AXT, Inc. Q4 FY2025 earnings call

• Disappointed with Q4 export permits but in a stronger position in Q1. Expect sequential revenue growth in Q1 driven by indium phosphide for data center AI build-out. Backlog of indium phosphide wafers at new high over $60 million. Expanding customer base for indium phosphide, including leading optical companies. Growth in gallium arsenide for wireless RF, industrial and data center lasers, and VCSELs in China and robotics. Raw material business up with subsidiary volume and JinMei refining high-quality indium. Focus on gross margin improvement, OpEx discipline, and inventory reduction.

Fourth quarter 2025 revenue was $23.0 million. Indium phosphide was $8.0 million, gallium arsenide was $7.0 million, germanium substrates were $231,000, and revenue from consolidated raw material joint venture companies was $7.6 million. Revenue from Asia Pacific was 81.5%, Europe was 17.5%, and North America was 1%. Non-GAAP gross margin was 21.5%, GAAP gross margin was 20.9%. Non-GAAP operating expense in Q4 was $7.8 million, GAAP operating expense was $8.8 million. Non-GAAP net loss was $2.6 million, GAAP net loss was $3.6 million.

• Expect sequential revenue growth in Q1. Have approximately $26 million in revenue realizable in Q1 with high confidence. Non-GAAP net loss expected in range of $0.02 to $0.04, GAAP net loss in range of $0.04 to $0.06. OpEx expected to be approximately $9.0 million in Q1. Share count in Q1 estimated at ~53.2 million shares.

• Uncertainty in export permit timing and issuance, including geopolitical factors and lack of transparency. Denial of some permits with instructions to resubmit, and difficulty in determining reasons. Impact of global economic and political conditions, including trade tariffs and import/export restrictions on financial performance and ability to obtain permits. Financial performance of partially owned supply chain companies and increased environmental regulations in China.

Q: Request for revenue number and upside potential.

A: Gary said they're confident in '26 number and could go higher with more permits but no normal range. Morris added about semifinished goods staging.

Q: Insights on licensing process.

A: Timothy Bettles said process not transparent, variable, with geopolitics involved. Received denials with instructions to resubmit.

Q: Backlog and customer orders.

A: Morris said customers' demand increases weekly, Tim Bettles said backlog scaled by permit dynamics, long-term supply agreements beyond 2030.

Q: Capacity additions.

A: Morris said doubled capacity by end of '26 with ~$30 million CapEx, looking to double again in '27 with ~$100 - $150 million.

Q: Unfettered demand and shipments.

A: Gary said variable is manufacturing capability, Morris said more orders than can be manufactured now.

Q: Customer commitments and gross margins.

A: Timothy Bettles said lots of purchase orders and LTAs, Gary said could get close to 35% gross margin, Morris said larger wafer sizes usually better margin but 6-inch still in development