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nLIGHT's second-quarter revenue shot up 22% to $61.74 million, topping forecasts and fueling fresh excitement - but some investors are wondering if the stock's momentum is getting ahead of itself.

What does this mean?

Fuelled by red-hot demand in aerospace and defense, nLIGHT blew past both revenue and profit expectations in the latest quarter. Adjusted EBITDA flipped positive to $5.55 million, and gross margin held strong at 29.9%. Powerful growth in laser sensing and directed energy systems powered the results, yet the company is still posting a net loss of $3.59 million and an operating margin in the red. Management predicts aerospace and defense sales will climb at least 40% this year, with third-quarter revenue expected in the $62 to $67 million range. Despite a unanimous 'buy' from analysts, the recent rally has shares trading nearly 20% above the average 12-month target, making some on Wall Street cautious about the current valuation.

nLIGHT's sharp rally has left investors debating how much higher the stock can climb from here. Strong demand in specialty markets like aerospace and defense is impressive, but a pricey share value alongside ongoing losses is giving folks pause. Even with most analysts bullish, a price well above target levels suggests market optimism could be overextended - so investors are now considering whether near-term results can keep justifying the premium.

The bigger picture: Defense tech spending lifts the sector.

Global appetite for advanced military tech is energizing innovators like nLIGHT, echoing across the broader sector. These gains highlight how ongoing investments in areas like laser-based defense and sensors could offer sustained tailwinds. But that momentum only lasts if companies can translate sales growth into steady profits - the real test for tech providers hoping to cement a long-term edge.