Xaar (LON:XAR) reported 9.2% like-for-like revenue growth in the first half of 2026, with growth across its Printhead, Megnajet and EPS businesses, as the industrial inkjet technology company returned to an adjusted pre-tax profit.
Chief Executive Officer John Mills said the performance came despite economic uncertainty and disruption in global markets, including the effects of events in the Middle East. Printhead revenue rose 5.5%, supported by new applications for the company’s technology, while group gross margin improved by 220 basis points, according to Chief Financial Officer Paul James.
Printhead growth and broader application base
Mills said Xaar’s strategy is centered on applications requiring its printheads to handle higher-viscosity and higher-pigment fluids than competing technologies can accommodate. The company does not intend to compete directly with larger manufacturers such as Epson, Ricoh and Fuji in their established markets, he said, but instead aims to pursue industrial uses where its technology has a differentiated role.
Xaar said it now serves 21 applications across multiple market sectors, compared with a business historically more concentrated in ceramics and certain coding and marking markets. Mills said the broader portfolio provides greater geographic and application diversity and could make the business more resilient to economic volatility.
The company emphasized that adoption cycles in industrial markets can be lengthy. In sectors such as semiconductors and solar panels, a printhead must be incorporated into a fluid-development process, tested and qualified within a broader manufacturing workflow before commercial volumes can begin. Mills said such processes can take years, but that qualification also makes the technology “incredibly sticky” once it has been adopted.
The installed base can subsequently produce replacement-printhead sales, while Xaar is also increasingly participating in fluid revenue as it works with customers on application development, management said.
- PCB conformal coating generated its first revenue after roughly three years of development, according to Mills.
- Ceramic glaze applications are supporting stabilization and modest growth in the legacy ceramics market.
- Five semiconductor companies are conducting trials with Xaar, though Mills said this area is not expected to generate material near-term revenue.
- Solar-panel applications are generating relatively small revenues and may require several years for wider deployment.
Desktop 3D launch delayed, inventory builds
Xaar had expected to discuss the launch of Flashforge’s Desktop 3D product during the interim-results presentation, but Mills said additional delays had pushed back the rollout. He characterized the outstanding issues as relatively minor and said the companies were focused on ensuring the product delivers the intended customer experience at launch.
The company said it is in the pre-launch phase and has received orders for initial production batches. James said the launch is expected in the second half, although neither executive provided a specific date.
The delayed launch was the principal reason for a £4.3 million adjusted free-cash-flow outflow during the first half. Xaar has built inventory to support the introduction, and James said the inventory position should reverse sharply once shipments commence. The inventory increase was “predominantly Flashforge,” he said.
Mills noted that approximately 8.8 million desktop 3D printers were shipped last year, including 700,000 units by Flashforge. He said estimates suggest full-color printing could ultimately represent 10% of the market, while cautioning that the opportunity will depend on product quality and consumer demand.
Management also said three other companies are developing similar products that could follow over the next 12 months.
Margins, manufacturing and liquidity
James said improved gross margin reflected pricing discipline, operating leverage and work on supply-chain and procurement efficiencies. Xaar’s approach is to offer more favorable pricing to early customers that assume development risk in a new market, then seek stronger pricing with subsequent original-equipment manufacturers in the same segment.
Megnajet revenue rose 27% year over year and its gross margin increased by 120 basis points. James said the business benefited from both new customers and increased demand from existing customers for supporting systems and components.
Operating expenses rose 5.7%, reflecting investment in sales, marketing and research and development, while general and administrative expenses declined 1.6% as back-office costs were reduced. James said Xaar’s longer-term gross-margin ambition was in the high-40% range, potentially reaching 50%, while noting that there remained further opportunities in procurement and supply-chain management.
The company also increased capital expenditure to expand capacity, including at its Dongguan, China facility. Mills said the site provides back-end printhead manufacturing and ink-system production, which has changed the cost base for certain products and should improve regional responsiveness. James said future near-term investment requirements at the facility were expected to be in the six-figure range rather than millions of pounds.
Xaar ended the period with net debt of £0.1 million. The company expanded its revolving credit facility to £10 million from £5 million, increased the EBITDA covenant to three times from two times, and added an uncommitted accordion facility and a larger invoice-discounting facility. James said liquidity was substantial.
Target markets face uneven adoption
In electric-vehicle and energy-storage batteries, Mills said Xaar technology has been installed on approximately 13 or 14 new lines. He said adoption is strongest in larger energy-storage batteries and cylindrical batteries, while replacement of existing production lines is progressing more slowly because of the high capital cost for automotive manufacturers.
Management expects a modest increase in battery-related activity next year, with Mills saying the number of new lines could potentially double. Automotive coating projects in Europe have progressed more slowly amid pressure on the region’s automotive industry and weaker investment confidence, he added.
Xaar is also developing a high-temperature printhead for lower-cost wax applications. Mills said prototype testing has demonstrated the ability to jet at high temperatures, with customer samples expected to follow. He estimated that bringing the product to market could take 12 to 18 months and said the addressable market could be materially larger than the existing jewelry-focused wax market.
Looking ahead, Mills said capital purchases such as printers can be deferred during periods of market instability, which can in turn affect printhead orders from equipment manufacturers. Still, he said Xaar’s management and board remained confident about the next six months and the company’s longer-term opportunity in industrial applications.
About Xaar (LON:XAR)
Xaar plc designs, develops, manufactures, markets, and sells printheads and associated products in Europe, the Middle East, Africa, Asia, and the Americas. It operates through four segments: Printhead, Product Print Systems, Digital Imaging, and Ink Supply Systems segments. The company offers print head products; digital imaging solutions, comprising digital inkjet label presses and digital pathology scanners; industrial ink management and supply systems for digital inkjet; electronic products; industrial printing machines; and system components, such as ink system test kit, print manager, hydra ink supply system, midas ink supply system, inkjet development system, head personality card 1000, and 2001+ head personality card.
