AXT 2025 Q1 Earnings Misses Targets as Net Loss Widens 389%

AXT Inc. (AXTI) reported its fiscal 2025 Q1 earnings on May 14th, 2025. The company experienced a challenging quarter, missing revenue expectations but surpassing net loss forecasts. Despite geopolitical and operational hurdles, AXT remains focused on strategic initiatives to bolster growth in China’s high-speed data center and autonomous vehicle sectors. For Q2 2025, AXT anticipates revenue between $20.0 million and $22.0 million, with improved gross margins expected. The company's strategic focus on optimizing growth opportunities, particularly in the data center connectivity and LIDAR markets, remains a priority.

Revenue
Revenue for AXT in the first quarter of 2025 saw a notable decline of 14.7%, amounting to $19.36 million compared to $22.69 million in the same quarter the previous year. The substrates segment contributed $11.08 million to this total, while raw materials and other segments added $8.27 million. This aggregate performance reflects the company's ongoing challenges in managing geopolitical and operational complexities affecting its revenue streams.

Earnings/Net Income
AXT's losses deepened significantly, with earnings per share dropping to $0.20 in 2025 Q1 from $0.05 per share in 2024 Q1, marking a 300.0% wider loss. The company's net loss expanded to $-10.02 million in 2025 Q1, a 389.1% increase from the previous year's $-2.05 million loss, indicating poor EPS performance.

Price Action
The stock price of AXT dropped 3.36% during the latest trading day, jumped 12.50% during the most recent trading week, and surged 24.14% month-to-date.

Post-Earnings Price Action Review
Following AXT Inc.'s earnings report, the stock displayed significant price movements. Although the company surpassed revenue expectations with $19.4 million, exceeding the market's forecast of $18.98 million, the broader financial picture remains concerning. Analysts project a one-year price target averaging $4.75, with a high estimate of $6.00, suggesting substantial upside from the current price of $1.35. However, the semiconductor sector's inherent volatility could impact short-term price movements. AXT's strategic positioning, particularly through its Chinese subsidiary Tongmei, offers potential for growth in high-speed data center connectivity and LIDAR technologies. Despite this, investors should remain aware of geopolitical risks, operational challenges, and market fluctuations. The strategy of buying AXTI on revenue beats and holding for 30 days presents potential gains but requires careful risk management and consideration of individual investment horizons.

CEO Commentary
Morris Young, Chief Executive Officer of AXT, Inc., expressed disappointment with the company's gross margin performance in the first quarter of 2025, attributing challenges to geopolitical conditions and operational issues. He emphasized the strategic focus on optimizing growth opportunities, particularly in the data center connectivity and LIDAR markets in China, where indium phosphide and gallium arsenide substrates are in demand. Young acknowledged that the company had been overly aggressive in scaling production, leading to yield issues, but he remains optimistic about resolving these challenges and improving margins moving forward.

Guidance
For the second quarter of 2025, AXT expects revenue in the range of $20.0 million to $22.0 million, excluding indium phosphide shipments to customers outside of China. The company anticipates a gross margin recovery to around 10% based on manufacturing improvements. Non-GAAP net loss is projected between $0.12 and $0.14 per share.

Additional News
AXT Inc. is actively pursuing the listing of its subsidiary, Tongmei, on China's STAR Market, a process requiring regulatory approvals. The company remains focused on strategic growth opportunities in China, particularly those involving high-speed data center connectivity and LIDAR technologies. Despite geopolitical challenges, AXT underscores its commitment to optimizing these opportunities through Tongmei. Additionally, AXT's involvement in semiconductor conferences highlights its ongoing efforts to engage with investors and industry professionals, showcasing its advancements in compound semiconductor substrates. These initiatives reflect the company's strategic approach to navigating market dynamics and enhancing its position in the semiconductor sector.