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- **Record Backlog Growth**: $49M indium phosphide backlog, up 125% QoQ, driven by AI data center demand and longer-term customer orders.
- **Revenue Recovery**: Q3 revenue $28M (15% YoY growth), with indium phosphide revenue at 5-year high. Non-GAAP gross margin 22.4%, up 14.2% YoY.
- **Export Permit Challenge**: 60-day permit processing time limits visibility, but customers adapting with 6-month order windows.
- **Capacity Expansion**: Current indium phosphide capacity $20M/Q, scalable to $25M in 3 months; doubling possible in 9 months with $10M-$15M investment.
- **Profitability Path**: Gross margin improvement achievable with higher utilization, but Q4 net loss expected ($0.01-$0.03/share) due to permit delays.
- **Strategic Shift**: Shifting focus from PON to data centers in China, with germanium substrates de-emphasized due to margin constraints.


**【CFO Financial Commentary】**
- Q3 2025 revenue: $28.0 million (15% YoY growth, 56% sequential increase). Indium phosphide ($13.1M), gallium arsenide ($7.5M), germanium ($0.6M), and raw materials ($6.7M) drove growth. 87% of revenue came from Asia Pacific.
- Non-GAAP gross margin improved to 22.4% (vs. 8.2% Q2 2025, 24.3% Q3 2024), driven by higher volume and better product mix.
- Operating expenses: $6.7M (down 12% YoY, 11% QoQ). Non-GAAP net loss: $1.2M ($0.03/share), narrower than Q2 ($6.4M loss).
- Cash: $31.2M (down $3.9M). Inventory: $77.7M (down $2.4M).

**【CEO Business Summary】**
- Indium phosphide revenue at highest level since 2022, with $49M backlog (permit-dependent). Export permits take ~60 days; customers now place longer-term orders (e.g., 12 shipments over 6 months).
- Data center demand (AI infrastructure) driving growth, with U.S. hyperscalers and China buildouts as key markets. China's data center expansion surpassing PON as primary application.
- Gallium arsenide revenue up 20% QoQ, driven by semi-insulating wafers for RF devices. Germanium substrates underperform due to low gross margins.
- Raw materials business stable, with focus on earth materials supply chain.

**【Q4 2025 Guidance】**
- Revenue: $27M-$30M (includes $20M with permits, $7M-$10M potential from backlog). Non-GAAP net loss: $0.01-$0.03/share. OpEx: ~$9M.
- Capacity: Current indium phosphide capacity ~$20M/Q, scalable to +25% in 3 months, doubling possible in 9 months with $10M-$15M investment.

**【Q&A Highlights】**
- **Customer Behavior**: New customers (Tier 1 optical transceiver makers) qualifying AXT due to low EPD wafers. Orders reflect 6-month visibility, with permits as gating factor.
- **Profitability**: Gross margin improvement possible with higher utilization, but permit delays limit predictability. ASPs stable, with premium pricing for high-quality indium phosphide.
- **Geopolitical Impact**: U.S. AI infrastructure spend and China's data center buildouts driving demand. Permit process complexity may lead to inventory builds by customers.
- **Capacity Expansion**: U.S.-based manufacturing considered for long-term growth, but China remains key for near-term scalability.


AXT, Inc. (AXTI) Q3 2025 Earnings Call Transcript

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AXTI

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