Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $18 million, down from $19.4 million in Q1 2025 and $27.9 million in Q2 2024 [5] - Non-GAAP gross margin improved to 8.2% in Q2 2025 from a negative 6.1% in Q1 2025 and 27.6% in Q2 2024 [6] - Non-GAAP operating loss for Q2 2025 was $6.1 million, an improvement from a loss of $9.6 million in Q1 2025 and a loss of $1.2 million in Q2 2024 [7][9] - Cash and cash equivalents decreased by $3.1 million to $35.1 million as of June 30, 2025 [10] Business Line Data and Key Metrics Changes - Revenue breakdown for Q2 2025: Indium phosphide at $3.6 million, gallium arsenide at $6.2 million, and germanium substrates at $1.5 million [5] - Revenue from consolidated raw material joint ventures was $6.7 million in Q2 2025, a decline of approximately $1.6 million compared to Q1 2025 [21] Market Data and Key Metrics Changes - Revenue from Asia Pacific accounted for 90% of total revenue, while Europe contributed 9% and North America only 1% [5] - The China data center optical interconnect market is estimated to be around one-third of the global market, with most optical devices sourced from outside China [17] Company Strategy and Development Direction - The company plans to list its subsidiary, Tongmei, on the STAR Market in Shanghai, keeping its IPO application current despite geopolitical challenges [11] - AXT is focusing on improving gross margins and driving recovery in Q3, with expectations of sequential revenue growth to between $19 million and $21 million [24] Management's Comments on Operating Environment and Future Outlook - Management noted that export permit delays for gallium arsenide and indium phosphide have impacted revenue, but they expect improvements in permit processing in July [12][15] - The company anticipates a 30% or more growth in total indium phosphide revenue in Q3 due to increased demand in AI-related applications and data center connectivity [18] Other Important Information - The company has a backlog of over $10 million in customer orders for gallium arsenide and indium phosphide substrates [21] - Management emphasized the importance of low EPD material in high-speed interconnect devices, which is driving demand for indium phosphide [22] Q&A Session Summary Question: Concerns about potential share loss due to permitting delays - Management acknowledged the delays but expressed confidence in their healthy backlog and the growing market demand, indicating that the business remains strong long-term [29][30] Question: Resolution of yield issues with germanium arsenide - Management confirmed that yield issues have been resolved and they are taking a conservative approach to business opportunities with that customer [34][35] Question: Insights on market growth and backlog - Management noted that demand for optical interconnectivity is growing rapidly, and they expect to see an increase in orders once permits are received [41][44] Question: Reasons for slowed gallium arsenide export licenses - Management indicated that the slowdown is industry-wide and not specific to AXT, but they have seen improvements in permit approvals recently [50][52] Question: Advanced order making and inventory building by customers - Management stated that while customers are eager to place larger orders, they are not yet at the stage of building significant inventory due to ongoing permit issues [54][55]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $19.4 million, down from $25.1 million in Q4 2024 and $20.2 million in Q1 2024 [5][6] - Non-GAAP gross margin was negative 6.1% in Q1 2025, compared to 17.9% in Q4 2024 and 27.3% in Q1 2024 [6][9] - Non-GAAP net loss for Q1 2025 was $8.2 million or $0.19 per share, compared to a loss of $4.3 million or $0.10 per share in Q4 2024 [9][10] Business Line Data and Key Metrics Changes - Revenue from indium phosphide was $3.8 million, gallium arsenide was $6.7 million, and germanium substrates were $600,000 in Q1 2025 [5] - Revenue from consolidated raw material joint ventures was $8.3 million, indicating healthy demand [5] Market Data and Key Metrics Changes - Revenue distribution: Asia Pacific region accounted for 83%, Europe 11%, and North America 6% in Q1 2025 [5] - The Chinese data center optical interconnect market is estimated to be one-third of the global market, with increasing sales of indium phosphide within China [16] Company Strategy and Development Direction - The company is focusing on optimizing growth opportunities in China, particularly in high-speed data center connectivity and sensors for autonomous driving [25] - Plans to improve gross margins through a more measured approach to production and addressing yield issues [21][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by geopolitical factors and trade restrictions but expressed optimism about future growth opportunities in the Chinese market [15][25] - Expected healthy double-digit growth for revenue from data center applications in China in Q2 2025 [17] Other Important Information - The company is preparing for an IPO of its subsidiary in China, Tongmei, on the STAR Market [11] - Cash and cash equivalents increased to $38.2 million as of March 31, 2025, from $33.8 million at the end of 2024 [10] Q&A Session Summary Question: Yield issues for semi-insulating gallium arsenide - Management acknowledged yield problems due to aggressive market penetration but believes solutions are in place for recovery [30][32] Question: Timeline for resolving yield issues - Management indicated that while the product is established, changes in customer specifications require careful recalibration, which may take time [36][38] Question: Indium phosphide permitting process - Management expressed confidence in obtaining permits by mid-June, allowing for backlog shipments [41][46] Question: Risk of losing customers due to shipping delays - Management believes they hold a significant market share and that customers are willing to wait for shipments [55][60] Question: Impact of tariffs on gross margin - Management noted that tariffs are a concern but not a significant factor affecting gross margins at this time [72][78]