AXT, Inc.

AXT reported Q2 2026 revenue of $47.6 million, up nearly 77% from $26.9 million in Q1 2026 and up 164% from $18 million in Q2 2025. Indium phosphide revenue was $30.7 million, gallium arsenide was $6.6 million, germanium substrates were $272 thousand, and raw material JV revenue was $10 million. Non-GAAP gross margin was 45.0% versus 29.9% in Q1 and 8.2% a year ago; GAAP gross margin was 44.9% versus 29.6% and 8.0%. Non-GAAP net income was $11.9 million, or $0.19 per diluted share, versus a non-GAAP net loss of $585 thousand in Q1 and $6.4 million in Q2 2025; GAAP net income was $11.1 million, or $0.17 per diluted share, versus a GAAP net loss of $1.6 million in Q1 and $7 million in Q2 2025. Cash, cash equivalents and investments were $749 million at June 30, up from $123 million at March 31, helped by a secondary offering that generated approximately $632 million before expenses. For Q3, management said it has approximately $66 million in revenue that can be realized across substrates and raw materials, with upside if additional permits are obtained; non-GAAP operating expenses are expected to be about $10.5 million and GAAP OpEx about $11 million, and non-GAAP net income is guided to $0.30 to $0.32 per share versus GAAP net income of $0.29 to $0.31 per share.

Morris Young framed the quarter as an inflection point and said customer demand for indium phosphide is extremely strong. He said AXT is ahead of schedule on its plan to double indium phosphide capacity in 2026 and that the revenue opportunity is on track to more than triple by the end of 2026, with further expansion expected in 2027. His tone was highly confident and upbeat, emphasizing AI data center demand, larger-diameter substrates, and a growing multi-year demand cycle.

Gary Fischer emphasized the scale of the step-up in financial performance: revenue of $47.6 million, non-GAAP gross margin of 45.0%, non-GAAP operating profit of $11.2 million, and non-GAAP net income of $11.9 million. He highlighted cash and investments of $749 million, up from $123 million, after the secondary offering, and noted two large prepayments tied to long-term supply agreements with Casella and Coherent totaling $22.3 million and $25.4 million. He also said inventory was up about $6.2 million to $96.3 million, and guided Q3 OpEx and earnings, while stressing that permit timing remains uncertain.

Analysts focused on three main issues: whether capacity targets had increased, how much of the business is constrained by export permits, and whether gross margins can keep rising. Management said the year-end indium phosphide target is about $60 million per quarter, and next year they expect to roughly double again to around $130 million per quarter, though they also said the target is moving as demand develops. On permits, they said approvals are becoming more regular in certain regions but timing is still unpredictable. On margins and backlog, management said backlog is well over $100 million and extends into 2027, but they are not taking every order if they cannot yet commit to ship, so backlog understates demand; they also said gross margins could target a number that starts with a 5 over time, but that 45% should be used as the current reference point.