AXT, Inc.

What they do

AXT develops and produces specialty semiconductor wafers used where silicon cannot meet performance requirements, principally InP for optical and data center connectivity, GaAs for RF, LED and laser applications, and Ge for solar cells. It does not design or make chips; it supplies the base substrate material. Two consolidated subsidiaries also produce raw materials, including pBN crucibles and purified gallium, used internally and sold externally. Manufacturing is conducted at three sites in China, with Asia headquarters in Beijing.

Revenue drivers

• Substrate product group — InP, GaAs and Ge wafers sold to device makers; generated 67% of consolidated revenue in 2025, 68% in 2024 and 63% in 2023.
• Raw materials product group — pBN crucibles and purified gallium produced by consolidated subsidiaries, used internally and sold to other companies; generated 33% of revenue in 2025, 32% in 2024 and 37% in 2023.
• Indium phosphide (InP) — High-performance substrates for data center optical connectivity, 5G infrastructure, fiber optics and silicon photonics; management said Q2 2026 recorded the highest quarterly InP revenue to date.
• Gallium arsenide (GaAs) and germanium (Ge) — Semi-insulating GaAs for RF/power amplifier chips in cell phones and satellite communications; semi-conducting GaAs for LEDs, industrial lasers and VCSELs; Ge for space and terrestrial solar cells.

Recent performance

Q2 2026 revenue was $47.6 million, up from $26.9 million in Q1 2026 and $18.0 million in Q2 2025. GAAP gross margin was 44.9% in Q2 2026 versus 29.6% in Q1 2026 and 8.0% in Q2 2025. GAAP net income was $11.1 million, or $0.17 diluted EPS, compared with a $1.6 million net loss in Q1 2026 and a $7.0 million net loss in Q2 2025. Full-year 2025 revenue was $88.3 million with a net loss of $21.3 million, or $0.49 per diluted share. Cash and equivalents stood at $412.2 million as of June 30, 2026.

Strategy

Management characterizes the current period as an inflection point driven by data center optical connectivity demand and says it is adding manufacturing capacity and improving productivity. AXT is investing in capacity, technology and what it calls its uniquely integrated supply chain, including partial ownership in more than ten China-based raw material and consumable companies. The company reports both GAAP and non-GAAP results that exclude stock-based compensation. It states it is working closely with direct customers and major end customers on expected demand and roadmaps.

Risks

• China export permits for InP — The 10-K specifically cites China's requirement of export permits for InP as an example of trade and export restrictions that may negatively impact business and financial results.
• China operational and regulatory concentration — All manufacturing is in China, and the 10-K warns the PRC central government may intervene in or influence PRC operations, rules can change quickly, and environmental reform efforts can cause intermittent mandatory shutdowns that lower gross margins.
• Stock price volatility — The 10-K states AXT's NASDAQ stock price is volatile and could decline due to unpredictable operating results, export permit requirements, and changes in end markets and global trends.
• Litigation and legal proceedings — The 10-K states the company faces litigation and legal proceedings that could adversely affect business, financial condition, results of operations or cash flows.

Outlook

CEO Morris Young said strong customer demand for data center optical connectivity combined with added manufacturing capacity and improved productivity are driving a step-function increase in revenue, and called this one of the most consequential chapters in the company's history. Management said the investments being made in capacity, technology and its integrated supply chain position AXT to meet demand it sees building across optical and AI infrastructure markets. No specific numeric guidance was provided in the earnings release. The company also noted the Chinese export permit requirement for InP as a risk factor.