News: Suppliers
4 August 2026
AXT returns to profit, driven by record quarterly revenue from InP
For second-quarter 2026, AXT Inc of Fremont, CA, USA — which makes gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) substrates and raw materials at plants in China — has reported record revenue of $47.6m (up 77% on $26.9m last quarter and 164% on $18m a year ago), greatly exceeding the expected $34m.
Indium phosphide revenue has continued its rebound, from just $3.6m (a fifth of total revenue) a year ago, then (after being granted the first InP export permits from China in late June 2025) $13.6m last quarter (just over half of total revenue) to a record $30.7m in Q2/2026 (almost two-thirds of total revenue), far exceeding the forecasted $17m. This is driven mainly by a surge in demand for high-speed optical data transmission devices for AI-focused data-center infrastructure. In particular, revenue from China’s InP-based laser sector more than doubled sequentially for a second consecutive quarter, boosting China to over 50% of total revenue.
“We have reached an inflection point in our business where strong customer demand for data-center optical connectivity coupled with our continued success in adding manufacturing capacity and improving productivity are driving a step-function increase in our revenue,” says CEO Morris Young.
Gallium arsenide has rebounded from $5.4m (a fifth of revenue) last quarter to $6.6m (above the $6.2m a year ago). This reflects growth in semiconducting wafers for industrial robotics and data-center laser applications, as well as continued demand for semi-insulating wafers for wireless RF devices.
Germanium substrate revenue was $272,000, up on $200,000 last quarter but down on $1.5m a year ago and $2.9m two years ago.
After falling to $6.7m a year ago, revenue has grown further from $7.6m last quarter to a record $10m for AXT’s two consolidated raw material joint venture companies: BoYu (which makes high-temperature pyrolytic boron nitride crucibles and pBN-based tools for organic light-emitting diodes) and JinMei (which supplies high-purity materials including gallium and germanium, as well as InP poly and other materials).
As announced last quarter, Jingmei is now refining high-purity indium, giving AXT direct control of a guaranteed supply of another critical material for InP substrates. “We are also investing to help to expand their capabilities so that when AXT’s demand for poly material grows, Jingmei will continue to provide a meaningful portion of our raw material requirements,” says Young.
On a non-GAAP basis, gross margin has improved further, from just 8.2% a year ago and 29.9% last quarter to 45%. This is driven mainly by higher total volume and the high proportion in the product mix of InP, which has higher margin than AXT’s other businesses.
Operating expenses have increased further, from $7.59m a year ago and $8.59m last quarter to $10.25m, above the expected $9.3m.
Nevertheless, AXT has returned to profitability. Net income was $11.9m ($0.19 per share, far exceeding the expected $0.06–0.08 per share), compared with a net loss of $0.6m ($0.01 per share) last quarter and $6.4m ($0.15 per share) a year ago.
During the quarter, cash, cash equivalents and investments rose by $626m, from $123m to $749m. This was due mainly to the secondary public offering of common stock that closed on 22 April, generating about $632m before expenses, in order to support InP capacity expansion at AXT’s China-based wafer manufacturing subsidiary Beijing Tongmei Xtal Technology Co Ltd as well as R&D investment in new products like larger-diameter, 6-inch InP wafers.
“The investments we are making today — in capacity, in technology, and in our uniquely integrated supply chain — position us to meet the extraordinary demand we see building across the optical and AI infrastructure markets,” says Young.
Order backlog well over $100m
As customer demand continues to outpace AXT’s ability to increase manufacturing capacity, order backlog is now well over $100m, extending through 2026 into 2027. “The backlog exceeds two quarters of projected revenue and could be significantly larger if the company accepted all available orders,” says Young.
“We are working closely with our direct customers as well as major end-customers to understand their expected demand and roadmaps,” says Young.
During Q2, AXT signed long-term supply agreements with both China-based Casella and US-based Coherent, receiving pre-payments for wafers of $22.3m and $25.4m respectively. Subsequently, in late July, US-based Lumentum agreed to pay the first of two $43.5m deposits to reserve InP wafer production capacity. “These type of agreements with significant upfront cash are an additional signpost regarding the important use of InP for high-speed optical data transmission required in AI data centers,” says chief financial officer Gary L. Fischer. “Long term supply agreements [LTSAs] take us out into 2027 and beyond,” notes VP of business development Timothy J. Bettles.
“The deployment of optical connectivity in AI data center is accelerating as hyperscalers scale GPU dense architectures and look for higher-speed, lower-power photonics to move data more efficiently,” says Young. “In the near term, we are seeing high demand from the industry migration to 100G and 1.6T transceiver modules, for which InP-based lasers and detectors are essential for higher-performance optical links. Longer term, hyperscalers are advancing towards near-packaged optics [NPO] and co-packaged optics [CPO], which will continue to drive increasing demand for our material. Overall, these trends point to a durable long-term build out of denser optical infrastructure and a multi-year demand cycle for our indium phosphide.”
“The massive AI infrastructure build-out and the planned capacity CapEx spending by cloud services and AI platform providers in the USA is the primary driver for EML [electro-absorption modulated lasers] and silicon photonics-based optical transceivers as well as high-speed photodetectors,” says Young. “Our material is being used in multiple US hyperscalers, and we expect that end-customer use will continue to broaden,” he adds.
“We are also seeing huge growth in China, as China moves to accelerate its capability throughout the AI supply chain,” notes Young. “This highlights China’s increasing investment in the AI infrastructure supply chain for the global market. This is a great opportunity for AXT as there is no permit required to ship our product within China,” he adds. “I would anticipate that we would see a revenue split moving forward somewhere in that 40%–60% range [non-China versus China] as we build up both capacity and long-term supply agreements both within China and throughout the rest of the world,” says Bettles.
Q3 to yield at least $66m in revenue; capacity expansion accelerating
AXT has about $66m in revenue that can be realized in third-quarter 2026, for which it either already has an export permit or for which an export permit is not required, i.e. continued strong growth in the InP-based laser market in China, highlighting China’s increasing investment in the AI infrastructure supply chain for the global market. “We could see upside, even significant upside, to this number in Q3 should we receive permits for additional orders which we have the inventory to support,” says Fischer.
In Q3, gross margin is expected to rise further, depending on a number of factors including product mix, absorption of fixed costs, and AXT’s ability to continue to drive better manufacturing efficiency, including migrating toward larger-diameter substrates (e.g. 6-inch InP).
Despite operating expenses rising slightly to about $10.5m in Q3, net income should grow to $0.30–0.32.
Quarterly indium phosphide manufacturing capacity is expected to almost double from the original targeted $20m to $35–40m in Q3. It should then reach $60m by end-2026 (tripling during the year, ahead of schedule compared with the originally planned doubling), and more than double again to $130m by end-2027 (compared with the originally targeted $70m).
“This is happening as a result of (1) being able to expand capacity at a faster rate than we expected; (2) making significant strides in driving manufacturing productivity with new crystal growth furnace designs and increase our output; and (3) customers moving to larger-diameter substrates and higher-value products, resulting in favorable pricing trends,” says Young.
“We are gaining capacity through other factors rather than just hardware deployment. It means that we can we can gain capacity without huge additional CapEx spend [versus the originally planned $14m in 2026 and $100m in 2027],” notes Bettles.
Tongmei listing effort transferred from Shanghai’s STAR market to Hong Kong Exchange
On 26 June, AXT’s China-based wafer manufacturing subsidiary Beijing Tongmei Xtal Technology Co Ltd notified the Shanghai Stock Exchange that it was removing its application for an initial public offering on its Science and Technology Innovation board (STAR Market). This was accepted in July. AXT and Tongmei will now instead transfer their efforts towards listing on the Hong Kong Exchange, which will likely take about a year to complete.
“We continue to believe that an IPO in China is highly beneficial in expanding our capacity in China and is the most efficient and effective way to support the rapidly evolving AI infrastructure build out,” says Fischer. “This contributes to China's development of its semiconductor supply chain to meet increased China-based demand for InP substrates,” he adds.
“Tongmei’s move to the Hong Kong Stock Exchange creates a redemption right for the $49m invested by the private equity funds back in 2021. However, they all wish to continue their investment and not be redeemed. We have sufficient cash to redeem investments should they be requested,” Fischer notes.
AXT announces long-term InP supply agreement with Lumentum
Nanjing-based Casela to buy $25.4m of InP wafers from AXT’s Tongmei during 2027
AXT’s revenue grows 17% in Q1 after greater-than-expected export permits
AXT announces exercise of over-allotment option in public offering
AXT’s Q4/2025 revenue constrained by delay in China export permits
AXT’s Q3 revenue far exceeds guidance, after China export licenses granted for InP
AXT’s Tongmei receives China export permits to resume shipping InP substrates to certain customers
AXT’s Q2 revenue constrained by slower-than-expected China export permitting
