Xaar plc Earnings Call Signals Profitable Growth Shift

Xaar plc ((GB:XAR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Xaar plc’s latest earnings call struck an optimistic tone, underpinned by robust printhead growth, improving margins, and accelerating traction in specialist markets like wax and jewelry. Management balanced this upbeat narrative with candid acknowledgment of uneven divisional performance, inventory and CapEx pressures, and execution risks around large but still-emerging opportunities such as battery coating.

Group Revenue Growth

Xaar reported group revenue up 12% year-on-year, with FY 2025 gains driven primarily by the Printhead division and adoption in new digital printing applications. Management framed this as evidence that the company is moving beyond its historic volatility and building a more diversified, structurally growing revenue base.

Printhead Segment Outperformance

The Printhead business was the standout, delivering 22% revenue growth with more than half of that increase coming from higher unit volumes rather than price. Gross margin in the segment expanded by about 300 basis points, signaling both strong pricing power and better cost discipline in Xaar’s core technology franchise.

Wax and Jewelry Market Breakthrough

In the wax and jewelry market, Xaar has moved from zero revenue in 2023 to about £1 million in 2024 and £8 million in 2025, highlighting rapid share capture. Management attributed this surge to the superior fluid-handling capabilities of its printheads, which are enabling a shift to digital processes in a traditionally niche, analog segment.

Battery Coating: A Large Long-Term Opportunity

The company highlighted battery electrode coating as a potentially transformative market, with 10 production lines in China currently generating roughly £150,000 each per year. Xaar expects another 10 to 15 lines to come online this year and estimates that if all 1,300 Chinese lines eventually adopt digital coating, the multi-year printhead opportunity could approach £200 million.

Recurring Revenue from Replacement Cycles

Xaar emphasized that its growing installed base of printheads underpins an annuity-like revenue stream through replacements. As an example, a four-year printhead life translates into about a 25% annual replacement rate, creating recurring revenue that should smooth out lumpiness from new system wins.

Gross Margin and Profitability Progress

Group gross margin stands at roughly 40%, and the company reported a profit of around £0.8 million for the year, alongside 300 basis points of margin expansion in both Printhead and EPS. Management’s medium-term ambition is to push gross margin toward 50% and operating margin into the high teens, signaling confidence that scale and mix can materially enhance profitability.

R&D Commitment and Growth Investment

Xaar continues to invest heavily in innovation, spending about 8–10% of revenue on research and development to support new applications and maintain technological edge. The company also flagged elevated near-term capital expenditure aimed at removing manufacturing bottlenecks and ensuring it can respond quickly as demand ramps.

Broadening Application Pipeline

Revenue now comes from 21 distinct markets, a sharp contrast to Xaar’s past reliance on a single dominant application, which once amplified volatility. Recent collaborations span automotive applications via NextJet, desktop 3D printing with Flashforge, and digital cardboard printing, underscoring the breadth of the current pipeline.

EPS Revenue Decline but Margin Improvement

The EPS division saw a 10% revenue decline year-on-year after the unexpected end of a large, multi-year golf ball printing contract. However, restructuring efforts helped push EPS gross margin up by around 300 basis points, suggesting that while top-line recovery will take time, the unit is now on firmer profitability footing.

Meggajet’s Flat Performance

Meggajet delivered only about 2% revenue growth in FY 2025, leaving the division effectively flat and highlighting that not all parts of the portfolio are firing. Management did not overplay near-term catalysts here, implicitly signaling that Printhead and newer niches will remain the primary growth engines.

Limited Near-Term Revenue Visibility

Management cautioned that forecasting near-term revenue remains challenging because sales often depend on OEM customers, multi-step qualification cycles, and the timing of end-market adoption. While the long-term opportunity set appears attractive, investors should expect some quarter-to-quarter variability in reported numbers.

Elevated Inventory and Working Capital Focus

Xaar acknowledged that inventory levels are historically elevated and represent an area of active management attention. The company aims to lift stock turns by about 0.5 to 1 turn per year, which would free up cash and improve overall balance sheet efficiency over time.

Capital Intensity and CapEx Burden

CapEx was higher than usual in FY 2025 as Xaar invested in capacity and process improvements to unlock growth and speed sales. Management signaled that this elevated capital intensity will likely persist in the near term, which may weigh on free cash flow even as the business scales.

Margin Pressure in Consumer and Desktop Markets

The company highlighted that consumer-facing segments such as desktop 3D printers typically carry lower margins than industrial applications. While Xaar continues to price to value, management was clear that drop-through from these markets is less attractive, meaning mix will remain critical to the margin story.

IP Strategy and China Enforcement Challenges

Xaar discussed the complexity of enforcing intellectual property rights in China, where legal and practical constraints can limit protection. The company is focusing on selective patenting in jurisdictions where enforcement is viable, but this approach inevitably leaves some residual risk and reinforces the need for continual innovation.

Addressing the Boom-and-Bust Legacy

Management acknowledged that many investors still view Xaar as a boom-and-bust story tied to single large wins, a reputation built in earlier cycles. The strategy now is to demonstrate layered, repeatable revenue progression across many smaller applications, supported by replacement-driven recurring income, to build a more predictable profile.

Forward-Looking Guidance and Outlook

For the medium term, Xaar is guiding to annual revenue growth of roughly 10% or more, with at least half of that driven by volume rather than price. Over a three to five-year horizon, the company aims to lift gross margin from about 40% toward 50%, push operating margins into the high teens, maintain R&D at 8–10% of sales, gradually improve stock turns, and leverage opportunities like battery coating and desktop 3D to scale its recurring printhead base.

Xaar’s earnings call painted a picture of a company transitioning from cyclicality toward more diversified, margin-accretive growth, powered by its printhead technology. While near-term forecasting remains tricky and certain divisions lag, the combination of strong niche wins, expanding margins, and recurring replacement revenue left investors with a cautiously confident outlook on the group’s earnings trajectory.