Shares of Cognex Corporation (NASDAQ:CGNX), a leading provider of machine vision solutions, dropped sharply by 5.6% in the after-hours trading session on Wednesday. The decline comes after Conestoga Capital Advisors, an asset management firm, revealed in its Q4 2024 investor letter that it had exited its position in Cognex due to concerns over customers' strained capital expenditure budgets across major end markets.

According to Conestoga, Cognex's revenue is heavily reliant on capital spending from its customers, which remains challenged across key sectors such as consumer electronics and logistics. This revelation sheds light on the potential headwinds facing the company's growth prospects and profitability in the near term.

Furthermore, an article from Simply Wall St highlights that despite Cognex's recent focus on innovative products like its AI-powered DataMan barcode readers, the company's earnings growth has declined by 43.5% over the past year. While Cognex is expected to achieve annual earnings growth of 30% and revenue growth of 10.4%, outpacing the broader US market, the current pressures on profit margins, which have dropped from 17.9% to 10.1%, raise concerns about the company's ability to maintain its momentum.