3D Printing Financials: Nikon’s Digital Manufacturing Revenue Grows 77% as Sam O’Leary Moves to Supervisory Board

Nikon (TYO: 7731) just announced its earnings for Q2 (fiscal year ending March ’27), and we learned that the digital manufacturing business grew revenue by 77 percent to ¥17.4 billion (~$110 million) while narrowing its operating loss from ¥8.9 billion (~$57 million) to ¥2.2 billion (~$14 million). Shrinking the loss that much is especially impressive given how much the revenue grew, and these numbers seem fairly positive following the news from earlier in the year that the digital manufacturing unit took a $591 million impairment loss, due mainly to Nikon SLM Solutions.

Relevantly, it was just announced that Nikon will be replacing Sam O’Leary as CEO, with O’Leary moving to a role on the company’s supervisory board. Chief Financial and Administration Officer Jan-Niklas Thielmann and Chief Technology and Engineering Officer Simone Castellani will now lead the company as co-presidents. Head of Nikon Advanced Manufacturing Hamid Zarringhalam characterized this “as a continuation, not a change of direction.”

It may be a continuation strategically, but I think it’s at least somewhat of a change of direction in that Nikon Advanced Manufacturing now appears to be fully in the driver’s seat in terms of what the company is doing with metal AM. Or rather, while it isn’t a change in direction in terms of the company’s long-term strategy, that long-term strategy seems to be built around treating machine sales as a component within an applications-first approach, as opposed to treating advanced manufacturing and machine sales as two parallel, equivalent, and overlapping but ultimately distinct businesses.

This might sound somewhat counterintuitive, as the earnings report credited higher 3D printer sales as the reason behind the increased revenue. However, consider the recent announcement from Nikon that it got a Cornerstone Other Transaction Agreement (COTA) from the Pentagon to develop a custom version of the NXG 600E specifically to support domestic Tomahawk production capacity.

That doesn’t represent a sale of machines so much as it does a sale of applications development that happens to include the sale of customized machines. Without Nikon Advanced Manufacturing’s ability to manage the joint work of all relevant partners in developing the Tomahawk components—materials, qualification, etc.—the machine sales wouldn’t happen.

What the AM industry is learning, and what I think we’ll see from Nikon going forward, is that being an OEM (especially in large-format, and especially in metal) only makes sense if you also have a sufficient level of organizational capacity for guiding your customers through all the phases of delivering finished parts at scale. This is in fact what actually makes sense about a company like Nikon, which sells precision equipment that requires a high level of technology integration competency on behalf of the supplier, being involved in metal AM.

Along those lines, in the long run, I think the best opportunity for Nikon’s digital manufacturing business is to build a base-of-operations that supports the rest of Nikon’s precision equipment sales. This isn’t to say that I think it should transform into an in-house service bureau for Nikon as a whole, but rather that if Nikon Advanced Manufacturing can directly contribute to Nikon’s semiconductor capital equipment sales, for instance, by 3D printing replacement parts for chip manufacturers, that would be a very logical way to work towards self-funding the rest of the company’s operations.

Meanwhile, the company is making substantial progress on its plan to target strategic sectors, starting with aerospace and defense, so the basis for a turnaround definitely looks to be in place. I’ll be watching to see if there are more deals like the one for Tomahawks, whether they’re from government customers or from the private sector. Nikon Advanced Manufacturing now has a relationship with all three branches of the US military and is being awarded more opportunities for materials qualification, which is always where the seeds to bring in long-term business are sown. Zarringhalam said at one point that Nikon Advanced Manufacturing has to become “a billion-dollar business.” If what it has done this quarter can become the new baseline, that starts to become a realistic target.