AXT Indium Phosphide Demand Lifts Revenue to Record

The Tip Desk · November 1, 2026 · 3 min read

Third-quarter revenue reached a record $73.4 million, up 54% from the prior quarter, as GAAP gross margin expanded to 56.0% of sales.

AXT, Inc. (AXTI), a manufacturer of compound semiconductor wafer substrates, reported record third-quarter revenue of $73.4 million, up 54% from the second quarter and 162% from a year earlier, as Chief Executive Officer Morris Young attributed the increase to exceptionally strong customer demand for indium phosphide material.

The sequential jump followed a 77% rise in the second quarter, when revenue was $47.6 million. Year-over-year growth of 162% compared with $28.0 million in the third quarter of 2025.

GAAP gross margin expanded to 56.0% of revenue from 44.9% in the second quarter and 22.3% a year earlier. Non-GAAP gross margin, which excludes stock-based compensation, was 56.1%.

GAAP net income attributable to AXT was $25.7 million, or $0.39 a share, compared with $11.1 million, or $0.17 a share, in the second quarter and a $1.9 million loss, or $0.04 a share, in the year-ago quarter. Non-GAAP net income was $26.8 million, or $0.41 a share.

Income from operations for the three months ended September 30, 2026, was $28.4 million, versus an operating loss of $1.1 million a year earlier. Selling, general and administrative expense was $8.7 million and research and development expense was $3.9 million. Interest income, net, was $5.9 million.

Young said the company entered 2026 with a commitment to double indium phosphide capacity and that it had surpassed that goal and more than quadrupled its 2026 indium phosphide revenue opportunity through additional productivity gains and expansion of capabilities for high-value, large-diameter products. He said AXT remained focused on execution and supporting customers as they scale.

In the second quarter, Young had described an inflection in which demand for data center optical connectivity, added manufacturing capacity and productivity gains were driving a step-function increase in revenue, and had said the company recorded its highest quarterly indium phosphide revenue to date.

Cash and cash equivalents were $485.5 million at September 30, 2026, versus $120.3 million at December 31, 2025. Restricted cash was $41.2 million and short-term investments were $27.3 million. Inventories were $103.7 million. Long-term investments were $272.0 million. Total assets were $1.22 billion.

The company develops and manufactures compound and single-element semiconductor wafer substrates comprising indium phosphide, gallium arsenide and germanium, used when a silicon wafer cannot meet device performance requirements. End markets include 5G infrastructure, data center connectivity, passive optical networks, LED lighting, lasers, sensors, power amplifiers and satellite solar cells. AXT has manufacturing facilities in three locations in China and partial ownership in more than ten Chinese companies producing raw materials and consumables.

Forward-looking statements in the release include plans to increase manufacturing capacity, expectations regarding export permits for indium phosphide substrates, market and customer demand, and the use of indium phosphide wafer substrates in artificial intelligence applications. The company listed among its risks the receipt of those export permits, withdrawals or redemptions by private equity funds in China of investments in Tongmei, and geopolitical tensions between China and the United States.