AXT Inc. Earnings Call: Navigating Challenges

AXT Inc ((AXTI)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for AXT Inc. painted a cautious picture for the company as it navigates through a challenging financial landscape. While there were some positive highlights such as improved cash reserves and effective cost management, these were overshadowed by significant negative trends including a decline in revenue, negative gross margins, and challenges related to export restrictions and yield issues. The overall sentiment expressed during the call was one of caution as AXT Inc. works to address these hurdles.

Cash and Cash Equivalents Increase

AXT Inc. reported an increase in cash and cash equivalents, which rose by $4.4 million to reach $38.2 million as of March 31. This improvement from $33.8 million at the end of December indicates a strengthening of the company’s financial position, providing a buffer as it faces ongoing challenges.

Cost Management Success

The company demonstrated effective cost management, with total non-GAAP operating expenses in Q1 reduced to $8.5 million from $10.5 million in Q4 of 2024 and $8.7 million in Q1 of 2024. This reduction reflects AXT Inc.’s commitment to controlling costs amidst a challenging revenue environment.

Strong Raw Material Joint Venture Sales

AXT Inc. saw robust performance in its raw material joint ventures, with revenue reaching $8.3 million in Q1. This was driven by continued healthy demand, highlighting a bright spot in the company’s operations.

Emerging Opportunities in China

Significant growth opportunities have been identified in China’s data center connectivity market. AXT Inc. expects healthy double-digit growth in revenue from data center applications in China, positioning the company to capitalize on this expanding market.

Revenue Decline

The company experienced a decline in revenue, reporting $19.4 million for the first quarter of 2025, down from $25.1 million in Q4 2024 and $22.7 million in Q1 2024. This decline underscores the challenges AXT Inc. faces in maintaining its revenue streams.

Negative Gross Margin

AXT Inc. reported a negative non-GAAP gross margin of 6.1% in the first quarter, a significant drop from 17.9% in Q4 2024 and 27.3% in Q1 2024. This negative margin reflects the impact of yield issues and a shift in revenue mix.

Export Restrictions Impact

China’s trade restrictions on the export of indium phosphide material have impacted AXT Inc.’s ability to fulfill orders outside of China, causing delays and affecting revenue.

Operating Loss Increase

The company’s non-GAAP operating loss increased to $9.6 million in Q1 2025, compared to $5.4 million in Q4 2024 and $2.5 million in Q1 2024. This increase in operating loss highlights the financial pressures AXT Inc. is under.

Yield Issues with Gallium Arsenide

AXT Inc. faced significant yield issues with semi-insulating gallium arsenide wafers, which negatively impacted gross margins due to scale-up challenges. This issue is a key area of concern for the company’s manufacturing processes.

Forward-Looking Guidance

Looking ahead, AXT Inc. anticipates Q2 revenue between $20 million and $22 million, with expectations of a gross margin recovery to approximately 10% based on manufacturing improvements. The company is focusing on overcoming current challenges and improving its financial performance in the coming quarters.

In conclusion, AXT Inc.’s earnings call highlighted a mix of positive and negative aspects, with the overall sentiment leaning towards caution. While the company has made strides in cash management and cost control, significant challenges remain, particularly in terms of revenue decline and negative gross margins. The forward-looking guidance suggests a potential recovery, but AXT Inc. will need to navigate export restrictions and yield issues to achieve its goals.