AXT’s Order Book Tops $500 Million as Fourth-Quarter Earnings Guidance Reaches $0.59 a Share
Key Facts
AXT said it expects fourth-quarter 2026 earnings per share of $0.57 to $0.59 on a non-GAAP basis and $0.56 to $0.58 on a GAAP basis, as its order book topped $500 million. Management said on the earnings call that about $90 million in revenue would be eligible for fulfillment during the quarter, based on available or unnecessary shipping permits. The guidance follows record third-quarter revenue and a profit, amid strong demand for indium phosphide used in data center applications. The company did not describe its expected earnings-per-share range as growth compared with a specific period. The stock closed the Oct. 29 session at $60.88, down 5.44%, then fell to $57.959 in after-hours trading.
Third-quarter revenue was $73.4 million, up from $47.6 million in the second quarter and $28.0 million in the third quarter of 2025. Adjusted earnings per share came to $0.41, topping analysts’ estimate of $0.31, while revenue also beat the $66 million estimate. The company reported GAAP net income of $25.7 million, compared with $11.1 million in the second quarter and a loss of $1.9 million in the year-earlier period. These comparisons reflect a return to year-over-year profitability, but do not by themselves establish that the trend will continue in coming periods. Non-GAAP gross margin was 56.1%, compared with 45.0% in the previous quarter and 22.4% a year earlier.
Indium phosphide made the largest contribution to the product mix, generating $54.3 million in third-quarter revenue, primarily from data center applications. Gallium arsenide brought in $9.1 million, while combined raw materials companies generated $9.7 million in revenue. The chief executive said record revenue was driven by “exceptionally strong customer demand for indium phosphide material.” Management linked that demand to the expansion of optical communications links in AI data centers, as transceiver speeds move to 800G and 1.6T. This reliance on a single material is an important part of the explanation for the revenue jump, while also highlighting the importance of the company’s ability to increase production to meet customer demand.
Management said the improvement in third-quarter gross margin was tied to higher volume and product mix, as well as higher indium phosphide prices. It added that the shift from 3-inch wafers to 4-inch wafers contributed to the improvement. Indium phosphide’s rising share of revenue helps explain the mix effect, as it was the company’s largest reported product category in the quarter. AXT expects operating expenses of about $13 million on a non-GAAP basis in the fourth quarter and about $14 million on a GAAP basis. Those estimates accompany expected revenue of about $90 million eligible for fulfillment and are among the company’s financial projections for the coming period.
The chief executive said the order book, which topped $500 million, comprises long-term, multi-year supply agreements, short-term contracts of less than 12 months and spot purchase orders. The variety of these components means the book covers different time frames and forms of demand, while the figure alone does not establish when all orders will convert into revenue. On expansion, management said it exceeded its goal in August of doubling indium phosphide production capacity for 2026 and is continuing to prepare a new adjacent production building, which it expects to begin operating in the following months. The company said it is expanding its capabilities for large-diameter, high-value products. By the end of 2026, management expects production capacity to reach between 2.75 and 3 times its level at the end of 2025, with plans to double it again in 2027.