Impinj anticipates Q3 product gross margin increase driven by M800 mix and lower wafer costs
Jul. 30, 2025 8:07 PM ET
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Earnings Call Insights: Impinj, Inc. (PI) Q2 2025
Management View- Chris Diorio, Co-Founder and CEO, highlighted strong second quarter results with revenue and adjusted EBITDA exceeding the upper end of guidance. He stated, "Endpoint ICs, reader ICs, readers and gateways all outperformed our expectations as category and use case expansion and 800 adoption and pull for Gen2X more than offset headwinds from tariffs, inflation and supply chain disruptions." He emphasized the success of the solutions strategy, with new deployments at a leading apparel retailer and a visionary European retailer driving meaningful reader revenue.
- Diorio explained that Gen2X, a set of extensions to the industry radio protocol, is "driving demand for our products and platform" by improving read range, speeding inventory, and enhancing loss analytics capabilities. He noted, "We expect these same demand drivers to deliver sequential revenue growth in the third quarter."
- Cary L. Baker, Chief Financial Officer, reported, "Second quarter revenue was $97.9 million, up 32% sequentially from $74.3 million in first quarter 2025 and down 4% year-over-year from $102.5 million in second quarter 2024." Baker added, "Second quarter adjusted EBITDA was $27.6 million compared with $6.5 million in first quarter 2025 and $26.8 million in second quarter 2024. Second quarter adjusted EBITDA margin was 28.2%, a new quarterly record."
Outlook- Management expects third quarter revenue between $91 million and $94 million. Baker indicated, "We expect adjusted EBITDA between $15.6 million and $17.1 million. On the bottom line, we expect non-GAAP net income between $14 million and $15.5 million, reflecting non-GAAP fully diluted earnings per share between $0.47 and $0.51."
- Diorio stated, "We expect to again deliver sequential endpoint IC product revenue growth" and "third quarter systems revenue to increase sequentially, led by strong reader and gateway demand."
- Baker projected, "We anticipate product gross margin to increase in the third quarter, driven by higher M800 mix and sell-through of lower-cost wafers. We anticipate further gross margin benefit from these factors in the fourth quarter."
Financial Results- Baker reported second quarter endpoint IC revenue of $84.6 million, up 38% sequentially and down 5% year-over-year. Systems revenue reached $13.3 million, up 2% sequentially and up 1% year-over-year.
- Second quarter gross margin was 60.4%, compared with 52.7% in first quarter 2025. Excluding licensing revenue, product gross margin was 52.6%. Total operating expense was $31.5 million, below expectations.
- Cash, cash equivalents, and investments at the end of the quarter totaled $260.5 million. Inventory declined to $96.2 million. Free cash flow was $27.3 million.
Q&A- Harsh V. Kumar, Piper Sandler: Asked about the impact of turns orders and margin drivers. Baker responded, "We did see more turns than we expected, but we also saw adjustments to delivery timing and location as our partners continue to optimize their geographic production strategies. ... We've assumed no additional turns at the midpoint of our guide."
- Kumar inquired further about margin factors. Baker explained, "The M800 continues to ramp. ... So we are starting to see the benefit of the M800 cost advantage in our gross margin. ... We're starting to see the benefit of those cost downs on the wafer side that we achieved in the first quarter."
- Christopher Rolland, Susquehanna: Asked about channel partner dynamics and Gen2X economics. Diorio confirmed alignment with partner observations and said for Gen2X, "It's focused on enabling our enterprise customers with solutions that we couldn't solve previously. ... You should focus on us using Gen2X to enterprise solutions that we couldn't do previously."
- Ezra Weener, Jefferies: Asked about overhead reading impact and channel inventory. Diorio stated, "The overhead reading opportunity is primarily a reader IC opportunity," and emphasized maintaining high endpoint IC market share. Baker added, "We actually saw channel inventory come down even as they built that optionality. ... We expect the weeks of channel inventory to roughly stay in this range for the foreseeable future."
- Troy Donavon Jensen, Cantor Fitzgerald: Inquired about logistics pipeline and license revenues. Diorio noted, "There are more opportunities in the logistics space," and Baker confirmed, "It was $16 million" in Q2 license revenue, up from $15 million last year.
- James Andrew Ricchiuti, Needham & Company: Asked about gross margin improvement and food opportunity timing. Baker pointed to "the M800 mix" and "lower-cost wafers" as drivers. Diorio said, "I'm about as excited as I could be about the food opportunity because the pace at which we see enterprises either piloting or being interested reminds me of what happened in the early days of retail apparel."
- Scott Wallace Searle, ROTH Capital: Asked about food sector pilots and systems pipeline. Diorio responded, "Item level food, I look to 2026 as to driving meaningful volumes," and discussed positive pilot results. He added, "We are putting a significant focus on [autonomous reading] as a company."
Sentiment Analysis- Analysts maintained a constructive but probing tone, pressing for more detail on margin drivers, channel dynamics, and the pace of new vertical adoption. They frequently referenced strong performance but sought clarity on the sustainability of recent gains and the timing of new opportunities.
- Management's tone was confident and forward-looking in both prepared remarks and Q&A. Diorio and Baker highlighted strong execution, new product adoption, and the ability to manage macro headwinds. Phrases such as "We feel good about our market position" and "We expect" appeared frequently, indicating confidence.
- Compared to the previous quarter, analyst sentiment was somewhat more focused on margin sustainability and inventory management, while management’s confidence appeared to have increased, with greater emphasis on sequential growth and gross margin expansion.
Quarter-over-Quarter Comparison- Guidance for Q3 revenue is slightly lower than the Q2 actual, but management projects sequential product revenue growth for endpoint IC and systems, emphasizing seasonality.
- Gross margin outlook has improved, with management now anticipating increases due to product mix and wafer cost reductions, versus previous guidance for flat margins.
- Management’s tone has shifted from caution in Q1 about macro and tariff uncertainties to increased optimism regarding product adoption, pilot conversion, and margin expansion in Q2.
- Analysts’ questions in the current quarter were more targeted on the drivers of margin improvement and inventory normalization compared to the previous quarter’s broader focus on tariff and macro risks.
Risks and Concerns- Management cited ongoing "tariff-related uncertainty and volatility" as a continuing risk.
- Macro softness and potential supply chain disruptions remain challenges, but management expressed confidence in their channel inventory position and strategic responses to geographic production shifts.
- Analysts raised concerns about the pace of food sector adoption, the timeline for pilot conversion to full deployments, and the sustainability of recent margin gains.
Final Takeaway
Impinj management underscored robust Q2 performance, record margins, and momentum in key product lines, with new customer wins and expanding pilots in logistics and food sectors. Looking ahead, the company expects sequential growth in core product revenues, improved gross margins driven by M800 mix and lower wafer costs, and continued focus on enterprise solutions despite macro and tariff-related headwinds. The team remains confident in its strategy, execution, and expanding market opportunity.
Read the full Earnings Call Transcript |
