AXT Reports Over 250% Surge in Indium Phosphide Revenues—Backlog Signals Major Data Center Demand Ahead
Revenue Jumps 56% Quarter-over-Quarter, Led by Data Center Materials Demand
AXT, Inc. (NASDAQ: AXTI) posted a dramatic turnaround for the third quarter of 2025, spotlighted by indium phosphide revenues skyrocketing more than 250% from the previous quarter—a three-year high. This material, key to high-performance data center and photonics applications, is now at the core of the company’s rapid growth story as global demand ramps for next-generation connectivity solutions.
The third-quarter revenue came in at $28.0 million, a sharp rise from $18.0 million in Q2 2025 and up from $23.6 million year-over-year. Management credits the gains to securing export permits for substantial indium phosphide orders and a rapidly strengthening order backlog, both for indium phosphide and gallium arsenide substrates.
Gross Margins Rebound; Operating Loss Narrows
AXT’s Q3 gross margin jumped to 22.3%, a notable recovery from 8.0% last quarter, suggesting early benefits from management’s ongoing drive to improve efficiency and cut costs. GAAP net loss narrowed significantly to $1.91 million (or $0.04 per share), compared with $7.0 million ($0.16 per share) last quarter and $2.94 million ($0.07 per share) a year ago. On a non-GAAP basis, the net loss was $1.17 million ($0.03 per share), marking substantial improvement from Q2.
| Key Metric | Q3 2025 | Q2 2025 | Q3 2024 |
|---|---|---|---|
| Revenue (millions) | $28.00 | $18.00 | $23.60 |
| GAAP Gross Margin | 22.3% | 8.0% | 24.0% |
| Non-GAAP Gross Margin | 22.4% | 8.2% | 24.3% |
| GAAP Net Loss (millions) | $(1.91) | $(7.00) | $(2.94) |
| Non-GAAP Net Loss (millions) | $(1.17) | $(6.40) | $(2.10) |
Management Sees 2026 as a Pivotal Growth Year
CEO Morris Young called this quarter “highly active” for the company, underscoring robust order activity and a “new normal” in global supply chains. The strong uptick in indium phosphide for data centers not only set a new internal revenue record, but also contributed to a healthy and growing order backlog—positioning AXT for meaningful expansion and a path back to profitability in 2026.
With the continued transition to higher-speed networking, optical interconnects, and evolving 5G/AI workloads, management expects these trends to accelerate further, benefiting both indium phosphide and gallium arsenide businesses.
STAR Market Listing Remains a Strategic Priority
AXT’s Beijing subsidiary, Tongmei, continues to pursue a public listing on China’s STAR Market. The listing has cleared several review milestones but awaits final regulatory approvals—a process described as lengthy and dependent on both Chinese regulators and market enthusiasm. The outcome could further strengthen AXT’s capital base and strategic position in the region.
Balance Sheet Remains Solid Despite Investments
| Asset/Liability | Sep 30, 2025 | Dec 31, 2024 |
|---|---|---|
| Cash & Equivalents (millions) | $23.11 | $22.83 |
| Total Assets (millions) | $334.03 | $339.31 |
| Total Liabilities (millions) | $93.58 | $84.41 |
| Stockholders’ Equity (millions) | $202.35 | $216.33 |
What’s the Takeaway for Investors?
AXT’s financial results point to a turning point driven by demand for advanced data center materials. While still in loss territory, margin recovery, a robust backlog, and optimistic forward guidance set the stage for potentially profitable growth in 2026. The upcoming STAR Market listing could serve as a further catalyst. Investors should watch how management continues to execute on its operational plans—and whether surging demand for data center infrastructure sustains its current momentum.
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