Contradictions Unveiled: AXT's 2025 Q1 Earnings Call Highlights Permitting, Tariffs, and Market Opportunities

Indium phosphide permitting and market impact, tariff exemption and revenue impact, wireless HPT yield issues and market opportunity, AI opportunity and market share, and indium phosphide permitting and shipping are the key contradictions discussed in AXT's latest 2025Q1 earnings call.



Revenue Performance:
- AXT, Inc. reported revenue of $19.4 million for Q1 2025, slightly above the midpoint of their guidance, but down from $25.1 million in Q4 2024 and $22.7 million in Q1 2024.
- The decline in revenue was partly due to the impact of trade restrictions on indium phosphide exports and yield issues in gallium arsenide production.

Gross Margin Challenges:
- AXT experienced a negative gross margin of 6.1% in Q1 2025, a significant decline from 17.9% in Q4 2024 and 27.3% in Q1 2024.
- The decrease was primarily due to yield issues in gallium arsenide, a shift in product mix due to trade restrictions, and lower margins from joint venture sales.

Operating Expenses and Loss:
- Non-GAAP operating loss for Q1 2025 was $9.6 million, compared to a non-GAAP operating loss of $5.4 million in Q4 2024 and a profit of $2.5 million in Q1 2024.
- The increase in operating loss was attributed to increased OpEx in Q1 despite efforts to control costs.

Export Restrictions and Market Opportunities:
- Trade restrictions on indium phosphide exports have impacted AXT's ability to meet customer demand, with permits expected to be secured by mid-June.
- Despite these challenges, AXT sees potential growth in China's domestic data center and autonomous vehicle markets, driven by increased domestic demand for indium phosphide.