure.
Deferred revenue itself jumped to $10.725 million from $1.489 million at the end of 2025, roughly a sevenfold increase. That is money received from customers before the revenue is recognised - a positive in itself, but it helps cash flow once rather than repeatedly.
The Outlook
This is the guidance for the third quarter of 2026, as given in Exhibit 99.1:
| Item | Third-quarter guidance |
|---|---|
| Revenue | $63 million to $73 million |
| Of which Products | about $43 million |
| Of which Advanced Development | about $25 million |
| Total gross margin | 24% to 30% |
| Products gross margin | 34% to 40% |
| Advanced Development gross margin | about 8% |
| Adjusted EBITDA | $1 million to $7 million |
Three points in this guide deserve attention.
First, the revenue. The entire range sits below the $82.591 million just reported, and the explanation is roughly $17 million of pushed-out shipments.
Second, the margin. The total gross margin guide of 24% to 30% is below the 31.1% recorded in the reported quarter at every point in the range. And inside it, a margin of about 8% in Advanced Development, meaning the company itself does not expect a fast recovery in the weak half.
Third, Adjusted EBITDA. The guide is $1 million to $7 million, against $10.731 million in the reported quarter. No reconciliation to a comparable GAAP measure was provided for that forward figure.
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What interests me in this report is that it points in two directions at once. Record revenue, record Products revenue, growth of 33.8% - and immediately after them a guide that sits below the reported quarter at every point in the range. Anyone reading only the headline gets exactly the opposite picture from what the company itself is saying about the next quarter.
The only profit in the report is the non-GAAP one, and all of it is stock compensation. The difference between a $1.339 million loss and $9.624 million of non-GAAP income is exactly $10.963 million of stock-based compensation, with no other adjustments. That is not a footnote, it is the entire line. And when that expense grows 72% while revenue grows 33.8%, the gap is widening.
The bottom line itself also leaned on the money raised, not only on the business. Interest income of $2.474 million is larger than the whole net loss. A company that raises capital and earns interest on it is doing something sensible, but that is a treasury outcome rather than an operating one, and the two are worth keeping apart.
Three things I will watch next quarter. Whether the $17 million comes back, and in which quarter exactly. Whether the Development margin stops falling, after the company guided it to about 8%. And whether stock-based compensation keeps growing faster than revenue.
And what I take from it beyond this company: a record quarter and a weak guide can sit in the same report, and sometimes the detail that explains both - here, shipments pushed out - lives in a single sentence in the middle of the release.
