American manufacturing is accelerating. China, the world's largest industrial robotics market, is showing signs of weakness. And Washington is reconsidering the country's dependence on imported robots and machinery.
All three developments emerged over the past week.
Meanwhile, several companies in the Black Scarab Physical AI 15 delivered new financial results, announced acquisitions, or expanded their industrial technology offerings.
Together, they paint a complicated but increasingly interesting picture for investors. The economic environment for automation is improving in some markets, while trade uncertainty and competitive pressures are creating new questions about which suppliers will benefit.
The Week in Markets
The Black Scarab Physical AI 15 declined 2.34% during the week ending November 3, compared with a 1.99% decline for the S&P 500 and a 4.18% decline for the Nasdaq Composite.
October 28–November 3
Weekly market performance
October 27 close to November 3 close. Tracked price returns exclude dividends and currency movements. Tokyo was closed November 3; Japanese constituents use November 2 closes.
Inovance gained 6.02%, while Teradyne fell 16.79%. Keyence declined 5.30%, and Ouster dropped 11.62%.
What makes the week interesting is that several companies reported encouraging operating developments despite weaker share prices.
Keyence delivered exceptional earnings growth, and Ouster reported a substantial increase in sensor shipments. Ouster's results were released after the November 3 market close, so they were not reflected in our weekly performance figures.
For investors, the contrast is a reminder that strong company performance and strong stock performance aren't necessarily the same thing. Expectations and valuations matter alongside operating results.
The Economic Backdrop: Two Manufacturing Markets Moving in Different Directions
On November 2, the Institute for Supply Management reported that the U.S. Manufacturing PMI increased to 55.5 in October, its tenth consecutive month of expansion.
The production index reached 59.0, its highest reading since November 2021.
A reading above 50 indicates expansion, rather than a percentage increase in actual factory output. Still, the figures suggest that American manufacturing activity is gaining momentum.
China reported a different picture. Its manufacturing PMI declined to 49.3, signaling contraction, with both production and new orders weakening.
This divergence deserves attention.
China installed approximately 354,000 industrial robots in 2025, more than nine times the U.S. total. It remains the world's largest market for industrial robotics, making its manufacturing outlook particularly important for global equipment suppliers.
For companies such as FANUC, Yaskawa, Estun, and Inovance, the geographic distribution of industrial investment could have a significant influence on future orders.
But the week's biggest macroeconomic development may have come from Washington.
On October 28, the White House formally identified reliance on imported robotics and industrial machinery as a national-security concern. Officials were directed to negotiate with trading partners, with a progress update required within 180 days.
No new tariffs were imposed immediately.
The potential consequences cut both ways. Policies encouraging domestic equipment production could benefit American industrial suppliers. Restrictions that increase machinery prices, however, could make automation more expensive for the factories Washington wants to modernize.
This creates an important variable for Japanese manufacturers such as FANUC and Yaskawa, as well as American suppliers including Rockwell Automation.
Keyence delivered particularly strong results. Six-month revenue increased 34.9%, while operating profit grew 50%. Its operating margin reached 55.5%, meaning the company generated approximately $55.50 of operating profit for every $100 in sales.
That is an unusually profitable industrial technology business. More importantly, profits grew faster than revenue, suggesting Keyence is benefiting from increasing operating efficiency as its business expands.
Estun Automation presented a more complicated picture. Third-quarter revenue fell 12.43%, yet attributable net profit increased 21.54%.
At first glance, that sounds encouraging. But falling sales alongside rising profits deserve closer examination. Estun's nine-month disclosures also included investment valuation gains, accounting adjustments, and a 17.14% decline in operating cash flow.
We would want to understand how much of the improvement comes from the underlying business before treating the earnings growth as evidence of stronger robotics demand.
Teradyne's latest filing provided more detail about its Robotics division. Quarterly revenue grew 27.6% to $95.8 million, and the business generated a modest $345,000 in pretax profit after losing $17.6 million a year earlier.
The improvement is meaningful, although profitability remains narrow. Higher sales volumes and lower costs have brought the division across the breakeven line. The next challenge is building a more substantial earnings base.
Ouster delivered one of the week's most important growth updates. Quarterly revenue increased 50% to $59.3 million, supported by industrial and robotics customers. The company shipped more than 27,000 lidar and camera sensors.
Its net loss narrowed to $14.2 million from $21.7 million.
But operating cash consumption over the first nine months nearly doubled to $49.4 million. The company has substantial liquidity, partly supported by equity financing, but continued growth will need to translate into stronger cash generation.
Across these four companies, we see very different operating conditions: exceptional profitability at Keyence, improving robotics economics at Teradyne, strong growth but continued cash consumption at Ouster, and mixed financial signals at Estun.
There isn't one financial story playing out across the Physical AI industry.
Industry Developments: The Competition Is Expanding Beyond Robots
Financial results weren't the only important developments.
On October 29, Rockwell Automation expanded its SecureOT cybersecurity offering for industrial equipment manufacturers. As factories connect more machines and software systems, protecting those systems becomes part of the automation investment.
Siemens is pursuing another opportunity.
On November 3, India's JSW Greentech selected Siemens Xcelerator software to connect electric-vehicle engineering, manufacturing, and supplier operations.
The contract value wasn't disclosed, but the announcement illustrates how industrial software is becoming increasingly important alongside physical machinery.
An interesting development reported by Black Scarab this week came from SAP, which is connecting enterprise software to robots and autonomous inspection systems.
This creates a competitive question for Siemens and Rockwell. As factories become more intelligent, established industrial technology companies may find themselves competing and collaborating with enterprise software providers over the systems that coordinate factory operations.
Yaskawa offered a different example of technological progress. Its newly disclosed autonomous welding deployment at a GAZOO Racing workshop can select welding conditions, inspect results, and correct work.
The financial impact of this particular installation is unknown. But it demonstrates how industrial robots are beginning to take on tasks requiring more independent decision-making.
Meanwhile, Hexagon completed its acquisition of Waygate Technologies, adding an industrial inspection business with approximately $630 million in historical annual revenue.
The acquisition expands Hexagon's capabilities, although the acquired business currently operates at lower margins than the rest of the group.
Outside public markets, Black Scarab also covered Foundry Robotics' $100 million financing to expand robot-powered manufacturing capacity in California.
Foundry's model of operating automated factories for customers offers an interesting potential source of demand for robotics, sensing, and industrial software suppliers.
The common thread is that Physical AI is expanding the range of technologies required for industrial automation. Robots remain central, but the opportunity increasingly involves the systems that help them perceive, operate, coordinate, and produce useful work.
Our Outlook: What We're Watching Next
The next several days should bring additional evidence about industrial automation demand.
Cognex is scheduled to report after the November 4 market close, followed by Rockwell Automation on November 5, when the company will also introduce fiscal 2027 guidance.
Both reports should help clarify whether improving U.S. factory activity is translating into demand for machine vision, controls, and automation equipment.
Over the next 6–12 months, we'll be paying particular attention to geographic order trends, the effect of trade uncertainty on equipment investment, and whether companies expanding into industrial AI software are finding sustained customer demand.
We remain constructive on Physical AI's long-term development, but the current evidence supports a selective approach.
Keyence's financial performance, Ouster's growth, Estun's mixed results, and the different strategic directions of Siemens, Rockwell, and Hexagon demonstrate that the industry is not advancing uniformly.
This week's central development is that the environment surrounding Physical AI is changing as rapidly as the technology itself.
American factories are getting busier, China is navigating softer manufacturing conditions, and industrial companies are competing for a larger role in the next generation of automation.
For public-equity investors, understanding those differences will be essential to identifying where the next phase of growth emerges.
U.S. Factories Expand as China Slows
In this edition +
Explore the Physical AI 15 ↗American manufacturing is accelerating. China, the world's largest industrial robotics market, is showing signs of weakness. And Washington is reconsidering the country's dependence on imported robots and machinery.
All three developments emerged over the past week.
Meanwhile, several companies in the Black Scarab Physical AI 15 delivered new financial results, announced acquisitions, or expanded their industrial technology offerings.
Together, they paint a complicated but increasingly interesting picture for investors. The economic environment for automation is improving in some markets, while trade uncertainty and competitive pressures are creating new questions about which suppliers will benefit.
The Week in Markets
The Black Scarab Physical AI 15 declined 2.34% during the week ending November 3, compared with a 1.99% decline for the S&P 500 and a 4.18% decline for the Nasdaq Composite.
Weekly market performance
Performance varied considerably across the index.
Inovance gained 6.02%, while Teradyne fell 16.79%. Keyence declined 5.30%, and Ouster dropped 11.62%.
What makes the week interesting is that several companies reported encouraging operating developments despite weaker share prices.
Keyence delivered exceptional earnings growth, and Ouster reported a substantial increase in sensor shipments. Ouster's results were released after the November 3 market close, so they were not reflected in our weekly performance figures.
For investors, the contrast is a reminder that strong company performance and strong stock performance aren't necessarily the same thing. Expectations and valuations matter alongside operating results.
The Economic Backdrop: Two Manufacturing Markets Moving in Different Directions
On November 2, the Institute for Supply Management reported that the U.S. Manufacturing PMI increased to 55.5 in October, its tenth consecutive month of expansion.
The production index reached 59.0, its highest reading since November 2021.
A reading above 50 indicates expansion, rather than a percentage increase in actual factory output. Still, the figures suggest that American manufacturing activity is gaining momentum.
China reported a different picture. Its manufacturing PMI declined to 49.3, signaling contraction, with both production and new orders weakening.
This divergence deserves attention.
China installed approximately 354,000 industrial robots in 2025, more than nine times the U.S. total. It remains the world's largest market for industrial robotics, making its manufacturing outlook particularly important for global equipment suppliers.
For companies such as FANUC, Yaskawa, Estun, and Inovance, the geographic distribution of industrial investment could have a significant influence on future orders.
But the week's biggest macroeconomic development may have come from Washington.
On October 28, the White House formally identified reliance on imported robotics and industrial machinery as a national-security concern. Officials were directed to negotiate with trading partners, with a progress update required within 180 days.
No new tariffs were imposed immediately.
The potential consequences cut both ways. Policies encouraging domestic equipment production could benefit American industrial suppliers. Restrictions that increase machinery prices, however, could make automation more expensive for the factories Washington wants to modernize.
This creates an important variable for Japanese manufacturers such as FANUC and Yaskawa, as well as American suppliers including Rockwell Automation.
Two Manufacturing Economies, Different Directions
Manufacturing PMI | October 2026
Inside the Physical AI 15: What the Latest Results Are Telling Us
The week's financial disclosures revealed substantial differences in demand and operating performance.
What the Latest Results Tell Us
Keyence
55.5%
Operating Margin
Six months to Sep 20, 2026
Profits growing faster than sales.
Ouster
+50%
Quarterly Revenue Growth
Q3 2026 · year over year
Strong demand, continued cash consumption.
Teradyne
$0.35M
Robotics Segment Pretax Profit
Quarter to Sep 27, 2026
Robotics reaches marginal profitability.
Estun Automation
−12.4%
Quarterly Revenue Growth
Q3 2026 · year over year
Sales weaken despite profit improvement.
Keyence delivered particularly strong results. Six-month revenue increased 34.9%, while operating profit grew 50%. Its operating margin reached 55.5%, meaning the company generated approximately $55.50 of operating profit for every $100 in sales.
That is an unusually profitable industrial technology business. More importantly, profits grew faster than revenue, suggesting Keyence is benefiting from increasing operating efficiency as its business expands.
Estun Automation presented a more complicated picture. Third-quarter revenue fell 12.43%, yet attributable net profit increased 21.54%.
At first glance, that sounds encouraging. But falling sales alongside rising profits deserve closer examination. Estun's nine-month disclosures also included investment valuation gains, accounting adjustments, and a 17.14% decline in operating cash flow.
We would want to understand how much of the improvement comes from the underlying business before treating the earnings growth as evidence of stronger robotics demand.
Teradyne's latest filing provided more detail about its Robotics division. Quarterly revenue grew 27.6% to $95.8 million, and the business generated a modest $345,000 in pretax profit after losing $17.6 million a year earlier.
The improvement is meaningful, although profitability remains narrow. Higher sales volumes and lower costs have brought the division across the breakeven line. The next challenge is building a more substantial earnings base.
Ouster delivered one of the week's most important growth updates. Quarterly revenue increased 50% to $59.3 million, supported by industrial and robotics customers. The company shipped more than 27,000 lidar and camera sensors.
Its net loss narrowed to $14.2 million from $21.7 million.
But operating cash consumption over the first nine months nearly doubled to $49.4 million. The company has substantial liquidity, partly supported by equity financing, but continued growth will need to translate into stronger cash generation.
Across these four companies, we see very different operating conditions: exceptional profitability at Keyence, improving robotics economics at Teradyne, strong growth but continued cash consumption at Ouster, and mixed financial signals at Estun.
There isn't one financial story playing out across the Physical AI industry.
Industry Developments: The Competition Is Expanding Beyond Robots
Financial results weren't the only important developments.
On October 29, Rockwell Automation expanded its SecureOT cybersecurity offering for industrial equipment manufacturers. As factories connect more machines and software systems, protecting those systems becomes part of the automation investment.
Siemens is pursuing another opportunity.
On November 3, India's JSW Greentech selected Siemens Xcelerator software to connect electric-vehicle engineering, manufacturing, and supplier operations.
The contract value wasn't disclosed, but the announcement illustrates how industrial software is becoming increasingly important alongside physical machinery.
An interesting development reported by Black Scarab this week came from SAP, which is connecting enterprise software to robots and autonomous inspection systems.
This creates a competitive question for Siemens and Rockwell. As factories become more intelligent, established industrial technology companies may find themselves competing and collaborating with enterprise software providers over the systems that coordinate factory operations.
Yaskawa offered a different example of technological progress. Its newly disclosed autonomous welding deployment at a GAZOO Racing workshop can select welding conditions, inspect results, and correct work.
The financial impact of this particular installation is unknown. But it demonstrates how industrial robots are beginning to take on tasks requiring more independent decision-making.
Meanwhile, Hexagon completed its acquisition of Waygate Technologies, adding an industrial inspection business with approximately $630 million in historical annual revenue.
The acquisition expands Hexagon's capabilities, although the acquired business currently operates at lower margins than the rest of the group.
Outside public markets, Black Scarab also covered Foundry Robotics' $100 million financing to expand robot-powered manufacturing capacity in California.
Foundry's model of operating automated factories for customers offers an interesting potential source of demand for robotics, sensing, and industrial software suppliers.
The common thread is that Physical AI is expanding the range of technologies required for industrial automation. Robots remain central, but the opportunity increasingly involves the systems that help them perceive, operate, coordinate, and produce useful work.
Our Outlook: What We're Watching Next
The next several days should bring additional evidence about industrial automation demand.
Cognex is scheduled to report after the November 4 market close, followed by Rockwell Automation on November 5, when the company will also introduce fiscal 2027 guidance.
Both reports should help clarify whether improving U.S. factory activity is translating into demand for machine vision, controls, and automation equipment.
Over the next 6–12 months, we'll be paying particular attention to geographic order trends, the effect of trade uncertainty on equipment investment, and whether companies expanding into industrial AI software are finding sustained customer demand.
We remain constructive on Physical AI's long-term development, but the current evidence supports a selective approach.
Keyence's financial performance, Ouster's growth, Estun's mixed results, and the different strategic directions of Siemens, Rockwell, and Hexagon demonstrate that the industry is not advancing uniformly.
This week's central development is that the environment surrounding Physical AI is changing as rapidly as the technology itself.
American factories are getting busier, China is navigating softer manufacturing conditions, and industrial companies are competing for a larger role in the next generation of automation.
For public-equity investors, understanding those differences will be essential to identifying where the next phase of growth emerges.
Sources
Index returns are based on tracked share prices, excluding dividends and currency movements.
About the author
Rodolfo Garcia Calderoni, CFAFounder, Black Scarab