AXT Q4 Earnings Call Highlights

Key Points

• Export permits constrained Q4 shipments, but management says permits have started arriving in Q1 and there is about $26 million of Q1 revenue either already covered by permits or not requiring them, with upside if more permits arrive before quarter-end.
• Demand for InP substrates is strengthening—backlog topped $60 million—and AXT has added ~25% capacity since October with plans to double capacity by end‑2026 (targeting an ~$35M/quarter run rate), with ~$30M first‑phase capex and a possible $100–150M expansion in 2027.
• Q4 revenue declined to $23.0 million (from $28.0M in Q3) and non‑GAAP net loss was $2.6 million, but cash rose to $128.4 million after a Dec. 30 public offering that generated about $93.9 million; management is prioritizing margin improvement, expense control and inventory reduction.

AXT NASDAQ: AXTI executives said fourth-quarter results were held back by fewer export permits than expected, but management described demand trends for indium phosphide (InP) substrates as strengthening into early 2026 as AI-related data center build-outs continue to accelerate.

Quarterly results and revenue mix

Chief Financial Officer Gary Fischer reported Q4 2025 revenue of $23.0 million, down from $28.0 million in Q3 2025 and compared with $25.1 million in Q4 2024. By category, InP revenue totaled $8.0 million (primarily for data center applications), gallium arsenide (GaAs) revenue was $7.0 million, germanium substrates contributed $231,000, and revenue from AXT’s consolidated raw material joint venture companies was $7.6 million.

Geographically, revenue in Q4 2025 was 81.5% from Asia Pacific, 17.5% from Europe, and 1% from North America. Fischer said the top five customers generated approximately 22.6% of total revenue, and no customer exceeded the 10% level.

Margins, expenses, and cash position

Non-GAAP gross margin was 21.5% in Q4 2025, compared with 22.6% in Q3 2025 and 18.0% in Q4 2024. On a GAAP basis, gross margin was 20.9%, versus 22.3% in Q3 and 17.6% in the year-ago quarter. Fischer said the company remains focused on continued improvement and “further recovery” in Q1.

Non-GAAP operating expenses were $7.8 million, up from $6.5 million in Q3 2025, which management noted benefited from favorable R&D adjustments. Non-GAAP operating expenses were $9.8 million in Q4 2024. On a GAAP basis, operating expenses were $8.8 million, compared with $7.3 million in Q3 and $10.6 million a year earlier.

AXT posted a non-GAAP operating loss of $2.6 million versus a non-GAAP operating loss of $384,000 in Q3 2025 and a non-GAAP operating loss of $5.4 million in Q4 2024. GAAP operating loss was $3.8 million, compared with a $1.1 million operating loss in Q3 and a $6.2 million loss a year ago.

Below the operating line, Fischer reported net other income of $285,000 in Q4 2025. The company’s non-GAAP net loss was $2.6 million, or $0.06 per share, versus a non-GAAP net loss of $1.2 million, or $0.02 per share, in Q3 2025. Non-GAAP net loss in Q4 2024 was $4.2 million, or $0.10 per share. On a GAAP basis, AXT reported a net loss of $3.6 million, or $0.08 per share, compared with a $1.9 million net loss, or $0.04 per share, in Q3 and a $5.1 million net loss, or $0.12 per share, in Q4 2024. Weighted basic shares outstanding were 44.7 million.

Cash, cash equivalents and investments rose to $128.4 million at December 31, up by $97.2 million sequentially, driven primarily by a public offering of common stock that closed on Dec. 30 and generated approximately $93.9 million. Fischer also noted accounts receivable decreased by $2.6 million, depreciation and amortization totaled $2.3 million, and total stock-based compensation was $1.3 million. Net inventory increased by about $4 million to $81.7 million, which Fischer said remains a focus area and is expected to decline in coming quarters.

Export permits remain the key gating factor

Chief Executive Officer Dr. Morris Young said the company was “disappointed” that it did not receive as many export permits in Q4 as management had hoped, based on average processing times seen in October. He added that AXT has since received permits in Q1 and is “in a stronger position” than at the same time in the prior quarter, with management expecting sequential revenue growth in Q1 driven primarily by InP demand for AI-related data center build-outs.

In the Q&A, management described the export licensing process as “not transparent,” with increased variability compared with an earlier view that cycles were running around 60 business days. Young said the company received a couple of denials for the first time, accompanied by instructions to resubmit with more information. Management said those applications have been resubmitted to China’s Ministry of Commerce (MOFCOM) and could potentially turn around quickly enough to affect Q1 results.

InP demand, backlog, and capacity expansion plans

Young said AXT is seeing a “welcome expansion” of its InP customer base, including support for Tier One laser manufacturers and optical transceiver module makers in China and globally. He highlighted AXT’s “low EPD wafers” as optical devices move to higher speeds and greater sophistication, and said the company’s InP wafer backlog reached a new high of over $60 million. Management said customers are placing longer-term orders to plan for longer lead times, improving visibility.

Vice President of Business Development Tim Bettles said backlog dynamics are tied to export permits, noting that once a permit is received, AXT typically has a six-month window to export under that permit, though customers often want material sooner. Bettles also said AXT is discussing long-term supply agreements and is seeing forecasts extending beyond 2030, alongside minimum demand expectations for at least the next two to three years.

On capacity, Young said AXT has already added about 25% more capacity since October and is on track to double capacity from the Q4 2025 level by the end of 2026. In response to analyst questions, management also discussed a near-term expansion plan to raise InP capacity to an estimated approximately $35 million per quarter run rate by the end of 2026, with permitting still the primary constraint on shipments outside China. Young said the first phase of expansion is expected to require about $30 million of capital spending, aided by “brownfield” expansion at the existing Tongmei facility. Looking further out, he said the company is considering potentially doubling capacity again in 2027, which could require $100 million to $150 million depending on the build approach, including “greenfield” facilities.

Q1 outlook framed by permit timing

Fischer said providing a traditional range is difficult because the timing and success of permits is not predictable. As of the call, he said AXT had about $26 million of Q1 revenue that can be realized across substrates and raw materials either because permits are already in hand or because permits are not required, and management has a “high degree of confidence” in recognizing that amount. He said there could be significant upside if additional permits are received before quarter-end.

For Q1, AXT expects operating expenses to remain at approximately $9.0 million. Fischer guided to a non-GAAP net loss of $0.02 to $0.04 per share and a GAAP net loss of $0.04 to $0.06 per share, which he described as substantial year-over-year progress. The company estimates Q1 share count of approximately 53.2 million.

Management reiterated that export licensing remains the most significant gating factor for growth, while also emphasizing internal priorities including gross margin improvement, operating expense discipline, and inventory reduction.

About AXT NASDAQ: AXTI

AXT, Inc NASDAQ: AXTI is a global supplier of compound and single-element semiconductor substrates, offering a range of materials critical for high-performance electronic and optoelectronic devices. Founded in 1986 and headquartered in Fremont, California, AXT specializes in the development, manufacture and distribution of wafers composed of gallium arsenide (GaAs), indium phosphide (InP), gallium nitride (GaN) and other compound semiconductor materials. These substrates serve as the foundational platforms for devices used in data communications, wireless infrastructure, advanced computing, consumer electronics and photovoltaic applications.

AXT's product portfolio encompasses a variety of wafer sizes, dopant concentrations and crystal orientations, tailored to meet the precise specifications of its customers.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.