AXT (NasdaqGS:AXTI) Q4 2025 Earnings call February 19, 2026 04:30 PM ET Company ParticipantsGary Fischer - CFOLeslie Green - Investor RelationsMorris Young - CEOTim Bettles - VP of Business DevelopmentConference Call ParticipantsMatt Bryson - AnalystRichard Shannon - AnalystTim Savageaux - AnalystOperatorGood afternoon, everyone, and welcome to AXT's Q4 2025 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer, and Gary Fischer, Chief Financial Officer. In addition, ...

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $28.0 million, up from $18.0 million in Q2 2025 and $23.6 million in Q3 2024, representing a 56% sequential growth and 18% year-over-year growth [5][12] - Non-GAAP gross margin improved to 22.4% in Q3 2025, compared to 8.2% in Q2 2025 and 24.3% in Q3 2024 [6][9] - Non-GAAP operating loss improved to $0.384 million in Q3 2025 from $6.1 million in Q2 2025 and $2.6 million in Q3 2024 [8][9] - Non-GAAP net loss was $1.2 million, or $0.03 per share, compared to a loss of $6.4 million, or $0.15 per share, in Q2 2025 [9][10] Business Line Data and Key Metrics Changes - Indium Phosphide revenue reached $13.1 million, primarily driven by data center and passive optical network applications [5][12] - Gallium Arsenide revenue was $7.5 million, while Germanium substrates generated $0.64 million [5] - Revenue from consolidated raw material joint ventures was $6.7 million, consistent with the prior quarter [5][18] Market Data and Key Metrics Changes - Revenue from Asia-Pacific accounted for 87%, Europe for 12%, and North America for 1% in Q3 2025 [5] - Indium Phosphide order backlog exceeded $49 million, indicating strong demand from data center applications globally [12][20] Company Strategy and Development Direction - The company is focused on increasing manufacturing capacity and efficiency to meet growing demand, particularly for Indium Phosphide substrates [16][19] - Plans to list subsidiary Tongmei on the STAR Market in Shanghai are ongoing, with the IPO application kept current despite a selective listing environment [10] - The company aims to drive gross margin improvement and operational efficiency while managing export permit processes effectively [19][24] Management's Comments on Operating Environment and Future Outlook - Management noted a strong uptick in Indium Phosphide demand due to AI infrastructure buildout and data center expansions [12][16] - The geopolitical environment is dynamic, affecting export permit processes, which remain a significant gating factor for growth [20][21] - The company expects revenue in Q4 2025 to be in the range of $27 to $30 million, contingent on the timing of export permits [22][24] Other Important Information - Cash and cash equivalents decreased by $3.9 million to $31.2 million as of September 30, 2025, with accounts receivable increasing by $11 million [9][10] - The company is actively engaging with new Tier 1 customers to qualify materials into their supply chains [14][16] Q&A Session Summary Question: Customer behavior regarding longer-term orders and permits - Management explained that the $49 million backlog includes orders from customers with existing permits and those still in the permit phase, indicating confidence in future permit approvals [27][28] Question: Profitability and cost structure changes - Management acknowledged that improving gross margins is essential, focusing on product mix and manufacturing efficiencies to return to previous profitability levels [37][39] Question: Indium Phosphide demand from domestic vs. overseas customers - Approximately 40% of Indium Phosphide business is from domestic Chinese customers, with significant demand driven by AI data center growth in the U.S. [40][42] Question: Capacity and backlog dynamics - The backlog has more than doubled compared to the previous quarter, with customers placing orders for immediate shipment upon receiving permits [46][47] Question: Competitor capacity increases and shipping capabilities - Management reiterated that the ability to ship is contingent on obtaining export permits, which currently take about 60 business days to process [87][88]