Welding and cutting equipment manufacturer ESAB (NYSE:ESAB) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 8.1% year on year to $727.8 million. Its non-GAAP profit of $1.36 per share was 6.9% above analysts’ consensus estimates.
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ESAB (ESAB) Q3 CY2025 Highlights:
- Revenue: $727.8 million vs analyst estimates of $696 million (8.1% year-on-year growth, 4.6% beat)
- Adjusted EPS: $1.36 vs analyst estimates of $1.27 (6.9% beat)
- Adjusted EBITDA: $139.5 million vs analyst estimates of $129.9 million (19.2% margin, 7.4% beat)
- Management slightly raised its full-year Adjusted EPS guidance to $5.25 at the midpoint
- EBITDA guidance for the full year is $537.5 million at the midpoint, in line with analyst expectations
- Operating Margin: 14.6%, down from 15.7% in the same quarter last year
- Organic Revenue rose 1.6% year on year vs analyst estimates of flat growth (116.7 basis point beat)
- Market Capitalization: $6.94 billion
StockStory’s Take
ESAB’s Q3 results for 2025 came in above Wall Street’s revenue and profit expectations, but the market reacted negatively, likely due to margin pressures and investor concerns around cost headwinds. Management pointed to a return to positive organic growth, especially in the Americas and EMEA/APAC regions, as well as the early completion of the EWM acquisition. CEO Shyam Kambeyanda emphasized operational execution, highlighting new product momentum and the integration of EWM’s advanced welding technologies as key contributors to the quarter. However, ongoing tariff impacts and increased investments in sales initiatives weighed on operating margins.
Looking ahead, ESAB’s updated guidance reflects confidence in both its acquisition strategy and its ability to drive higher returns through margin expansion initiatives. Management expects further gains from restructuring activities, manufacturing shifts to offset tariffs, and the integration of EWM’s high-margin products. CFO Kevin Johnson noted that additional investments in the EWM business are anticipated over the next year, aiming for a return on invested capital above 10% within three years. Kambeyanda stated, “We’re focusing on both productivity improvements and growth initiatives to position ESAB for stronger results as we enter 2026.”
Key Insights from Management’s Remarks
Management credited the quarter’s improved performance to the successful integration of recent acquisitions, operational discipline through EBX, and resilient demand in high-growth markets, while acknowledging margin headwinds from tariffs and ongoing investment.
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EWM acquisition accelerates equipment shift: The addition of EWM, a provider of advanced arc welding and robotic solutions, is shaping ESAB's push into higher-margin equipment and automation. Management described EWM’s gross margins as “better than 45%” and cited early cross-selling opportunities, especially in Europe and North America. EWM’s React technology, which enables faster weld speeds and improved quality, is seen as a differentiator for ESAB’s product portfolio.
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Americas segment faces margin drag: While the U.S. delivered mid-single-digit growth in equipment and automation, the Americas’ EBITDA margin declined due to late-quarter tariff impacts and increased investments in sales and AI initiatives. Management is shifting manufacturing to “region for region” to mitigate future tariff effects, and expects restructuring to drive margin improvement in 2026.
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Strong EMEA and APAC momentum: EMEA and APAC regions showed volume growth of 4%, led by robust demand in Asia, India, and the Middle East. Management noted share gains in Europe, with equipment and automation products driving high single-digit growth. Recent acquisitions are strengthening ESAB’s reach and competitiveness across these markets.
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Workflow solutions and product launches: Management highlighted the launch of new products, including an engine-driven welder, the Edge product line, and workflow solutions that bundle equipment, consumables, and digital overlays. These solutions are now certified by major customers, supporting both equipment and consumables sales.
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EBX-driven operational focus: ESAB’s proprietary EBX management system continues to guide pricing, supply chain efficiency, and productivity initiatives. The integration of AI into EBX is expected to raise process standards and support the company’s goal of exceeding 22% EBITDA margins by 2028.
Drivers of Future Performance
ESAB expects future performance to be shaped by integration of recent acquisitions, margin recovery efforts, and continued investment in automation and workflow solutions.
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Margin expansion initiatives: Management plans to complete manufacturing shifts and restructuring projects early next year, targeting margin improvement in the Americas and leveraging EBX for global cost discipline. These efforts are expected to offset tariff-related headwinds and contribute to the long-term EBITDA margin goal of over 22% by 2028.
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EWM integration and product synergies: The company will continue investing in EWM to drive cross-selling and unlock synergies across equipment and consumables. Management aims for a return on invested capital above 10% within three years and expects EWM’s high-margin, innovative products to strengthen ESAB’s position, especially in Europe and North America.
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Growth in high-potential markets: ESAB anticipates continued volume growth in high-potential regions such as Asia, India, and the Middle East, supported by infrastructure, defense, and energy investments. Management believes the pipeline remains robust, with recent wins in workflow solutions positioning the company for broader adoption and future share gains.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will focus on (1) the pace and success of EWM integration and cross-selling, (2) whether ESAB can deliver margin recovery in the Americas through restructuring and manufacturing moves, and (3) sustained order momentum in EMEA and APAC, especially in high-growth sectors like infrastructure and defense. Progress on AI-driven workflow solutions and new product adoption will also be important markers of execution.
ESAB currently trades at $114.34, down from $121.19 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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