AXT, Inc. Q3 FY2025 earnings call

Revenue saw a 56% sequential growth and 18% year-over-year growth in Q3 2025. Indium phosphide revenue reached its highest level since 2022 due to increased demand from data center applications and successful acquisition of export permits. The indium phosphide backlog stands at over $49 million. Gallium arsenide revenue grew over 20% from the prior quarter, driven by semi-insulating wafers for wireless RF devices. Germanium substrates sales declined as the market had poor gross margin potential. The raw material business was consistent and profitable. The company remains focused on driving gross margin improvement, operating expense discipline, and inventory reduction.

Revenue for the third quarter of 2025 was $28.0 million. By product category, indium phosphide contributed $13.1 million, gallium arsenide was $7.5 million, germanium substrates were $640,000, and revenue from consolidated raw material joint venture companies was $6.7 million. Revenue from Asia Pacific accounted for 87%, Europe 12%, and North America 1%. The top 5 customers generated approximately 45.2% of total revenue with 2 customers exceeding the 10% level.

For Q4, the company expects revenue in the range of $27 million to $30 million. Non-GAAP net loss is projected to be in the range of $0.01 to $0.03, and GAAP net loss is expected to be in the range of $0.03 to $0.05. The significant gating factor for growth is the success and timing of obtaining export permits.

Uncertainties exist regarding the timing of export permits, the financial performance of partially owned supply chain companies, and increased environmental regulations in China.

Q: Charles Shi inquired about customer behavior in placing orders without permits and details of export permits.

A: Tim Bettles and Morris Young explained that the $49 million backlog includes orders with permit applications in place and permits lasting 6 months.

Q: Richard Shannon asked about indium phosphide backlog dynamics and capacity.

A: Timothy Bettles and Morris Young discussed backlog growth, potential capacity increases, and factors affecting shipments.

Q: Matthew Bryson asked about permits as the gating factor and gross margin dynamics.

A: Timothy Bettles and Gary Fischer explained that permits are the key gating factor and gross margin can improve through volume and efficiency