AXT Inc ((AXTI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for AXT Inc. painted a mixed picture for the company. While there were positive developments such as a recovery in gross margins and a surge in AI-related demand, these were overshadowed by significant revenue declines and ongoing challenges with export permits. The sentiment during the call was cautious, reflecting concerns over geopolitical factors affecting revenue and continued net losses.
Improved Gross Margin
AXT Inc. reported a notable improvement in its non-GAAP gross margin, which rose to 8.2% in Q2 2025 from a negative 6.1% in Q1 2025. This recovery is a positive sign for the company, indicating better cost management and operational efficiency.
AI-Related Demand Growth
The company experienced healthy growth in AI-related demand, particularly for indium phosphide substrates in China. This segment nearly doubled its revenue within the Chinese market, showcasing the potential for future growth in AI applications.
First Export License Obtained
In June, AXT Inc. secured its first export license, enabling the shipment of initial orders of indium phosphide substrates outside China. This development marks a critical step in expanding the company’s international market presence.
Sequential Revenue Growth Expected
Looking ahead to Q3, AXT Inc. expects sequential revenue growth, projecting revenues between $19.0 million and $21.0 million. This forecast suggests a potential rebound from the current revenue challenges.
Revenue Decline
Despite some positive developments, AXT Inc. faced a revenue decline in Q2 2025, with earnings dropping to $18.0 million from $19.4 million in Q1 2025 and $27.9 million in Q2 2024. This decline highlights the ongoing challenges the company faces in maintaining its revenue streams.
Gross Margin Decline Year-over-Year
The non-GAAP gross margin for Q2 2025 was 8.2%, a significant drop from 27.6% in Q2 2024. This year-over-year decline underscores the difficulties in sustaining profitability amid changing market conditions.
Export Permit Delays
AXT Inc. encountered delays in obtaining export permits for gallium arsenide and indium phosphide in Q2 2025. These delays have adversely affected the company’s revenue, as they limit the ability to fulfill international orders.
Net Loss
The company reported a non-GAAP net loss of $6.4 million in Q2 2025, a stark increase from a loss of $0.8 million in Q2 2024. This growing net loss is a significant concern for investors and stakeholders.
Forward-Looking Guidance
For the third quarter, AXT Inc. projects revenue growth between $19.0 million and $21.0 million, with modest contributions from sales outside China. The company is focusing on emerging opportunities within China and anticipates further improvements in gross margins, targeting low to mid-teens percentages. However, non-GAAP net loss is expected to range between $0.11 and $0.13, indicating ongoing financial challenges.
In summary, AXT Inc.’s earnings call reflected a cautious optimism. While there are promising signs of recovery in certain areas, significant challenges remain, particularly in revenue generation and export logistics. Investors will be closely watching the company’s ability to navigate these hurdles and capitalize on emerging opportunities in the coming quarters.