AXT, Inc. Reports Second Quarter 2025 Financial Results, Highlights Export Progress and Indium Phosphide Demand Growth
AXT, a prominent manufacturer of compound semiconductor substrates used in a range of high-performance applications, today announced its financial results for the second quarter ended June 30, 2025. Despite continued macroeconomic headwinds and logistical challenges, the company reported sequential improvements in gross margin and delivered progress in strategic areas, including the ramp-up of indium phosphide (InP) substrate shipments and ongoing efforts toward the public listing of its subsidiary, Tongmei, on China’s STAR Market.
Management Commentary: Export Approvals, Indium Phosphide Demand, and Operational Focus
Dr. Morris Young, AXT’s Chief Executive Officer, provided a qualitative update on the company’s performance and strategic initiatives during the second quarter. While acknowledging a challenging operating environment, particularly with regard to export logistics and demand softness in China, Young emphasized the company’s resilience and its efforts to drive long-term shareholder value through manufacturing efficiency and advanced product offerings.
“Our substrate revenue increased in Q2 compared to the previous quarter,” said Young. “However, the growth was less robust than we had forecasted due to delays in obtaining export permits for gallium arsenide (GaAs), as well as a generally sluggish demand climate in China. This dual impact also influenced our raw materials business, which experienced headwinds from the softer market conditions.”
Despite these challenges, AXT made notable strides in improving its gross margins. Young attributed these gains to targeted improvements in manufacturing processes and cost-efficiency initiatives across the organization. “We remain laser-focused on optimizing our operations. These efforts are showing tangible results in terms of margin recovery,” he noted.
One of the more promising developments during the quarter was the increasing demand for indium phosphide substrates, particularly driven by AI-related applications in China. AXT capitalized on this momentum by beginning shipments of InP substrates to customers outside China for the first time—made possible through the receipt of initial export permits in June.
“Our competitive position in the substrate market is reinforced by our superior product quality,” Young added. “In critical areas such as low etch pit density (EPD), our materials deliver high-performance metrics that are increasingly important to next-generation semiconductor technologies. As a result, we are well-positioned to support the evolving needs of our global customer base.”
Second Quarter 2025 Financial Results
AXT reported total revenue of $18.0 million for the second quarter of 2025, representing a sequential decline from the $19.4 million reported in the first quarter of 2025, and a year-over-year decrease from $27.9 million in the second quarter of 2024. The revenue decline reflects a combination of external headwinds—including delays in export permitting, customer demand variability, and softer conditions in China’s raw material markets.
Gross Margin Improvement:
Despite the revenue decline, the company significantly improved its profitability on a gross margin basis. AXT posted a GAAP gross margin of 8.0% for the quarter, compared with a negative gross margin of (6.4%) in Q1 2025. This improvement reflects operational efficiencies, better cost control, and more favorable product mix. On a non-GAAP basis—excluding stock-based compensation—gross margin reached 8.2%, up from (6.1%) in the prior quarter. However, these margins remain well below the 27.6% non-GAAP gross margin achieved in Q2 2024.
Net Loss Narrows Sequentially:
The company reported a GAAP net loss of $7.0 million, or $0.16 per share, for Q2 2025. This compares to a larger net loss of $8.8 million, or $0.20 per share, in Q1 2025. On a non-GAAP basis, which excludes the impact of stock-based compensation, the net loss for the quarter was $6.4 million, or $0.15 per share, down from $8.2 million, or $0.19 per share in Q1 2025.
Although the company is still operating at a net loss, the sequential improvement is an encouraging sign as AXT continues to navigate a difficult macroeconomic landscape and execute its turnaround strategy. Compared to the second quarter of 2024, the year-over-year performance reflects the challenges of a slowing demand cycle and regulatory hurdles in global trade flows, with the previous year’s net losses being significantly smaller—$1.5 million GAAP and $0.8 million non-GAAP.
Strategic Update: STAR Market IPO of Tongmei
AXT also provided an update on the planned initial public offering of its majority-owned subsidiary, Beijing Tongmei Xtal Technology Co., Ltd. (“Tongmei”), on China’s STAR Market—a technology-focused segment of the Shanghai Stock Exchange (SSE).
Tongmei, which plays a central role in AXT’s operations and growth strategy in China, first submitted its IPO application to the SSE on January 10, 2022. The SSE formally accepted the application for review, and after several rounds of questions and clarifications between the company and the exchange, the SSE approved the IPO proposal on July 12, 2022.
Subsequently, on August 1, 2022, the China Securities Regulatory Commission (CSRC) accepted the application for further review. As of now, the IPO remains under review by the CSRC and other relevant authorities. AXT emphasized that the listing process for the STAR Market includes multiple phases and regulatory evaluations, and therefore can be quite lengthy.
“We continue to move forward with our plan to list Tongmei on the STAR Market,” the company said in a statement. “We remain optimistic about completing the listing in the months ahead, pending necessary approvals. We believe this IPO will unlock significant value, both for AXT and for Tongmei’s operations within the dynamic Chinese semiconductor market.”and Strategic Focus Areas
