AXT Inc ((AXTI)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for AXT Inc. painted a picture of mixed sentiments, with strong revenue growth and improved margins being overshadowed by persistent challenges. The company has seen an uptick in demand for indium phosphide, particularly in data centers, which has bolstered their financial performance. However, ongoing net losses, export permit delays, and declines in germanium substrates continue to pose significant hurdles. Despite these challenges, there are positive trends that indicate potential for future growth.
Significant Revenue Growth
AXT Inc. reported a remarkable revenue increase for Q3 2025, reaching $28.0 million. This represents a 56% increase from the previous quarter and an 18% rise year-over-year. This growth is a testament to the company’s ability to capitalize on market opportunities and drive sales.
Indium Phosphide Demand Surge
The demand for indium phosphide has surged, with revenue reaching its highest level since 2022 at $13.1 million. This growth is primarily driven by applications in data centers, highlighting the material’s critical role in supporting modern technological infrastructure.
Substantial Improvement in Operating Loss
AXT Inc. has made significant strides in reducing its operating loss, with a non-GAAP operating loss of $384,000 in Q3 2025, down from $6.1 million in the previous quarter. This improvement underscores the company’s efforts to streamline operations and enhance efficiency.
Gross Margin Improvement
The company’s non-GAAP gross margin saw a notable improvement, rising to 22.4% in Q3 2025 from 8.2% in Q2 2025. This increase is attributed to a better product mix and higher volume absorption, reflecting AXT’s strategic focus on optimizing its product offerings.
Record Indium Phosphide Backlog
AXT Inc. has reported a record backlog for indium phosphide orders, exceeding $49 million. This backlog is driven by strong demand from data center expansions in the U.S. and emerging applications in AI and optical transceivers, positioning the company for future growth.
Net Loss Persisting
Despite improvements, AXT Inc. continues to face net losses, with a non-GAAP net loss of $1.2 million or $0.03 per share in Q3 2025. While this is an improvement from the $6.4 million loss in Q2 2025, it highlights the ongoing financial challenges the company must address.
Export Permit Delays
The company is experiencing delays in obtaining export permits for indium phosphide, which are taking approximately 60 business days. These delays are impacting the timely shipment of products and could potentially affect future revenue streams.
Germanium Substrates Decline
Sales of germanium substrates have declined by about $1 million in Q3 2025, with poor gross margin potential. This decline poses a challenge for AXT Inc. as it seeks to diversify its product offerings and maintain profitability.
Decrease in Cash and Cash Equivalents
AXT Inc. reported a decrease in cash and cash equivalents by $3.9 million, bringing the total to $31.2 million as of September 30. This decrease is primarily due to increased accounts receivable, indicating potential cash flow management issues.
Forward-Looking Guidance
Looking ahead, AXT Inc. provided guidance for Q4 2025, anticipating revenue between $27 million and $30 million, contingent on the timing of export permits. The company expects further improvements in gross margins and a narrowed non-GAAP net loss ranging from $0.01 to $0.03 per share. Strong demand from data centers and emerging applications in AI and optical transceivers are expected to drive future growth.
In summary, AXT Inc.’s earnings call reflects a company navigating through a landscape of both opportunities and challenges. While strong revenue growth and improved margins signal positive momentum, persistent net losses and operational hurdles remain. The company’s strategic focus on indium phosphide and its applications in data centers and AI could pave the way for future success, provided it can overcome current obstacles.