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    AXTI
    Earnings call· Jun 2026(Q2 FY26)

    AXT Q2 FY26 earnings call AXTI

    Jul 30, 2026 Source

    Executive summary

    AXT Q2 FY26 — Record Revenue and Indium Phosphide Growth

    AXT achieved record revenue in Q2 FY26, driven by unprecedented demand for indium phosphide in AI data center applications, leading to a significant return to profitability. The company is aggressively expanding indium phosphide capacity, with plans to more than triple by year-end and double again in 2027, though demand continues to outpace supply. The IPO plan for its Tongmei subsidiary has shifted to the Hong Kong Exchange.

    Highlights

    5

    • Revenue reached $47.6 million, the highest quarterly revenue in AXT's history, up 77% QoQ and 164% YoY.

    • Indium phosphide revenue hit a record $30.7 million, primarily driven by data center applications.

    • Non-GAAP gross margin improved substantially to 45.0% from 29.9% in Q1 FY26 and 8.2% in Q2 FY25.

    • The company returned to profitability with a non-GAAP net profit of $11.9 million, or $0.19 per diluted share.

    • Indium phosphide capacity is on track to more than triple by the end of 2026, with significant expansion expected in 2027.

    Concerns

    3

    • Tongmei's IPO application shifted from the STAR market to the Hong Kong Exchange, creating a redemption right for $49 million invested by PE funds.

    • Customer demand continues to outpace supply, despite rapid capacity expansion efforts.

    • Permit timing and certainty for export remain unpredictable, though regularity in the process is improving.

    Guidance & targets

    11
    CategoryTargetConfidence
    Revenue
    $66 million
    high materiality
    High
    Non-GAAP Net Income per diluted share
    $0.30 to $0.32
    high materiality
    Medium
    GAAP Net Income per diluted share
    $0.29 to $0.31
    high materiality
    Medium
    Non-GAAP Operating Expense
    approximately $10.5 million
    medium materiality
    Medium
    GAAP Operating Expense
    approximately $11 million
    medium materiality
    Medium
    Diluted Shares Outstanding
    approximately 66.5 million shares
    low materiality
    Medium
    Indium Phosphide Capacity (revenue equivalent)
    more than triple
    high materiality
    High
    Indium Phosphide Capacity (revenue equivalent)
    double again
    high materiality
    High
    Indium Phosphide Capacity (revenue equivalent)
    somewhere in the region of about $60 million a quarter
    high materiality
    High
    Indium Phosphide Capacity (revenue equivalent)
    somewhere in the region of about $130 million a quarter
    high materiality
    High
    Gross Margin
    a number that begins with the 5
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Indium Phosphide
    Primarily from data center applications.
    Highest in company history
    		$30.7 million———
    Gallium Arsenide
    Demand for semiconducting wafers for industrial robotics and data center laser applications grew sequentially.
    		$6.6 million—sequentially grew—
    Germanium
    		$272,000———
    Consolidated Raw Material Joint Ventures
    Highly strategic to growth plan.
    Record third quarter revenue
    		$10.0 million———

    Operational metrics

    22
    Revenue
    $47.6 millionup 77% QoQ, up 164% YoY
    Q2 FY26
    Non-GAAP Gross Margin
    45.0%vs 29.9% in Q1 FY26, vs 8.2% in Q2 FY25
    Q2 FY26
    GAAP Gross Margin
    44.9%vs 29.6% in Q1 FY26, vs 8.0% in Q2 FY25
    Q2 FY26
    Non-GAAP Operating Expense
    $10.2 millionvs $8.6 million in Q1 FY26, vs $7.6 million in Q2 FY25
    Q2 FY26
    GAAP Operating Expense
    $10.9 millionvs $9.6 million in Q1 FY26, vs $8.2 million in Q2 FY25
    Q2 FY26
    Non-GAAP Operating Profit
    $11.2 millionvs non-GAAP operating loss of $550,000 in Q1 FY26, vs non-GAAP operating loss of $6.1 million in Q2 FY25
    Q2 FY26
    GAAP Operating Profit
    $10.4 millionvs operating loss of $1.6 million in Q1 FY26, vs operating loss of $6.7 million in Q2 FY25
    Q2 FY26
    Non-GAAP Net Profit
    $11.9 millionvs non-GAAP net loss of $585,000 in Q1 FY26, vs non-GAAP net loss of $6.4 million in Q2 FY25
    Q2 FY26

    Company returned to profitability.

    GAAP Net Profit
    $11.1 millionvs net loss of $1.6 million in Q1 FY26, vs net loss of $7.0 million in Q2 FY25
    Q2 FY26
    Non-GAAP EPS
    $0.19vs loss of $0.01 in Q1 FY26, vs loss of $0.15 in Q2 FY25
    Q2 FY26
    GAAP EPS
    $0.17vs loss of $0.03 in Q1 FY26, vs loss of $0.17 in Q2 FY25
    Q2 FY26
    Weighted Average Diluted Shares Outstanding
    63.5 million
    Q2 FY26
    Cash and investments balance
    $748.8 millionincreased by $625.6 million
    Q2 FY26
    Accounts Receivable
    $4.7 millionincreased
    Q2 FY26
    Depreciation and Amortization
    $2.5 million
    Q2 FY26
    Total Stock Compensation
    $0.8 million
    Q2 FY26
    Net Inventory
    $96.3 millionup approximately $6.2 million QoQ
    Q2 FY26
    Prepayments for Wafers
    $22.3 million
    Q2 FY26

    Received under long-term supply agreement, posted as liability.

    Prepayments for Wafers
    $25.4 million
    Q2 FY26

    Received under long-term supply agreement, posted as liability.

    Indium Phosphide Revenue in China
    more than doubledQoQ
    Q2 FY26

    Expected continued strong growth in Q3.

    Indium Phosphide Revenue Share
    above 50%
    Q2 FY26

    Share of total indium phosphide revenue from China.

    Indium Phosphide Revenue Share
    40% to 60%
    future

    Anticipated revenue split moving forward as capacity and LTSAs build globally.

    Industry KPIs

    5
    MetricValueDetails
    Backlog order bookwell over $100 millionUSD
    Ai data center revenue$30.7 millionUSD
    Inventory channel inventory$96.3 millionUSD
    Node platform ramp schedule6-inch indium phosphide capability
    End market segment revenue mixIndium phosphide: $30.7 million; Gallium arsenide: $6.6 million; Germanium: $272,000; Consolidated raw material joint venture companies: $10.0 millionUSD

    Orderbook & backlog

    1
    Backlogwell over $100 millionQ2 FY26

    continues to grow

    Exceeds 2 quarters; extends out 3 or 4 quarters with long-term supply agreements; company is selective in taking orders due to capacity constraints.

    Deals & partnerships

    3
    CaselaLong-term supply agreement for wafers$22.3 million

    Agreement includes significant upfront cash prepayment for wafers. Supply starts in 2027.

    CoherentLong-term supply agreement for wafers$25.4 million

    Agreement includes significant upfront cash prepayment for wafers.

    LumentumAgreement (implied long-term supply agreement)

    Agreement announced this week, deepens relationship with an important customer.

    Capital programs

    1
    Indium Phosphide Capacity Expansionunderway
    Period spend: not a lot of additional CapEx spend here
    Spent to date: ahead of schedule
    Start: 2026

    Benefit: more than triple by end of 2026, double again in 2027; make AXT by far the largest indium phosphide producer in the world

    Committed to doubling 2026 capacity, now on track to more than triple by year-end, with further doubling planned for 2027. This is driven by new furnace designs, productivity, and product mix, not just CapEx.

    Risks & headwinds

    3
    Permit timing and certainty for exportOngoing, Q3 FY26

    Cannot predict the future timing of permits or success in obtaining them for any specific customer or individual order. Could impact realization of upside revenue.

    Mitigation: Seeing more regularity in the process, especially in certain geographic regions; driving more permit applications through the Ministry of Commerce.

    Tongmei IPO shift to Hong Kong ExchangeLikely take about a year to complete

    Creates a redemption right for the $49 million invested by PE funds back in 2021.

    Mitigation: Discussions with PE funds indicate they wish to continue investment; company has sufficient cash to redeem if requested.

    Customer demand outpacing supplyOngoing

    Customer demand continues to outpace supply no matter how fast we add capacity.

    Mitigation: Aggressive capacity expansion, accelerating physical capacity, improving manufacturing productivity, moving to larger diameter substrates.

    What to watch in Q3 FY26

    5

    Indium Phosphide Capacity Expansion

    End of 2026
    CurrentAhead of schedule for doubling in 2026, on track to more than triple by end of 2026.
    TargetContinued acceleration towards $60M/quarter revenue equivalent capacity by end of 2026.

    Why it matters

    This is the primary driver for revenue growth and market share in the high-demand AI data center market.

    We have committed to doubling our indium phosphide capacity in 2026, and I'm pleased to report that we are ahead of the schedule in that effort. But more importantly, I can now report to you that our revenue opportunity for indium phosphide is on track to more than triple by the end of 2026, with continued significant expansion expected in 2027.

    Q&A highlights

    7

    Clarification on the new indium phosphide capacity targets for end of 2026 and 2027, and details on the Lumentum supply agreement.

    Confirmed indium phosphide capacity equivalent to $60 million per quarter by end of 2026 and $130 million per quarter by end of 2027. Did not disclose the total revenue impact of the Lumentum deal but noted prepayments.

    “Yes, that's about right, Tim. That's exactly what we're looking at here. About $60 million there thereabouts.”

    asked by Timothy Savageaux · answered by Timothy Bettles

    2 min read6 chapters

    Detailed Narrative

    01

    Record Indium Phosphide Demand

    AXT reported its highest quarterly revenue of $47.6 million, with indium phosphide revenue reaching a record $30.7 million, primarily driven by AI data center applications. The company is experiencing an inflection point with extremely strong customer demand for its indium phosphide material, leading to a significant return to profitability with a non-GAAP net profit of $11.9 million.

    02

    Aggressive Capacity Expansion

    The company is ahead of schedule in doubling its indium phosphide capacity in 2026 and plans to more than triple it by year-end, with further doubling expected in 2027. This expansion is supported by new crystal-growing furnace designs, increased manufacturing productivity, and a shift to larger diameter substrates and higher-value products, which are driving a step function increase in revenue.

    03

    Strategic Long-Term Agreements

    AXT signed strategic long-term supply agreements with Casela, Coherent, and Lumentum. These agreements include significant prepayments for wafers ($22.3 million from Casela, $25.4 million from Coherent) and deepen customer relationships, providing conviction for the ongoing capacity build-out. These partnerships highlight the critical role of indium phosphide in high-speed optical data transmission for AI data centers.

    04

    China Market Growth and IPO Shift

    China's investment in AI infrastructure is driving significant growth, with indium phosphide-based laser market revenue in China more than doubling quarter-over-quarter in Q2. While the Tongmei IPO application was moved from the STAR market to the Hong Kong Exchange, the company views this as beneficial for expanding capacity and supporting AI infrastructure in China, despite creating a redemption right for $49 million in PE funds.

    05

    Gross Margin Improvement Drivers

    Gross margin saw substantial improvement to 45.0% non-GAAP, driven by increased total volume and a favorable product mix, particularly the higher contribution from indium phosphide. Management anticipates further margin expansion due to continued volume growth, productivity gains, and the migration to larger diameter substrates, with a target of reaching margins that begin with a '5'.

    06

    Raw Material Vertical Integration

    The raw material joint venture companies contributed $10.0 million in revenue. The subsidiary Jin Mei is now refining high-purity indium, providing direct control over a critical supply chain component for indium phosphide substrates. This unique integrated supply chain is considered a major competitive differentiator, with ongoing investments to expand Jin Mei's capabilities.

    AI-generated summary of the company’s earnings call. Not investment advice.