World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

IPG Photonics CorporationThe Fiber Laser Company™

(NASDAQ: IPGP)

Needham 4th Annual

Advanced Industrial Technologies Conference

August 6, 2015

Safe Harbor Statement

2

The statements in this presentation that relate to future plans, market forecasts, events or performance are forward-looking statements. These statements involve risks and uncertainties, including, risks associated with the strength or weakness of the business conditions in industries and geographic markets that IPG serves, particularly the effect of downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; IPG's ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG's products; inability to manage risks associated with international customers and operations; foreign currency fluctuations; high levels of fixed costs from IPG's vertical integration; the appropriateness of IPG's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; government regulations and trade sanctions; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K and its periodic reports filed with the SEC, as applicable. Actual results, events and performance may differ materially. Readers are cautioned not to rely on the forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

IPG Overview

Global leader in industrial fiber lasers

FY 2014 sales of $770 million; YOY growth of 19%

$3.79 diluted EPS; up 28% YOY

Growing acceptance of fiber lasers replacing traditional lasers

Products are sold to OEMs, systems integrators and end

users for use in many industries

Global operations with over 3,000 employees

3

Investment Highlights

Expanding $4.7 billion opportunity for all lasers Approximate average annual growth rate of 6%

Recognized leader in the rapidly growing fiber laser market Estimated 15% CAGR from 2015 to 2019

Significant competitive advantages First mover advantage

Performance, product range and reliability

Lowest cost (vertically integrated model)

Strong IP position

Vertical integration and direct sales model drives

industry-leading margins (54.1% GM in FY 2014)

Broad geographies, end markets and applications Asia & Australia 52%, Europe 33%, North & South America 15%

4

The technology leader and most profitable

company in the rapidly growing fiber laser market

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

All Lasers Fiber Lasers All Lasers Fiber Lasers

2014 2019

Forecast

Materials Processing Advanced Applications Medical

5

Rapidly Taking Share in Large, Existing Laser Markets

$4,670

$1,090

$6,300

$2,200

____________________

Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates.

Fiber, 23%

2014

Fiber, 35%

2019Forecast

(000)

Materials Processing – Diverse End Uses and Customers

6

Automotive

General

Manufacturing

Heavy Industry

Aerospace

Semi/

Electronics

Consumer

7

Materials Processing Laser Market

____________________

Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates.

Opportunity for Continued Fiber Laser Market Share Gain is Significant

$1,420

$1,850

$430

$560

$390

$580

$400

$590 $550

$1,250

$280

$400

$110

$310

$30

$150 *

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2014 2019 2014 2019 2014 2019 2014 2019

High Power Marking Fine Processing Addressable Micro Processing

All Lasers Fiber Lasers

(US$ mm)

(Excludes lithography)

*2019 Micro Processing is IPGP estimate

based on fiber laser potential to penetrate

25% of overall market.

Fiber Laser Penetration of High Power Applications

8

7%

9%

17%

40%

27%

Welding Applications

Power Train

Tube Welding

Car Body ScannerWelding

Car Body SeamWelding / Brazing

Other

81%

3% 16%

Cutting Applications

Flat SheetCutting

Tube Cutting

3D Cutting

$410

$970

$140 $280

$710

$440

$160

$160

0%

10%

20%

30%

40%

50%

60%

70%

80%

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

2014 2019 2014 2019

Cutting Welding

Fiber Lasers All Other Lasers Fiber Market Share

____________________

Source: Laser Focus World, Industrial Laser Solutions, Strategies Unlimited, Optech Consulting and IPGP estimates.

(US$ mm)

Other Applications Provide Potential Additional Longer

Term Growth Opportunities

9

$160 $140

$60

$320

$340

$730

Displays & Light Shows

Sensors, LIDAR &Instruments

Mid-IR Spectroscopy

R&D

Defense

Medical

2014

$510

$210

$100

$340

$440

$1,120

Displays & Light Shows

Sensors, LIDAR &Instruments

Mid-IR Spectroscopy

R&D

Defense

Medical

2019

(US$ mm)

____________________

Source: Strategies Unlimited, IPG estimate of potentially addressable market

Fiber participation is relatively low in these other applications. Longer term opportunity will depend

on successful product development and market acceptance of these products.

A Diverse Mix with Year-over-Year Growth

10

$134.9

$344.1

$53.3

$13.8 $21.5

$131.4

$426.0

$79.7

$13.3

$34.9 $62.0

$246.1

$48.5

$7.2 $25.7

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

Pulsed High-Power Medium-Power Low-Power QCW

($US mm)

IPG Sales by Product Lines

2013 2014 YTD 2015

New spectral ranges (wavelengths) and ultra-short pulse

durations U.V. & higher power Green

Nano, Pico & Femto-Second Lasers at different wavelengths with high peak powers

Mid Infra-Red

Improved reliability

Improved electrical efficiency Eco Laser for material processing with electrical efficiency greater than 40%

New optical delivery systems Welding & Cutting Heads

Compact Switches

Couplers

Collimators

Macro-systems Materials Processing

Opens up new applications and revenue streams starting for 2014 and longer term

New Product Introductions

11

Comparison: Cutting with Fiber & CO2 Lasers

12

0.5 mmGALVANIZED

1 mmSTAINLESS

STEEL

2 mmZINC

COATED

3 mmSTEEL

5 mmCOPPER

5 mmSTAINLESS

STEEL

18 mmSTEEL

3 kW Fiber4 kW CO2

+150%

+130%

+110%

+50%

Faster Cutting Speed Fiber’s higher absorption and

excellent beam quality

enable:

Faster cutting speed

with less power

Processing of a wider

variety of materials

____________________

Source: Salvagnini

3kW Fiber 4kW CO2

Energy Consumables Cutting Gas

Maintenance Compressed Air Laser Gas

-55%

Improved productivity and

significantly less energy

consumption = lower cost

per part

Lower Processing Costs

Additive Manufacturing (3D Printing)

Selective Laser Melting or Sintering (SLM/SLS) of metals and metallic alloys are the fastest

growth segments in additive manufacturing (AM) industry

Previous growth in this market has come from plastics whereas metal processes are starting to gain significant traction

Fiber lasers are a critical component of SLS/SLM additive manufacturing equipment with IPG

having achieved strong market position for metal processes

New cost-effective IPG high power green lasers address shortcomings of current processes

(surface roughness, parts tolerances) critical for aerospace and other industries

Move towards higher powers – up to 10-kilowatts – will drive market size

Airbus A-380 3D printed

pneumatic manifold

13

Total Plastics & Metals

$0

$2

$4

$6

$8

$10

$12

2013 2015 2017 2019 2020

3D Printer Forecast($ in billions)

CAGR: ~23%

Source: Wohler’s Report

14

Source: AirforceTimes

Ablates paint from the surface

Vacuum removes 99.9% of residue

Does not require chemicals which produce toxic sludge or

plastic beads

Manual paint stripping requires:

F-16 4 people

16 to 18 people for a C-130

Dept. of Defense current paint stripping costs > $800

million per year (2015 Air Force LCMC)

Many applications outside of aerospace:

Cleaning of molds, casts, tanks, pipes & other

surfaces

New generation of Nano-Second Pulsed laser with

average power up to 4 kilowatt

Pulsed product limits thermal damage to cleaned

surface

Laser Ablation for Paint Stripping and Cleaning

Sources:

*Potential alternative report for the portable handheld laser small area

supplemental coating removal system, prepared for USAF by SAIC, Feb. 2001

** Penn State Applied Research laboratory, Automated Rotor Blade Stripping

System (ARBSS) study for the USN, 2005

Environmental Benefits:

0

5

10

Media Blast* Solvent* LaserAblation**

Solid

waste

(lb

.) g

enera

ted

Per

1 lb.

on p

ain

t str

ipped

Paint Stripping Method

Plus 165 lbs of Liquid Waste

IPG’s Defensible Laser Position

15

Strong IP Portfolio

Vertical Integrated Business Model

Manufacturing Scale

Diode Production a Significant Advantage

16

High volume production levels of pump diodes, proprietary processes

and use of unique chip and package designs allows IPG to increase

yields, lower component costs and assure high quality

____________________

Source: IPGP estimates.

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

2009 2010 2011 2012 2013 2014

% C

ha

ng

e in

Pa

ck

ag

ed

Dio

de

Co

st

Te

ste

d C

hip

s P

rod

uc

ed

Decrease in Packaged Diode Cost/Watt Consistently Averages 20%

Tested Chip Production Cost/watt % decrease (base yr 2009) Annual cost decrease %

Global Sales and Production Capabilities

____________________

Please note: IPG has 4 offices in China and 2 offices in Japan. Map excludes all rep offices

Sales & Support

R&D, Mfg.,

Sales & Service

HQ, R&D, Mfg.

Sales & Service

17

10

Application

Centers

worldwide0

50

100

150

200

2009 2010 2011 2012 2013 2014

Sales and Marketing Headcount

18

Three Distribution Channels

OEMs/Integrators Direct Sales Representatives

End User

End User

End User

End User

End User

End User

End User

End User

Factory 1

Factory 2

Factory 3

End User

OEM

Large Manuf.

OEM

Integrator

Representatives

Direct Sales

Direct Sales

Direct Sales

Leveraged Sales Model Maximizes Market Reach

Unique Technology Driving Market Adoption

Fiber Laser

Laser

Output

Fiber Bragg GratingsActive FibersCouplersDiodes

Modular

Scalable

Efficient

Compact

Proprietary Design and Components

High Power Fiber Laser Assembly

Scalable kilowatt

laser modules

19

Vertical Integration Drives Significant Benefits

2020

Fab Operations

Semiconductor Wafer Growth

Diode Processing, Chip Mounting

& Burn-In

Laser diode

Packaging

Up to 120-watts of

power

Optical Preform

Silica based glass

MCVD method

Dope with rare earth ions

Fiber Draw

Draw towers

Fiber Block

Modules

Up to 2000 Watts

Final Assembly

Coupling

Final burn in

Shipment

Components

Bragg Gratings

Isolators

Couplers

Deep in technology

Deep in experience

Vertical Integration

21

Optical Delivery

Systems: Welding

& Cutting Heads,

Scanners, process

fibers

World Leadership in High Power Fiber Lasers

www.ipgphotonics.com

Financial Overview

23

Investment Highlights 2013 – 2014 Revenue growth ~19%

27% CAGR from 2010 to 2014

Highly diversified revenue stream and business model

Customers, powers, geographies, applications

Vertically integrated model driving gross margin

Significant operating leverage

Strategically focused and efficient R&D that creates value

Track record of profitability and financial discipline

Strong return on invested capital (excluding cash)

39% in 2014

Financial Highlights

Sales and Gross Margin Growth

24

____________________

(1) Gross margin includes stock-based compensation of $0.7mm, $1.7mm, $2.2mm, $3.2mm, $4.2mm and $2.5mm for

2010, 2011, 2012, 2013, 2014 and YTD 2015, respectively.

$299.3

$474.5

$562.5

$648.0

$769.8

$434.1

48.9%

54.2% 54.2%

52.5%

54.1% 54.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

$0

$100

$200

$300

$400

$500

$600

$700

$800

2010 2011 2012 2013 2014 YTD 2015

Gross Margin(%)(1)Sales ($ mm)

Revenue ($mm) Gross Margin

Operating Leverage Improvement

25

$299.3

$474.5

$562.5

$648.0

$769.8

$434.1

$80.4

$175.5

$208.9 $218.1

$283.8

$169.5

26.9%

37.0% 37.1%

33.7%

36.9%39.0%(2)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

$0

$100

$200

$300

$400

$500

$600

$700

$800

2010 2011 2012 2013 2014 YTD 2015

Operating Margin(1)

(%)Sales & Operating Income(1) ($mm)

Revenue ($mm) Operating Income ($mm) Operating Margin____________________

(1) Operating income includes stock-based compensation of $3.2mm, $8.0mm, $8.6mm, $11.7mm, $15.2mm and $8.9mm for

2010, 2011, 2012, 2013, 2014 and YTD 2015, respectively.

(2) YTD 2015 operating margin includes FX gains of $5.6mm

(37.8% excluding

FX gains)

13,998

17,686

20,938 21,106

24,847

1,636

3,467

4,935

7,278

10,138

0

5,000

10,000

15,000

20,000

25,000

30,000

2010 2011 2012 2013 2014

Un

its

So

ld

2010 – 2014 Total Units Sold CAGR: 15%2010 – 2014 KW Power Sold CAGR: 58%

Total Units Sold KW Power Sold

Acceptance Drives High-Power Growth

____________________Note: KiloWatt of power sold only represents medium, QCW and high-power sales.

Units excludes telecom components and component PLDs

26

Strong Cash and Liquidity Position

Long-term CapEx target <10% of revenue

Investments in product and manufacturing technology development,

capacity expansion and sales and service infrastructure

27

($ in thousands) As of December 31, 2014 As of June 30, 2015

Cash and cash equivalents $522,150 $571,508

Total assets $1,210,887 $1,334,541

Revolving line-of-credit facilities $2,631 $1,600

Long-term debt, including current portion $33,000 $20,667

Stockholders' equity $1,046,561 $1,163,755

Investment Highlights

Expanding $4.7 billion opportunity for all lasers Approximate average annual growth rate of 6%

Recognized leader in the rapidly growing fiber laser market 27% CAGR from 2010 to 2014

19% growth from 2013 to 2014

Significant competitive advantages First mover advantage

Performance, product range and reliability

Lowest cost (vertically integrated model)

Strong IP position

Vertical integration and direct sales model drives

industry-leading margins (54.1% GM in FY 2014)

Broad geographies, end markets and applications Asia & Australia 52%, Europe 33%, North & South America 15%

28

The technology leader and most profitable

company in the rapidly growing fiber laser market