The IndustrialMiddleman

We've just put February behind us, and 2026 has already been a very eventful year.

In early January, the United States carried out a bold military operation in Venezuela that resulted in the capture of Nicolás Maduro — a move that reshaped geopolitical dynamics across the hemisphere. At the same time, gold and silver reached new highs in January before crashing sharply on January 29th. Now, they are making their way back toward those highs.

As of the time of writing, tensions in the Middle East are escalating. The United States has moved significant military assets into the region as friction with Iran increases. There are signs that Russia and China may be providing support to Iran. If this situation escalates into a larger conflict, oil prices could surge — at least temporarily.

Then there's Mexico. The situation with the cartels remains unstable. If that conflict intensifies, silver production could be disrupted, which would likely push silver prices higher.

In my portfolio, I'm positioned for higher prices in oil, precious metals, copper, rare earths, and natural gas. But when I look at everything happening in the world, I see something else. I see a growing likelihood of escalation — and possibly even war. And even if large-scale war never materializes, I see a race unfolding between world superpowers for AI dominance, quantum computing leadership, and energy infrastructure buildout.

All of that requires manufacturing — and that's an area I've been wanting more exposure to in my portfolio. My wait has finally paid off. I've come across a young disruptor inside the manufacturing sector — one that has everything I've been looking for and more. It's asset-light. It uses AI to get smarter with every transaction. And it offers a modern solution to a sector that, until now, has largely felt dated and inefficient.

The company I'm referring to is Xometry. At its core, Xometry is a digital marketplace for custom, on-demand manufacturing.

If an engineer needs a bracket, housing, enclosure, or precision component made, they upload a design file. The platform instantly generates a price and delivery timeline. Behind the scenes, Xometry routes that job to one of thousands of manufacturers in its network — machine shops, metal fabricators, 3D printing facilities, injection molding specialists.

Xometry does not own factories. It does not carry inventory. It does not build workshops. Instead, it coordinates. Think of it as a software platform sitting on top of thousands of independent machine shops. Orders come in from customers. The platform matches each order with a shop that can make the part. Everything is coordinated digitally.

In many ways, it's similar to what Uber did for drivers or what Airbnb did for homeowners. Those platforms don't own the cars or the houses — they connect people and handle the system behind the scenes. In an industry traditionally defined by heavy assets, that structure stands out.

Not all manufacturing looks the same. There's mass production — large automated factories producing millions of identical products. There's contract manufacturing — big suppliers building at scale for global brands. And then there's custom manufacturing.

This is the world of made-to-spec parts, prototypes, and short production runs. Thousands of independent machine shops operate in this space. It's fragmented, relationship-driven, and often manual.

If a company needs a custom part made, it usually means searching for suppliers, sending design files back and forth, waiting for quotes, and hoping someone can take the job. It works. But it hasn't fully modernized. That fragmentation creates inefficiencies — and that's where opportunity lives.

If more production shifts closer to home over the next decade, this coordination layer becomes more important. The parts still need to be made. The question is who becomes the system that connects everything.

Xometry does not own the factories. It does not carry inventory. It does not build workshops. Xometry makes money by taking a spread on each transaction. A customer pays Xometry for a part. Xometry pays the shop that produces it. Xometry keeps the difference.

Because it doesn't own factories, the model is asset-light. It scales through artificial intelligence, software, data, and network growth rather than heavy capital spending. Every job that flows through the platform generates information:

• Which shops deliver on time
• How long certain materials really take
• Where pricing mistakes happen
• What demand patterns look like

Over time, the system improves. The more orders processed, the better pricing becomes. The better the matching. The more efficient the coordination. AI isn't just a buzzword here — it helps power the quoting and routing engine. With each new order, the system learns.

Full year 2025 was a record year. Revenue reached $686.6 million, up 26% year over year. The core marketplace business — where most transactions happen — grew even faster, up 30% to $629.6 million. Growth above 25% at this size is not small. It tells us demand is still strong and the platform is still gaining traction.

Gross profit for the year reached $268.8 million, up 25% from last year. Marketplace gross margin improved to 34.7%, up from 33.5% the year before. That may not sound dramatic. But margin expansion, even by one percentage point, matters a lot in a platform business. It means the system is getting more efficient.

The company still reported a net loss of $61.7 million for the full year. However, it also reported positive non-GAAP net income of $20.8 million, meaning the core operations are moving toward profitability once non-recurring and accounting items are adjusted. This is a business transitioning — not yet fully profitable, but clearly improving.

As of year-end, the company had cash and marketable securities totaling $219 million. Total current assets were $334.6 million versus total current liabilities of $88.9 million. In simple terms, the company has far more short-term assets than short-term obligations. That's a strong liquidity position. Convertible debt sits at about $327.5 million, but it is long-term and refinanced at a low interest rate. There is no immediate pressure.

For 2025, operating cash flow was positive $6.1 million. That's an important shift. The core business is no longer consuming cash from operations. However, the company invested heavily during the year, spending about $30.2 million on capital expenditures. After those investments, free cash flow remains negative.

But the more important detail is this: operating cash flow has already turned positive. That means the core engine is beginning to support itself. Future cash burn is increasingly tied to growth investments — not survival. That's a very different situation from a company that is structurally dependent on external financing.

On the day full-year 2025 results were released, the stock declined sharply from around $57 to approximately $44, a drop of roughly 23% in a single session. My plan was clear. I intended to initiate a position on a meaningful pullback — around 15% below recent levels — provided the fundamental story remained intact. The decline exceeded that threshold.

I am initiating a core position at these prices, representing about 2.5% of the portfolio. From a business standpoint, the quarter was strong. Revenue growth accelerated. Marketplace margins expanded. Operating cash flow turned positive for the year. The underlying execution remains solid.

The sell-off appears tied more to conservative 2026 guidance — "at least" 21% revenue growth — than to any deterioration in fundamentals. The market may have been looking for something closer to 30%, reflecting recent momentum.

That said, macro risks remain elevated. U.S.–Iran tensions, tariff uncertainty, layoffs across parts of the economy, and broader market volatility could still create turbulence in the months ahead. I am comfortable accepting that risk at this price.

Over time, during periods of consolidation, I may selectively sell covered calls against a portion of the position to reduce my cost basis. The intention, however, is long-term ownership.