AXTI

AXT (AXTI) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving. The upward trend in estimate revisions for this semiconductor materials supplier reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. For AXT, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: For the current quarter, the company is expected to earn $0.31 per share, which is a change of +1,133.3% from the year-ago reported number. Over the last 30 days, three estimates have moved higher for AXT compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 304.55%. For the full year, the earnings estimate of $0.86 per share represents a change of +309.8% from the year-ago number. In terms of estimate revisions, the trend for the current year also appears quite encouraging for AXT. Over the past month, three estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 322.81%. Thanks to promising estimate revisions, AXT currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision.You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. AXT shares have added 28.2% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AXT Inc (AXTI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

AXT has surged 351% YTD but is pausing as traders de-risk ahead of Lumentum's closely watched earnings after tonight's close. Coherent, up 76% YTD, plans to double internal InP wafer output by year-end 2026, a direct demand signal for AXT substrates. Lumentum has beaten EPS four straight quarters, with past beats averaging a 7% day-of gain and 15% one-week gain. It sounds nuts, but SoFi1 is giving new Active Invest users up to $3,000 in stock for a limited time, and all it takes is a $50 deposit to get started.2 See for yourself (Sponsor) Shares of AXT (NASDAQ:AXTI) are drifting lower midday Tuesday, changing hands near $74 and roughly flat on the session. The relatively calm day follows a whip saw previous week that saw shares spike and then drop nearly 17% yesterday. Overall, AXT has rebounded from trading down to $36.97 on July 29th's close. Looking further back, shares have surged 351% year to date. Traders across the optical complex appear to be de-risking ahead of Lumentum (NASDAQ:LITE) earnings after the close. AXT's move so far this week appears to be a sentiment tell rather than a reaction to its own results. AXT supplies indium phosphide (InP) substrates that feed directly into the silicon photonics and high-speed transceiver supply chain that Lumentum and Coherent (NYSE:COHR) sell into. When Lumentum reports tonight, its commentary on 800G modules, optical circuit switches, and co-packaged optics will set the tone for anyone tied to AI datacenter optical connectivity, and that includes AXT's core InP business. The setup into tonight is loaded. Lumentum guided fiscal Q4 revenue to $960 million to $1.01 billion with non-GAAP EPS of $2.85 to $3.05 and operating margin of 35.0% to 36.0%. CEO Michael Hurlston flagged an OCS backlog above $400 million and an incremental multi-hundred-million-dollar co-packaged optics order. SoFi Active Invest is offering a limited-time promotion. Open an account, fund it with $50 or more, and you could receive up to $3,000 in complimentary stock for Active Invest accounts. See for yourself by clicking here now. (Sponsor) Reaction risk cuts both ways. Lumentum has beaten EPS estimates four consecutive quarters, yet last quarter shares still closed down 5% on the day of the print despite the beat, with an intraday range of $902 to $1,014. Over the last five reports, beats have delivered an average day-of move of +7% and a one-week average gain of +15%. That is the whipsaw AXT holders are staring down midday. Coherent shares also fell 14% yesterday. Wall Street commentary yesterday threw cold water on the potential transceiver ban out of China. Reuters reported on August 5th that the Trump Administration was looking to limit future optical transceivers from the country. That would be good news for domestic companies like Coherent, Lumentum, and Applied Optoelectronics. So, any Wall Street commentary that media reports of the ban are more the Trump Administration negotiating in public before a September summit with President Xi would lead to selling pressure on these names. A ban is far more complicated for AXT, so those same reports would seem to be positive for the company. Yet, AXT shares fell 17% yesterday. A transceiver ban would provide complications for AXT because the company relies on export licenses from China for its InP sales. If the U.S. were to ban Chinese optical transceivers, China could retaliate by limiting InP exports from the country. All major optical stocks have been on a tear this year. Coherent is up 76% year to date, and Lumentum is up 121%. Against those runs, AXT's 351% YTD move stands out, and small pullbacks around sector catalysts are unsurprising after that kind of parabolic rally. Coherent's own fiscal Q4 earnings lands tomorrow after the close, per confirmed company timing. Its guidance calls for revenue of $1.91 billion to $2.05 billion and non-GAAP EPS of $1.52 to $1.72. Notably, Coherent flagged plans to double internal InP wafer output by year-end 2026 and more than double it again by 2027. That is a direct read-through to AXT's substrate demand. AXT delivered its own step-function last quarter. Q2 revenue landed at $47.59 million, up 164.8% year over year and beating consensus by 40%, while non-GAAP EPS of $0.19 topped the $0.07 estimate. CEO Morris Young cited "strong customer demand for data center optical connectivity" and a "step-function increase in our revenue." That narrative rises or falls with what Lumentum and Coherent signal about forward optical demand. Looking to grow your money but unsure where to begin? SoFi Active Invest is offering a limited-time promotion—open a new Active Invest account, fund it with $50 or more, and you could receive up to $3,000 in complimentary stock. From $0 commission trading3 to fractional shares4 and automated investing, this app is designed to simplify investing for everyone, whether you’re just starting or already experienced. Its easy to sign up and secure your bonus.(Sponsor) Contact [email protected] for any questions or corrections.

Image source: The Motley Fool. Thursday, July 30, 2026 at 4:30 p.m. ET investor relations - Leslie Green Chief Financial Officer - Gary L. Fischer Chief Executive Officer - Dr. Morris S. Young VP of business development - Timothy J. Bettles Operator: Good afternoon, everyone. And welcome to AXT's Second Quarter 26 Financial Conference Call. Leading the call today is Dr. Morris S. Young, chief executive officer and Gary L. Fischer, chief financial officer. In addition, Timothy J. Bettles, VP of business development, will be participating in the Q&A portion of the call. My name is Kenneth, and I will be your coordinator today. I would now like to turn the call over to Leslie Green, investor relations for AXT. Leslie Green: Thank you, Kenneth, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide forward-looking projections or make other forward-looking statements. Regarding, among other things, the future financial performance of the company market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, ability to obtain China export permits, timing of receipt of export permits, listing our subsidiary, Tongmei, in Hong Kong our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies or to utilize our manufacturing capacity. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events and results to differ materially. Addition to the matters just listed, these uncertainties and risks include, but are not limited to, the financial performance of our partially owned China companies and increased environmental regulations in China. In addition to the factors just mentioned that may be discussed on this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at axt.com. Through July 30, 2027. Also, I want to note that shortly following the close of the market today, we issued a press release reporting financial results for the second quarter of 2026 This information is available on the Investor Relations portion of our website. I would now like to turn the call over to Gary L. Fischer for a review of our second quarter 26 results. Gary? Gary L. Fischer: Thank you, Leslie, and good afternoon to everyone. Our Q2 financial results highlight an exciting inflection in our business trajectory, the beginnings of a multiyear growth phase for AXT. Revenue for the second quarter of 2026 is $47.6 million. This is the highest quarterly revenue in AXT history. Up nearly 77% from $26.9 million in the first quarter. And up a 164% from $18 million the second quarter of 2025. To break down our Q2 26 revenue, for you by product category, indium phosphide was $30.7 million also the highest in our company's history. Let me repeat that. Indium phosphide was $30.7 million also the highest in our company's history. Primarily from data center applications. Gallium arsenide was $6.6 million. Germanium substrates were $272 thousand. Finally, revenue from our consolidated raw material joint venture companies in Q2 was $10 million. The top 5 customers generated approximately 30% of total revenue and no customers are over the 10% level. Gross margin showed a substantial improvement again in the second quarter primarily driven by an increase in total volume and a favorable product mix, Non GAAP gross margin was 45.0%, compared with 29.9% gross margin in Q1 of 2026 and 8.2% gross margin in Q2 of 2025. For those who prefer to track results on a GAAP basis, gross margin in the second quarter was 44.9%. Compared with 29.6% in Q1 of 2026 and 8.0% in Q2 of 2025. This is a huge, huge positive change from Q1 of 2025. Moving to operating expenses. Our total non GAAP operating expense in Q2 was $10.2 million compared with $8.6 million in Q1 and $7.6 million in Q2 of 2025. On a GAAP basis, total operating expense in Q2 was $10.9 million compared with $9.6 million in Q1 and $8.2 million in Q2 of 2025. Our non GAAP operating profit for the second quarter of 2026 is $11.2 million compared with a non GAAP operating loss in Q1 of $550 thousand and a non GAAP operating loss of $6.1 million in Q2 of 2025. For reference, our GAAP operating line for the second quarter of 2026 was Kenneth. Operator: Hello, Leslie. You disappeared for a sec. You are back now. Leslie Green: Okay. Great. Terrific. Continue, Gary. Gary L. Fischer: Am I just on the speaker on your cell phone now? Can you hear me okay? Operator: Loud and clear. You can continue. Gary L. Fischer: Okay. For the benefit of people listening, it is afternoon where you are. We are we are in China right now, and we are we are at the conference room of the Tongme Headquarters. So we have a little bit of a hiccup on the on the phone equipment. Alright. Non GAAP operating profit for the second quarter of 20 was $11.2 million compared with a non GAAP operating loss in Q1 of 2026 of $550 thousand and a non GAAP operating loss of $6.1 million in Q2 of 2025. For reference, our GAAP operating line for the second quarter of 2026 was a profit of $10.4 million compared with an operating loss of $1.6 million in Q1 and an operating loss of $6.7 million in Q2 of 2025. Nonoperating other income and expense and other items below the operating line for the second quarter of 2026 was a net profit of $705 thousand The details can be seen in the P&L included in our press release today. In Q2 26, we returned the company to profitability. We are pleased to report a non GAAP net profit of $11.9 million or $0.19 per diluted share This compares with the non GAAP net loss of $585 thousand or $0.01 per share loss in the first quarter and a non GAAP net loss in Q2 of 2025 of $6.4 million or $0.15 per share loss. On a GAAP basis, net profit in Q2 is $11.1 million or $0.17 per diluted share. By comparison, net loss of $1.6 million or $0.03 per share in the first quarter. And a GAAP net loss in Q2 of 2025 of $7 million The weighted average diluted shares outstanding in Q2 is 63.5 million Cash, cash equivalents and investments increased by $626 million to $749 million as of June 30. This was primarily the result of our secondary public offering of common stock which closed on April 22 and generated approximately $632 million before expenses. By comparison, at March 31, our cash was $123 million Accounts receivable increased by $4.7 million. During Q2, we signed long term supply agreements with Casella and Coherent. Under the terms of these agreements, we receive prepayments for wafers of $22.3 million and $25.4 million respectively, These type of agreements with significant upfront cash are an additional signpost regarding the important use of indium phosphide for high speed optical data transmission required in AI data centers. Morris is going to talk more about this in a moment. These prepayments are posted on our financial statements as a liability. And they will be converted to revenue when the liability reduces, as we ship product against the these agreements. Depreciation and amortization in the second quarter was $2.5 million Total stock comp was $800 thousand Net inventory was up approximately $6.2 million in the second quarter to $96.3 million And this concludes our report on financial numbers. Turning to our plan to list our subsidiary Tongmei in China, On June 26, Tongmei notified the stock exchange that it was moving its application for an initial public offering on the STAR Market. This was accepted in July. AXT and Tongmei will now instead transfer our efforts towards listing on the Hong Kong Exchange which will likely take about a year to complete. We continue to believe that an IPO in China is a highly beneficial in expanding our capacity in China and is the most efficient and effective way to support the rapidly evolving AI infrastructure build out. This contributes to China's development of its semiconductor supply chain to meet increased China based demand for Indian phosphide substrates. Tongmei's move to the Hong Kong Stock Exchange creates a redemption right for the $49 million invested by the PE funds back in 2021. However, we have been in discussion with them and currently, they all wish to continue or continue their investment and not be redeemed. We have sufficient cash to redeem investments should they be requested. With that, I will turn the call over to Dr. Morris S. Young. For a review of our business and markets. Morris? Morris S. Young: Thank you, Gary. This is a incredibly exciting time for you at AXT. As Gary mentioned, we have reached an inflection point in our business where the customer demand is extremely strong for our indium phosphide material. We are committed to doubling our indium phosphide capacity in 2026 and I am pleased to report that we are ahead of the schedule in that effort. But more importantly, I can now report to you that our revenue opportunity for indium phosphide is on track to more than triple by the end of 2026. Which continues significant expansion expected in 2027. This is happening as a result of 3 factors. First, we are being able to expand capacity at a faster rate than we expected. Second, we are making significant strides in driving our manufacturing productivity with new crystal growth furnace designs and increase our output. And third, our customers are moving to larger diameter substrates and higher value products. Resulting in favorable pricing trends. The combination of these factors is driving a step function increasing our revenue in Q2. We recorded our highest quarterly revenue and highest indium phosphide revenue in our history. With the backlog that continues to grow and is now well over $100 million. Customer demand continues to outpace supply no matter how fast we add capacity. Broadly, the deployment of optical connectivity in AI data center is accelerating as hyperscalers scale GPU dense architectures and look for higher speed lower power photonics to move data more efficiently. In the near term, we are seeing high demand from the industry migration to 100G and 1.6T transceiver modules. For which indium phosphide based lasers and detectors are essential for higher performance optical links. Longer term, hyperscalers are advancing towards near packaged and co packaged optics which will continue to drive increasing demand for our material. Overall, these trends point to a durable long term build out of denser optical infrastructure and a multiyear demand cycle for our indium phosphide. As many of you are aware, the competitive landscape for high quality indium phosphide is limited to just a few players. Due to primarily the very high technical barrier to entry. Among our peers, we believe AXT is in the strongest position to increase manufacturing capacity quickly and at a scale and quality needed to move the needle in our industry. And meet our customers' requirements. Our team in China has done an outstanding job in bringing up new lines in our existing factory facilities as well as innovating to drive higher productivity. In working closely with our direct customers, as well as our major end customers to understand their expected demand and road maps while well into the planning process to double our capacity again in 2027 in adjacent location. This will make AXT by far the largest indium phosphide producer in the world. In addition to growing our manufacturing footprint, we have also made great strides in development of our 6-inch indium phosphide capability. 6-inch phosphide substrates are exponentially more difficult to produce in volume than 3- or 4-inch wafers. And I am very pleased and proud of our team's progress towards this new offering. I also want to thank our customers who have partnered with us throughout this process We are excited to support them as we move forward with our own capability. Partnership is a cornerstone of our business philosophy. Through which we have been able to deliver game changing innovation. This dates back to the formation of joint ventures that today make up a unique and vertically integrated supply chain. And in the last 10 years, our work with 2 globally recognized indium phosphide customers helped us to raise the bar even further on our manufacturing and business processes to be able to support the rigorous standard of some of the most prestigious companies in the world. Strong partnership lifts innovation, and enables both partners to achieve more. That is why 1 of the most rewarding aspect of our unfolding chapter in our history is the extent to which we have been able to partner with leading customers around the world. Who are defining the next generation of data center connectivity. We recently signed strategic long-term supply agreements with Casella and Coherent. And this week, we are very pleased to announce an agreement with Lumentum. These agreements deepens our relationship with these important customers working shoulder to shoulder with them to help them deliver on their own vision and road maps. In addition, they gave us the even greater sense of conviction that our capacity build out is mirrored and necessary. From a geographic perspective, the massive AI infrastructure build out and the planned capacity CapEx spending by cloud services and AI platform providers in the U.S. is the primary driver for EML and silicon photonics based optical transceivers. As well as high speed photo detectors. We believe that today, our material are being used in multiple U.S. hyperscalers and we are expected and we expect that end customer use will continue to broaden. We are also seeing huge growth in China, as China moves to accelerate its capability throughout the AI supply chain. Our revenue related to indium phosphide based lasers market in China more than doubled in Q2 from the prior quarter. And we expect continued strong growth in Q3. This highlights China's increasing investment in AI infrastructure supply chain for the global market. This is a great opportunity for AXT as there is no permit required to ship our product within China. Turning to gallium arsenide. In Q2, demand for semiconductor wafers for industrial robotics and data center laser applications grew sequentially from the prior quarter. We also continue to see demand for semi insulating wafers for wireless RF devices and believes that we have a strong affinity for market share expansion. Finally, our raw material business continues to be highly strategic to our growth plan. And also generated record third quarter revenue In Q2. As we reported last quarter, our subsidiary, Jingmei, is now refining high purity Indian which gives us direct control of a guaranteed supply of yet another critical material for indium phosphide substrates. We are also investing to help to expand their capabilities so that when AXT's demand for poly material grows, GMA will continue to provide a meaningful portion of our raw material requirements. Globally, there continues to be a great awareness of the importance of our raw material supply chain. And we are decades ahead of the curve in developing our unique integrated supply chain. We will continue to invest in our portfolio as we believe it is a major competitive differentiator. Now in summary, we believe AXT is entering 1 of the most consequential chapter in our company history. The investment we are making today in capacity, in technology, and in our unique integrated supply chain position us to meet the extraordinary demand we see building across the optical and AI infrastructure markets. Our customer engagement is deepening Our visibility is improving. And our competitive differentiation is strong. We while we remain disciplined and thoughtful in our execution, We are confident that the groundwork we are laying now will enable transformational growth in the years to come. With that, I turn the call back to Gary for third quarter guidance. Gary? Gary L. Fischer: As of today, we have approximately $66 million in revenue, that can be realized in Q3 across our substrate product lines and raw materials. For which we either already have a permit to ship or for which an export permit is not required. So $66 million. We have a high degree of confidence in recognizing this revenue. We could see upside, even significant upside, to this number in Q3 should we receive permits for additional orders which we have the inventory to support. But we do not want to stress we do want to stress that we cannot predict the future timing of permits or success in obtaining them for any specific customer or individual order. We have delivered strong gross margin improvement over the past several quarters, Further improvement depends on a number of factors, including total revenue as it relates to the revenue mix by product, absorption of fixed costs, and our ability to continue to drive better manufacturing efficiency. With regards to OpEx, we expect that it will be approximately $10.5 million in Q3 on a non GAAP basis and approximately $11 million on a GAAP basis. With these factors in mind, we believe our non GAAP net income will be in the range of $0.30 to $0.32 and GAAP net income in the range of $0.29 to $0.31. We estimate share count for Q3 will be approximately 66.5 million shares. Okay. This concludes our prepared comments. We are glad to answer your questions now. Kenneth? Operator: Thank you so much. We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press Star 1 on your telephone keypad. To withdraw your question, press Star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Timothy Savageaux from Northland Capital Markets. Timothy, your line is open. Please go ahead. Tim Savageaux: Hey. Well, good afternoon from here at least, and wow, congrats on the results and the guide. My first question is about the comments on the call about, I guess, an increased target for indium phosphide capacity for this year and looks like and I assume most of the growth you are guiding to in Q3 comes from the new phosphide. But I think we were looking at doubling from a $20 million-type level as the original target, maybe 35 to 40. Am I right to think the new sort of target exiting the year is something in the neighborhood of $60 million in quarterly indium phosphide capacity? And I will follow-up from there. Timothy J. Bettles: Yeah. that is about right, Timothy. that is exactly what we are looking at here. So that is $60 million, thereabouts. Great. Tim Savageaux: Good answer. And then you are you are looking to double that still, I guess, exiting calendar 2027. So just confirmation on that. And then around the Lumentum deal, I wonder if you could you know, obviously, you are you have got larger prepays a longer term I wonder if you could speak to maybe the overall size of that opportunity you know, from a baseline standpoint or upside or however you wanna talk about it. Thanks, and congrats again. Timothy J. Bettles: Thank you, Timothy. So, yeah, next year, we are we are looking at doubling, slightly more than doubling again. Take our revenue to somewhere in the region of about $130 million a quarter. Exiting the year. Yeah. I Thank you. About the Lumentum deal. Clearly, we have got some we have got some prepayments on that but we are not discussing the total revenue impact of that deal at this moment. Okay. Thanks. I will pass it along. Morris S. Young: Yeah. So let maybe let me add 1 point. About the capacity expansion. I we are planning at least to double next year. But as you know, this target changes when in fact, I think this year, we are going to more than double And it is because customer demand is just mounting. So we are finding you know, whatever way to increase the capacity expansion Although so I am saying, although we are planning for double next year, but depends about how the business develops in the second quarter. We could find the other way to even better than that. Okay. that is my so that in a way, it is a moving target. But we think it is going to be more than double in 2027. Gary L. Fischer: The demand is moving faster than we can move. We are doing great to move fast. Analyst: But the demand is even stronger. Tim Savageaux: Okay. Not much faster, but you guys are moving pretty fast. But okay. Thanks. Appreciate it. Operator: Your next question comes from the line of Matthew Bryson with Wedbush Securities. Matthew, your line is open. Please go ahead. Matt Bryson: Hi. Thanks for taking my question, and congrats on the results and guide. Just when it obviously, you are having a whole lot more success in getting permits And it seems like with the Coherent deal, have to have certainty that you are going to get permits to ship out China given the terms of that deal. I guess, can you talk about how the process is changed, and about how you have more confidence in getting these permits or what has changed? Timothy J. Bettles: Yeah. Sure. Thanks, Matthew. You know, permits always remain a bit of an issue on the back of our minds. As Gary mentioned, it is not something that we can absolutely predict. Both the timing and the certainty of. But we are seeing more regularity in the process especially in certain geographic regions. So that is you know, that is great news. And we are seeing increased demand in those geographic regions too. So we are we are focusing now even with greater intensity on capacity and allocation. But, yeah, the right now, the permits, as I say, we are seeing we are seeing more regularity. In certain geographic regions. And we are driving more and more permit applications through the Ministry of Commerce. Matt Bryson: Awesome. that is really helpful. Second question, Gary, my math has gross margins staying relatively stable in Q3. Is that roughly the right way to think about things? And I guess as part of that, is there any more given how tight indium phosphide seems, is there any more room for price appreciation in our models? Gary L. Fischer: Well, it is it is, you know, a moving target. And, of course, I know you guys are going to quote to me that I would always say You can go to 35%. But that is not management's target. Management's target is a number that begins with a 4. I am delighted that we got here as fast as we did. I think I would recommend stick close to what we are at right now. But I have to say again, management's target is better than that. And let's see what we can do. there is you know, there you know, when you add more volume, that helps. On your gross margin because the fixed cost get absorbed over more units. And, also, when you added more volume, in manufacturing business, you get better at it. So we are just experiencing a lot of positive influences right now. To push this over 40%. And, stay at 45% for now. But put your seat belts on. Morris S. Young: Well, I know I cannot help myself, but make a comment. You know, I am a CEO, but I know my number. Okay? Look. Everybody knows our indium phosphide business has better margin than the other 2 business. The gallium and JVs. Okay? As we grow for next quarter, it is obviously all the growth happening in indium phosphide. So just by simple math, the gross margins could be better. Matt Bryson: Right. Because the sales of indium phosphide is increasing, and the other stuff is not increasing as fast. So we are optimistic. No. that is that is really Yeah. Gary L. Fischer: But, you know, we try and be conservative on this kind of a discussion. So Yeah. Timothy J. Bettles: I want to add another point as well. You know, the market is moving to larger diameters here too. So we are seeing a migration from 2-inch to 3-inch, 3-inch to 4-inch. And, of course, now there is a there is a big push towards 6-inch for the future. This gives us a great opportunity to increase our gross margins. Morris S. Young: Yeah. Let's not spend on the bullet, but let me give you another 1. Because the demand is so strong, The whole indium phosphide, like, line is fully utilized. Let me give you an example. In the past, you know, some of the let's say, smaller diameter 2-inch, they are not in favor, so they are not sold out. And the big demand is on 3-inch. Now because the demand is so strong, the customer are forced or they want everything. So whatever we can produce, we can sell. That also will help us in terms of margin. Operator: All the Next question, please. Matt Bryson: Answers my question. Thank you so much. Operator: Your next question comes from the line of Richard Shannon with Craig Hallum. Richard, your line is open. Please go ahead. Richard Shannon: Well, hi, guys. Thanks for taking my questions, and I will add congratulations on an awesome quarter. Keep up the great work here. I guess my first question is, the language you used for the backlog, maybe it was slightly different use the same number of $100 million. I think you are just saying a lot more than $100 million. Wonder if you clarify, that number anymore. And then specifically comment how much of your calendar 2027 is? Is covered by backlog? Morris S. Young: I am gonna let Timothy answer that. So go ahead, Timothy. Timothy J. Bettles: Yeah. I do not want to go into a lot of details about how big exactly our backlog is, but I can tell you that it, it is growing. And I can tell you it continues to grow. Even as we ship more material. So demand can just completely outpaces our ability to increase capacity. Even though with increased capacity or we are about to increase capacity 3x this year. Just simply cannot keep up with it. So backlog continues to grow. As I say, beyond $100 million right now In terms of 2027, Yeah. We are we are covered with backlog going out into 2027. Obviously, a lot of our customers, if we could deliver the majority of that today, they would take it today. But that does cover going out to 2027. And, of course, we have these long term supply agreements. That take us out into 2027 and beyond as well. So we have we have we have got a lot of next year and beyond covered with LTSAs. And even in some cases backlog. Morris S. Young: Look. I think the other answer, why we are not giving out the backlog Perhaps he said we are not taking orders if customer wants to place order. We are looking at whether we can deliver Because once we take the order, we are gonna put them on the production queue. Right now, it is full. So it is difficult to know how much the backlog is. In fact, I think we open up the floodgate, it is gonna be huge. So we are not counting on it. And as far as 2027 is concerned, I think if we want to sign up a lot of well, team is working on other long term supply agreement. But that does not mean that 2027 is all spoken off. That is we are measuring how much we are expanding how much we want we are gonna sign up for long term supply agreement, And some of them, we wanna reserve for customers coming in. So I think right now, order is not a problem. Mostly is how fast we can grow. Richard Shannon: Okay. I appreciate that perspective. More questions for me. I will jump on the line here. The next 1 is on the new 5 here, and specifically, how much of that was shipped into China versus rest of the world? And how do you see that going over the next, say, couple of years or so? And I ask this because you have obviously signed up an agreement with a Chinese laser company, but then also 2 North American based laser companies here. And while I am sure those are not the only customers you are gonna have for indium phosphide here, I would love to get a sense of how this ratio changes over time Kind of what is the peak from China, and what do you see as kind of that long term stable share between China and the rest of the world. Timothy J. Bettles: that is a great question, Richard. So there is certainly a lot of market opportunity in China right now. As we have said, we are we are we are doubling our capacity, actually tripling our capacity in 2026. And China is definitely taking some of that capacity as we move forward. What we are what we are seeing with the permits and with the demand globally. This is a global market, remember. We are seeing growth across all sectors. So China right now is definitely above 50% of our revenue in Q2. I would anticipate that we would see a revenue split moving forward somewhere in that 40% to 60% range as we build up both capacity and, we build up long term supply agreements both within China and throughout the rest of the world. So, yeah, I would kinda model that as a as a China being 40% to 60% of our revenue. Richard Shannon: Okay. Thanks for that, Timothy. And last question for me is on the topic of gross margins. I know there was a previous question on this topic. I will ask it slightly differently, Gary, which is you know, we have -- and I think even Morris commented today, and we have heard many times in the past where it indium phosphide has a positive Mixed dynamic, and only seemingly getting better given the pricing comments you have mentioned here. But, also, we are gonna see from your capacity expansions and depreciation costs here, And so we would love to get a sense of from the number you just reported in the second quarter, which is utterly fantastic. How much more can it go? Can you get to a number that starts with a 5? Gary L. Fischer: Eric, Well, let's see. Can we get there? It would be a record for us. that is for sure. But, yes, further increases in volume and improvements in productivity as well as continued favorable mix moving towards larger diameter substrates? We should definitely be targeting a number that begins with a 5. But I do not want you to, Richard. Okay? Let's keep this first. Richard Shannon: I will not. I just want to know, you know? Gary L. Fischer: We all think of these we all think of these to the finish line. I will not, and I never have here. Richard Shannon: I just wanna understand how close to the asymptote we are. Gary L. Fischer: Yeah. You have been with us for a long time to cover us, and obviously, it this is as Morris said, it is sort of more than an inflection point. This is a huge step up. So we are you know, we will try and be as specific and accurate as we can. But it is it is it is moving pretty fast. So yeah, we wanna be careful what we tell you. So but, yeah, we are going to target something that begins with a 5. So Yeah. Richard Shannon: Understood. Makes sense. And that is all the questions for me. Thank you. Gary L. Fischer: Thanks. Appreciate it. Operator: Kenneth, next. Your next question comes from the line of Charles Shi with Needham. Charles, your line is open. Please go ahead. Charles Shi: Hi. Hey. Good morning. I guess you guys are in China right now. So the question first question I have regarding the capacity exiting the year raising from basically $35 million per quarter. $35 million per quarter. to $60 million. And then next year, basically, raising from $70 million per quarter to $130 million per quarter. Are those number correct? And I think previously, on the previous capacity numbers, you plan to spend Well, I am looking at my numbers. $14 million in CapEx this year, $100 million in CapEx next year. Do you have -- what is the new CapEx number because it does look like the capacity growth, it has upsized a lot. I want to get some thoughts on CapEx. Thank you. Timothy J. Bettles: Yeah. Thanks, Charles. So the capacity is growing faster. Than we thought. Certainly, you know, in terms of revenue, that comes out from a number of factors as well. Said. We have we have been able to accelerate the actual physical capacity that we have here. We are moving to larger diameter substrates which, of course, helps the revenue. And we are seeing greater productivity. As Gary mentioned, moving to larger and larger volumes, increases the productivity of the facility. We have seen this time and time again. So part of the capacity increase that we are we are seeing here is not just a CapEx spend but it is it is a productivity, and a product mix. Change here. And that is what is really allowing us to grow the revenue quicker than we anticipated. So there is a lot going on here. Now, you know, when you are looking at CapEx spend to get this additional capacity, There is actually not a lot of additional CapEx spend here. You know, as I said, there is as we are gaining capacity through other factors rather than just hardware deployment, it means that we can we can gain capacity without huge additional CapEx spend on that. Charles Shi: Okay. So basically, you sounds like they are reaffirming the CapEx plan you previously communicated. Is that right? Timothy J. Bettles: that is correct. that is correct. Charles Shi: Okay. Okay. The second question, once again, on backlog, you know, Maurice, I understand what you said. You only wanna book the order. that is what I heard. You only wanna book the order Only a booked order can be put in backlog. When you can commit to ship the to the customers given that you are probably still trying to catch up with the demand by increasing supply. 100 million plus backlog, but I think I am looking at you are already shipping $30-plus million this quarter. Looks like implied. For September quarter, probably will be able to ship $50 million I wonder if you can give us a little bit more. How much more than $100 million you actually can see? Because it sounds a little bit too low to me that your backlog only covers a little bit over 2 quarters of the next 2 quarters of the expected indium phosphide revenue. At the implied Q3 run rate. So wanna get some thoughts. What exactly is your visibility now? And why do not you book more orders? And we would like to see -- maybe the backlog can be a little bit higher than what you just communicated. Thank you. Timothy J. Bettles: Yeah. The backlog, as I say, we are not giving actual backlog numbers out here. it is I can say that it is it is well over a 100 million. It exceeds 2 quarters for sure. I just do not wanna give out too much information about that at this time. And the backlog is also covered with a lot of long term supply agreements that are in place. To that there is a lot of commitment going out well beyond 2 quarters, both in terms of backlog and long term supply agreements. So I really do not worry that this is a short term thing. And remember, lot of this backlog here is, of course, is a factor of the permits As we wait for permits, and it does not include a lot of the China business. So, we can turn the China business a lot quicker than we can turn the permitting business. As Gary said, permits are certainly getting freer They are getting quicker, but it still takes time to apply for a permit. And we cannot apply for a permit without an order in place. Morris S. Young: Yeah. So let me comment on the backlog issue. When our visibility was not good, then usually, it is only 1 quarter or maybe 2 quarters issue. But right now, visibility is so good that it extend out 3 or 4 quarters So it is not a fair comparison, in a way. And the other thing is that we are actually honestly, we are not taking orders. When customer give us the demand, we look at what we can you know, plan the production capacity will be and talk to customers about, okay. You can place this order, and we have now planned capacity. We can accommodate this order. But beyond that, we are not taking orders. So the backlog can be much bigger if we take all the orders, but then we are not expanding the So why would we be taking an order? You understand what I am saying? So it does not make any sense to give you all. We could have $150 million backorder. it is not the same measure anymore. Charles Shi: Got it. So, Morris, just clarify, backlog is not that, quote, unquote, issue. I think you have proven that is not an issue. Just wanna clarify on that. But okay. The maybe a third question I have maybe a technology question, maybe for Morris. Morris, you guys also have a pretty strong gallium arsenide product line. And I am sure you have heard about potential use of VCSEL for scale up rather than use indium phosphide for scale up. it is a shorter distance, VCSEL probably has some advantages there. And I wonder if you have any customer discussion around the VCSEL, around maybe supplying the gallium arsenide substrates there and how the any of conversation going so far. Thank you. Morris S. Young: Yeah. Well, we have customers in China who are developing VCSEL solutions. And in fact, that is a US customer also talking to us about using our arsenide for VCSEL solutions. Correct? Timothy J. Bettles: Yeah. Correct. We are we are currently a supplier to gallium arsenide VCSELs for 2 large data center companies or laser companies. So, yeah, we do have some visibility out there. And we are we are seeing that these technologies coexist. Right? So the people that are deploying gallium arsenide VCSELs are also very, very strongly focused on indium phosphide as well. I am I am seeing more focus on the indium phosphide side of the business than the VCSELs. But as I say, there is the VCSEL technology has been out there for a long time, and I do not see it going away. I see an indium phosphide lasers, silicon photonics, and gallium arsenide based VCSELs coexisting in this marketplace. Morris S. Young: So from what I understand, looks like it is a speed is the killer and is in favor of indium phosphide. VCSEL, I think, is more difficult to reach 200G. Both in terms of laser, emitter, as well as detectors. So when you go to 200G, it has to be indium phosphide detectors and also indium phosphide laser work better. Well, I am in favor of indium phosphide for sure. The reason is that indium phosphide, we got more margins out of the supply chain. And we are a dominant player in indium phosphide. So that is the issue. Thanks, Morris and Timothy, for the insights. Charles Shi: Thank you. Appreciate the answers. Operator: We have another question from Timothy Savageaux from Northland Capital Markets. Timothy, your line is open. Please go ahead. Tim Savageaux: Hey. Thanks for the follow-up. Wanted to kind of stick with that 1-question, 1-follow-up thing before Suppose that is somewhat of an outlier. But, the question is and maybe this sort of syncs up with your China commentary. To what extent were the new deals long term supply agreements you have announced in recent weeks contributors either to the Q2 results or Q3 guide or do we have a fair bit of that in front of us? Timothy J. Bettles: that is a great question, Timothy. The latter is the answer. We have a fair bit of that in front of us. We are supplying materials to backup those long term supply agreements. To get qualified and get ready for them. So They do not move the needle too much on Q2. We are gonna see a bigger impact in Q3. And then we are gonna see further growth moving out through Q4 and into next year. And beyond? Morris S. Young: In the Kasela deal, Great. Gary L. Fischer: Does not start until 27. Right. Morris S. Young: that is a good point. that is that is not even happening right now in terms of that contract even though we are selling stuff to them. Tim Savageaux: But Great. Great. I probably should have known that. But anyway, I appreciate that. Cheers. Operator: There are no further questions at this time. I will now turn the call back to Leslie Green for closing remarks. Leslie Green: Thank you for participating in our conference call. We will be participating in the Needham Virtual Investor Conference in August and the B. Riley Securities Consumer and TMT Conference in September, and we hope to see many of you there. As always, feel free to contact us if you would like to set up a call, and we look forward to speaking with you in the near future. Operator: This concludes today's call. Thank you for attending. May now disconnect. Before you buy stock in AXT, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AXT wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $386,727!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,232,139!* That performance is why people listen. 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AXT (AXTI) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

In the past few days, AXT, Inc. reported sharply higher second-quarter 2026 sales of US$47.59 million and net income of US$11.13 million, and disclosed a long-term indium phosphide supply and capacity-reservation agreement with Lumentum Operations, LLC backed by up to US$87,500,000 in deposits applied as shipment credits. Alongside these results, AXT moved to expand board expertise, lowered its shareholder meeting quorum threshold, and secured multi‑year indium phosphide commitments that tie its materials business more directly to AI data center demand. Against this backdrop, we’ll examine how the long-term Lumentum indium phosphide agreement could reshape AXT’s AI-focused investment narrative. Find 56 companies with promising cash flow potential yet trading below their fair value. To own AXT, I think you need to believe that compound semiconductor substrates, especially indium phosphide for AI data centers, can support durable demand while the company manages export, customer and China-related risks. The latest Q2 2026 results and the Lumentum agreement highlight strong near term traction in indium phosphide, which may reinforce the key catalyst around AI infrastructure demand. The biggest near term risk remains geopolitical and export permit uncertainty, which this news does not directly resolve. The long term indium phosphide supply and capacity reservation agreement with Lumentum looks most relevant here, because it links AXT’s record Q2 AI driven strength to a multi year order and deposit framework. The up to US$87,500,000 in deposits, applied as shipment credits, could help support capacity investment tied to AI optical demand, but also deepen customer concentration, which is already a core risk in the story. Yet even with these AI wins, investors should be aware of how export controls and customer concentration could still... Read the full narrative on AXT (it's free!) AXT's narrative projects $374.9 million revenue and $141.0 million earnings by 2029. Uncover how AXT's forecasts yield a $96.50 fair value, a 106% upside to its current price. Before this news, the most optimistic analysts were assuming AXT could reach about US$511.2 million in revenue and US$199.0 million in earnings by 2029, which is a far more upbeat view than the baseline concerns around export permits and China exposure, and shows just how differently you and other investors might weigh this new AI driven backlog against those unresolved risks. Explore 5 other fair value estimates on AXT - why the stock might be worth just $52.00! Disagree with existing narratives? Extraordinary investment returns rarely come from following the herd, so go with your instincts. A great starting point for your AXT research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision. Our free AXT research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate AXT's overall financial health at a glance. The market won't wait. These fast-moving stocks are hot now. Grab the list before they run: Rare earth metals are an input to most high-tech devices, military and defence systems and electric vehicles. The global race is on to secure supply of these critical minerals. Beat the pack to uncover the 29 best rare earth metal stocks of the very few that mine this essential strategic resource. We've uncovered the 8 dividend fortresses yielding 5%+ that don't just survive market storms, but thrive in them. Invest in the nuclear renaissance through our list of 89 elite nuclear energy infrastructure plays powering the global AI revolution. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include AXTI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management identified a significant business inflection point, achieving record quarterly revenue driven by an accelerating AI infrastructure build-out. Indium phosphide (InP) performance was primarily fueled by the industry migration to 100G and 1.6T transceiver modules in data centers. Revenue growth is being amplified by a shift toward larger diameter substrates and higher-value products, which is creating favorable pricing trends. The company is leveraging a unique, vertically integrated supply chain to control critical raw materials like high-purity indium, providing a competitive advantage in supply security. Gross margin expansion to 45% was attributed to substantial volume increases, better fixed-cost absorption, and a more profitable product mix dominated by InP. Strategic partnerships and long-term supply agreements (LTSAs) with major players like Coherent and Lumentum are providing increased conviction for aggressive capacity expansion. Management plans to more than double InP capacity in 2026 and double it again in 2027 to meet demand that currently outpaces supply. Revenue opportunity for InP is on track to more than triple by the end of 2026, supported by a growing backlog exceeding $100 million. The company is transitioning its subsidiary Tongmei's IPO efforts from the China STAR Market to the Hong Kong Exchange, a process expected to take approximately one year. Q3 guidance assumes $66 million in revenue from orders that either have existing export permits or do not require them, with potential upside if additional permits are granted. Future margin targets are set above 45%, with management aiming for levels 'beginning with a 5' as 6-inch InP production scales and productivity improves. The shift to a Hong Kong listing triggered a $49 million redemption right for private equity investors, though management states investors currently intend to maintain their positions. Export permit timing remains a variable that management cannot precisely predict, though they noted increased regularity in the application process recently. The company secured $47.7 million in prepayments from Casella and Coherent, recorded as liabilities that will convert to revenue upon product shipment. AXT is investing in adjacent locations for 2027 expansion to become the world's largest indium phosphide producer by a significant margin. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management confirmed an exit-year quarterly capacity target of approximately $60 million for InP in 2026. Capacity is expected to reach roughly $130 million per quarter by the end of 2027. Growth is being achieved through hardware deployment as well as significant gains in manufacturing productivity and product mix shifts. China currently represents over 50% of revenue, with management expecting a long-term global split between 40% and 60%. The China market is seeing rapid growth as the domestic AI supply chain accelerates, requiring no export permits for local shipments. Management argues InP is the superior solution for 200G speeds and beyond, where VCSEL technology faces technical hurdles. While VCSELs and InP will coexist, AXT is prioritizing InP due to higher technical barriers to entry and better margin profiles. The $100 million plus backlog is described as a conservative figure because management is intentionally not taking all available orders to avoid over-committing capacity. Visibility now extends three to four quarters out, a significant improvement from the historical one to two quarters.

Beyond the near-term earnings beat, Needham said AXT is becoming better positioned to capitalize on AI-driven demand for optical networking components. The firm said that deals with two global InP laser providers and growth in China's optical networking market create "real opportunities" for AXT to gain data center networking share. AXT forecast earnings per share of $0.3 to $0.32 in the third quarter on revenue of $66 million, blowing past Wall Street’s estimates of an EPS of $0.1 on revenue of $38.8 million. Shares of AXT Inc. (AXTI) continued soaring on Friday, surging by nearly 47% in the opening trade following a 27% surge on Thursday, as investors cheered the semiconductor materials company’s blowout third-quarter guidance. AXT’s better-than-expected second-quarter (Q2) performance and the third-quarter (Q3) guidance also earned it an upgrade and a price target hike from Wall Street, according to TheFly. See what 10M+ investors are talking about. Get the Stocktwits Daily Rip for what retail is watching right now, free to your inbox AXT shares were up more than 20% in Friday’s opening trade after paring some of the early gains. AXTI was among the top trending tickers on Stocktwits at the time of writing. Needham upgraded AXT to ‘Buy’ from ‘Hold’ with a $90 price target, implying an upside of 61% from current levels. Beyond the near-term earnings beat, the firm said AXT is becoming better positioned to capitalize on AI-driven demand for optical networking components. Needham pointed to the company's contracts with two global indium phosphide (InP) laser providers and the continued growth of China's domestic optical networking ecosystem as "real opportunities" for AXT to expand its market share in data center networking. Analysts at B. Riley raised their price target on AXT to $55 from $52 while maintaining a ‘Neutral’ rating, updating its estimates following the company's Q2 earnings report. AXT reported earnings per share (EPS) of $0.19 on revenue of $47.6 million, beating an estimated EPS of $0.07 on revenue of $34.1 million, according to Fiscal.ai data. AXT highlighted that its Q2 revenue was the highest quarterly revenue in its history. The company forecast an EPS of $0.3 to $0.32 in Q3 on revenue of $66 million, blowing past Wall Street’s estimates of an EPS of $0.1 on revenue of $38.8 million. During a post-earnings call with analysts, AXT CEO Morris Young said that the company has reached an “inflection point” as demand for its indium phosphide (InP) materials accelerates, driven by the rapid build-out of AI data center infrastructure. Young said the company is on track to more than triple its indium phosphide revenue opportunity by the end of 2026, fueled by faster-than-expected capacity expansion, manufacturing productivity improvements and a shift toward larger-diameter, higher-value substrates. AXT is also planning to double its InP production capacity in 2027 after expanding capacity this year, a move that would make it the world's largest indium phosphide producer. “Customer demand continues to outpace supply, no matter how fast we add capacity. Broadly, the deployment of optical connectivity in AI data center is accelerating as hyperscalers scale GPU dense architectures and look for higher speed, lower power photonics to move data more efficiently,” Young said, while adding that the order backlog now exceeds $100 million. He said hyperscalers are rapidly deploying optical connectivity for AI data centers, driving demand for indium phosphide-based lasers and detectors used in 800G and 1.6T optical transceivers. Young also highlighted AXT's recently announced long-term supply agreements with Coherent Corp. (COHR), Lumentum Holdings Inc. (LITE) and Casela. Retail sentiment on Stocktwits around AXTI was in the ‘extremely bullish’ territory, with message volumes at ‘extremely high’ levels at the time of writing. One bullish user believes that AXT shares will top $150 by the end of 2026, noting that they are slowly adding to their position in the company. AXTI stock is up 242% year-to-date and 2,587% over the past 12 months. The Vanguard Morningstar Total Stock Market ETF (VTI) is up 17% over the past 12 months, while the Tema Photonics & Optical ETF (LAZR) is down 27%. Also See: Fed Divide Widens As Dissenters Publicly Push For Rate Hikes To Tame Inflation — Hammack Says 'Now Is The Time' To Act For updates and corrections, email newsroom[at]stocktwits[dot]com. Rounak Jain has no position in any of the stocks mentioned in this article. StockTwits' news team content is for informational purposes only and is not intended as investment advice. For more, see our editorial policy. This article was originally published on StockTwits. Related: Insurance ETFs Top Defensive Sector Chart In July As Investors Look To Pivot Slightly From Chips And AI AMBA Stock Rockets 18% On NXP Buyout Talks For Self-Driving Chip Maker NVO Stock Ends Three-Month Winning Streak As Novo Nordisk’s Key Heart Drug Flops, Competition Goes To Court

Image source: The Motley Fool. Thursday, July 30, 2026 at 4:30 p.m. ET investor relations - Leslie Green Chief Financial Officer - Gary L. Fischer Chief Executive Officer - Dr. Morris S. Young VP of business development - Timothy J. Bettles Operator: Good afternoon, everyone. And welcome to AXT's Second Quarter 26 Financial Conference Call. Leading the call today is Dr. Morris S. Young, chief executive officer and Gary L. Fischer, chief financial officer. In addition, Timothy J. Bettles, VP of business development, will be participating in the Q&A portion of the call. My name is Kenneth, and I will be your coordinator today. I would now like to turn the call over to Leslie Green, investor relations for AXT. Leslie Green: Thank you, Kenneth, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide forward-looking projections or make other forward-looking statements. Regarding, among other things, the future financial performance of the company market conditions and trends, emerging applications using chips or devices fabricated on our substrates, our product mix, global economic and political conditions, including trade tariffs and import and export restrictions, ability to obtain China export permits, timing of receipt of export permits, listing our subsidiary, Tongmei, in Hong Kong our ability to increase orders in succeeding quarters to control costs and expenses, to improve manufacturing yields and efficiencies or to utilize our manufacturing capacity. We wish to caution you that such statements deal with future events, are based on management's current expectations, and are subject to risks and uncertainties that could cause actual events and results to differ materially. Addition to the matters just listed, these uncertainties and risks include, but are not limited to, the financial performance of our partially owned China companies and increased environmental regulations in China. In addition to the factors just mentioned that may be discussed on this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online by link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at axt.com. Through July 30, 2027. Also, I want to note that shortly following the close of the market today, we issued a press release reporting financial results for the second quarter of 2026 This information is available on the Investor Relations portion of our website. I would now like to turn the call over to Gary L. Fischer for a review of our second quarter 26 results. Gary? Gary L. Fischer: Thank you, Leslie, and good afternoon to everyone. Our Q2 financial results highlight an exciting inflection in our business trajectory, the beginnings of a multiyear growth phase for AXT. Revenue for the second quarter of 2026 is $47.6 million. This is the highest quarterly revenue in AXT history. Up nearly 77% from $26.9 million in the first quarter. And up a 164% from $18 million the second quarter of 2025. To break down our Q2 26 revenue, for you by product category, indium phosphide was $30.7 million also the highest in our company's history. Let me repeat that. Indium phosphide was $30.7 million also the highest in our company's history. Primarily from data center applications. Gallium arsenide was $6.6 million. Germanium substrates were $272 thousand. Finally, revenue from our consolidated raw material joint venture companies in Q2 was $10 million. The top 5 customers generated approximately 30% of total revenue and no customers are over the 10% level. Gross margin showed a substantial improvement again in the second quarter primarily driven by an increase in total volume and a favorable product mix, Non GAAP gross margin was 45.0%, compared with 29.9% gross margin in Q1 of 2026 and 8.2% gross margin in Q2 of 2025. For those who prefer to track results on a GAAP basis, gross margin in the second quarter was 44.9%. Compared with 29.6% in Q1 of 2026 and 8.0% in Q2 of 2025. This is a huge, huge positive change from Q1 of 2025. Moving to operating expenses. Our total non GAAP operating expense in Q2 was $10.2 million compared with $8.6 million in Q1 and $7.6 million in Q2 of 2025. On a GAAP basis, total operating expense in Q2 was $10.9 million compared with $9.6 million in Q1 and $8.2 million in Q2 of 2025. Our non GAAP operating profit for the second quarter of 2026 is $11.2 million compared with a non GAAP operating loss in Q1 of $550 thousand and a non GAAP operating loss of $6.1 million in Q2 of 2025. For reference, our GAAP operating line for the second quarter of 2026 was Kenneth. Operator: Hello, Leslie. You disappeared for a sec. You are back now. Leslie Green: Okay. Great. Terrific. Continue, Gary. Gary L. Fischer: Am I just on the speaker on your cell phone now? Can you hear me okay? Operator: Loud and clear. You can continue. Gary L. Fischer: Okay. For the benefit of people listening, it is afternoon where you are. We are we are in China right now, and we are we are at the conference room of the Tongme Headquarters. So we have a little bit of a hiccup on the on the phone equipment. Alright. Non GAAP operating profit for the second quarter of 20 was $11.2 million compared with a non GAAP operating loss in Q1 of 2026 of $550 thousand and a non GAAP operating loss of $6.1 million in Q2 of 2025. For reference, our GAAP operating line for the second quarter of 2026 was a profit of $10.4 million compared with an operating loss of $1.6 million in Q1 and an operating loss of $6.7 million in Q2 of 2025. Nonoperating other income and expense and other items below the operating line for the second quarter of 2026 was a net profit of $705 thousand The details can be seen in the P&L included in our press release today. In Q2 26, we returned the company to profitability. We are pleased to report a non GAAP net profit of $11.9 million or $0.19 per diluted share This compares with the non GAAP net loss of $585 thousand or $0.01 per share loss in the first quarter and a non GAAP net loss in Q2 of 2025 of $6.4 million or $0.15 per share loss. On a GAAP basis, net profit in Q2 is $11.1 million or $0.17 per diluted share. By comparison, net loss of $1.6 million or $0.03 per share in the first quarter. And a GAAP net loss in Q2 of 2025 of $7 million The weighted average diluted shares outstanding in Q2 is 63.5 million Cash, cash equivalents and investments increased by $626 million to $749 million as of June 30. This was primarily the result of our secondary public offering of common stock which closed on April 22 and generated approximately $632 million before expenses. By comparison, at March 31, our cash was $123 million Accounts receivable increased by $4.7 million. During Q2, we signed long term supply agreements with Casella and Coherent. Under the terms of these agreements, we receive prepayments for wafers of $22.3 million and $25.4 million respectively, These type of agreements with significant upfront cash are an additional signpost regarding the important use of indium phosphide for high speed optical data transmission required in AI data centers. Morris is going to talk more about this in a moment. These prepayments are posted on our financial statements as a liability. And they will be converted to revenue when the liability reduces, as we ship product against the these agreements. Depreciation and amortization in the second quarter was $2.5 million Total stock comp was $800 thousand Net inventory was up approximately $6.2 million in the second quarter to $96.3 million And this concludes our report on financial numbers. Turning to our plan to list our subsidiary Tongmei in China, On June 26, Tongmei notified the stock exchange that it was moving its application for an initial public offering on the STAR Market. This was accepted in July. AXT and Tongmei will now instead transfer our efforts towards listing on the Hong Kong Exchange which will likely take about a year to complete. We continue to believe that an IPO in China is a highly beneficial in expanding our capacity in China and is the most efficient and effective way to support the rapidly evolving AI infrastructure build out. This contributes to China's development of its semiconductor supply chain to meet increased China based demand for Indian phosphide substrates. Tongmei's move to the Hong Kong Stock Exchange creates a redemption right for the $49 million invested by the PE funds back in 2021. However, we have been in discussion with them and currently, they all wish to continue or continue their investment and not be redeemed. We have sufficient cash to redeem investments should they be requested. With that, I will turn the call over to Dr. Morris S. Young. For a review of our business and markets. Morris? Morris S. Young: Thank you, Gary. This is a incredibly exciting time for you at AXT. As Gary mentioned, we have reached an inflection point in our business where the customer demand is extremely strong for our indium phosphide material. We are committed to doubling our indium phosphide capacity in 2026 and I am pleased to report that we are ahead of the schedule in that effort. But more importantly, I can now report to you that our revenue opportunity for indium phosphide is on track to more than triple by the end of 2026. Which continues significant expansion expected in 2027. This is happening as a result of 3 factors. First, we are being able to expand capacity at a faster rate than we expected. Second, we are making significant strides in driving our manufacturing productivity with new crystal growth furnace designs and increase our output. And third, our customers are moving to larger diameter substrates and higher value products. Resulting in favorable pricing trends. The combination of these factors is driving a step function increasing our revenue in Q2. We recorded our highest quarterly revenue and highest indium phosphide revenue in our history. With the backlog that continues to grow and is now well over $100 million. Customer demand continues to outpace supply no matter how fast we add capacity. Broadly, the deployment of optical connectivity in AI data center is accelerating as hyperscalers scale GPU dense architectures and look for higher speed lower power photonics to move data more efficiently. In the near term, we are seeing high demand from the industry migration to 100G and 1.6T transceiver modules. For which indium phosphide based lasers and detectors are essential for higher performance optical links. Longer term, hyperscalers are advancing towards near packaged and co packaged optics which will continue to drive increasing demand for our material. Overall, these trends point to a durable long term build out of denser optical infrastructure and a multiyear demand cycle for our indium phosphide. As many of you are aware, the competitive landscape for high quality indium phosphide is limited to just a few players. Due to primarily the very high technical barrier to entry. Among our peers, we believe AXT is in the strongest position to increase manufacturing capacity quickly and at a scale and quality needed to move the needle in our industry. And meet our customers' requirements. Our team in China has done an outstanding job in bringing up new lines in our existing factory facilities as well as innovating to drive higher productivity. In working closely with our direct customers, as well as our major end customers to understand their expected demand and road maps while well into the planning process to double our capacity again in 2027 in adjacent location. This will make AXT by far the largest indium phosphide producer in the world. In addition to growing our manufacturing footprint, we have also made great strides in development of our 6-inch indium phosphide capability. 6-inch phosphide substrates are exponentially more difficult to produce in volume than 3- or 4-inch wafers. And I am very pleased and proud of our team's progress towards this new offering. I also want to thank our customers who have partnered with us throughout this process We are excited to support them as we move forward with our own capability. Partnership is a cornerstone of our business philosophy. Through which we have been able to deliver game changing innovation. This dates back to the formation of joint ventures that today make up a unique and vertically integrated supply chain. And in the last 10 years, our work with 2 globally recognized indium phosphide customers helped us to raise the bar even further on our manufacturing and business processes to be able to support the rigorous standard of some of the most prestigious companies in the world. Strong partnership lifts innovation, and enables both partners to achieve more. That is why 1 of the most rewarding aspect of our unfolding chapter in our history is the extent to which we have been able to partner with leading customers around the world. Who are defining the next generation of data center connectivity. We recently signed strategic long-term supply agreements with Casella and Coherent. And this week, we are very pleased to announce an agreement with Lumentum. These agreements deepens our relationship with these important customers working shoulder to shoulder with them to help them deliver on their own vision and road maps. In addition, they gave us the even greater sense of conviction that our capacity build out is mirrored and necessary. From a geographic perspective, the massive AI infrastructure build out and the planned capacity CapEx spending by cloud services and AI platform providers in the U.S. is the primary driver for EML and silicon photonics based optical transceivers. As well as high speed photo detectors. We believe that today, our material are being used in multiple U.S. hyperscalers and we are expected and we expect that end customer use will continue to broaden. We are also seeing huge growth in China, as China moves to accelerate its capability throughout the AI supply chain. Our revenue related to indium phosphide based lasers market in China more than doubled in Q2 from the prior quarter. And we expect continued strong growth in Q3. This highlights China's increasing investment in AI infrastructure supply chain for the global market. This is a great opportunity for AXT as there is no permit required to ship our product within China. Turning to gallium arsenide. In Q2, demand for semiconductor wafers for industrial robotics and data center laser applications grew sequentially from the prior quarter. We also continue to see demand for semi insulating wafers for wireless RF devices and believes that we have a strong affinity for market share expansion. Finally, our raw material business continues to be highly strategic to our growth plan. And also generated record third quarter revenue In Q2. As we reported last quarter, our subsidiary, Jingmei, is now refining high purity Indian which gives us direct control of a guaranteed supply of yet another critical material for indium phosphide substrates. We are also investing to help to expand their capabilities so that when AXT's demand for poly material grows, GMA will continue to provide a meaningful portion of our raw material requirements. Globally, there continues to be a great awareness of the importance of our raw material supply chain. And we are decades ahead of the curve in developing our unique integrated supply chain. We will continue to invest in our portfolio as we believe it is a major competitive differentiator. Now in summary, we believe AXT is entering 1 of the most consequential chapter in our company history. The investment we are making today in capacity, in technology, and in our unique integrated supply chain position us to meet the extraordinary demand we see building across the optical and AI infrastructure markets. Our customer engagement is deepening Our visibility is improving. And our competitive differentiation is strong. We while we remain disciplined and thoughtful in our execution, We are confident that the groundwork we are laying now will enable transformational growth in the years to come. With that, I turn the call back to Gary for third quarter guidance. Gary? Gary L. Fischer: As of today, we have approximately $66 million in revenue, that can be realized in Q3 across our substrate product lines and raw materials. For which we either already have a permit to ship or for which an export permit is not required. So $66 million. We have a high degree of confidence in recognizing this revenue. We could see upside, even significant upside, to this number in Q3 should we receive permits for additional orders which we have the inventory to support. But we do not want to stress we do want to stress that we cannot predict the future timing of permits or success in obtaining them for any specific customer or individual order. We have delivered strong gross margin improvement over the past several quarters, Further improvement depends on a number of factors, including total revenue as it relates to the revenue mix by product, absorption of fixed costs, and our ability to continue to drive better manufacturing efficiency. With regards to OpEx, we expect that it will be approximately $10.5 million in Q3 on a non GAAP basis and approximately $11 million on a GAAP basis. With these factors in mind, we believe our non GAAP net income will be in the range of $0.30 to $0.32 and GAAP net income in the range of $0.29 to $0.31. We estimate share count for Q3 will be approximately 66.5 million shares. Okay. This concludes our prepared comments. We are glad to answer your questions now. Kenneth? Operator: Thank you so much. We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press Star 1 on your telephone keypad. To withdraw your question, press Star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Timothy Savageaux from Northland Capital Markets. Timothy, your line is open. Please go ahead. Tim Savageaux: Hey. Well, good afternoon from here at least, and wow, congrats on the results and the guide. My first question is about the comments on the call about, I guess, an increased target for indium phosphide capacity for this year and looks like and I assume most of the growth you are guiding to in Q3 comes from the new phosphide. But I think we were looking at doubling from a $20 million-type level as the original target, maybe 35 to 40. Am I right to think the new sort of target exiting the year is something in the neighborhood of $60 million in quarterly indium phosphide capacity? And I will follow-up from there. Timothy J. Bettles: Yeah. that is about right, Timothy. that is exactly what we are looking at here. So that is $60 million, thereabouts. Great. Tim Savageaux: Good answer. And then you are you are looking to double that still, I guess, exiting calendar 2027. So just confirmation on that. And then around the Lumentum deal, I wonder if you could you know, obviously, you are you have got larger prepays a longer term I wonder if you could speak to maybe the overall size of that opportunity you know, from a baseline standpoint or upside or however you wanna talk about it. Thanks, and congrats again. Timothy J. Bettles: Thank you, Timothy. So, yeah, next year, we are we are looking at doubling, slightly more than doubling again. Take our revenue to somewhere in the region of about $130 million a quarter. Exiting the year. Yeah. I Thank you. About the Lumentum deal. Clearly, we have got some we have got some prepayments on that but we are not discussing the total revenue impact of that deal at this moment. Okay. Thanks. I will pass it along. Morris S. Young: Yeah. So let maybe let me add 1 point. About the capacity expansion. I we are planning at least to double next year. But as you know, this target changes when in fact, I think this year, we are going to more than double And it is because customer demand is just mounting. So we are finding you know, whatever way to increase the capacity expansion Although so I am saying, although we are planning for double next year, but depends about how the business develops in the second quarter. We could find the other way to even better than that. Okay. that is my so that in a way, it is a moving target. But we think it is going to be more than double in 2027. Gary L. Fischer: The demand is moving faster than we can move. We are doing great to move fast. Analyst: But the demand is even stronger. Tim Savageaux: Okay. Not much faster, but you guys are moving pretty fast. But okay. Thanks. Appreciate it. Operator: Your next question comes from the line of Matthew Bryson with Wedbush Securities. Matthew, your line is open. Please go ahead. Matt Bryson: Hi. Thanks for taking my question, and congrats on the results and guide. Just when it obviously, you are having a whole lot more success in getting permits And it seems like with the Coherent deal, have to have certainty that you are going to get permits to ship out China given the terms of that deal. I guess, can you talk about how the process is changed, and about how you have more confidence in getting these permits or what has changed? Timothy J. Bettles: Yeah. Sure. Thanks, Matthew. You know, permits always remain a bit of an issue on the back of our minds. As Gary mentioned, it is not something that we can absolutely predict. Both the timing and the certainty of. But we are seeing more regularity in the process especially in certain geographic regions. So that is you know, that is great news. And we are seeing increased demand in those geographic regions too. So we are we are focusing now even with greater intensity on capacity and allocation. But, yeah, the right now, the permits, as I say, we are seeing we are seeing more regularity. In certain geographic regions. And we are driving more and more permit applications through the Ministry of Commerce. Matt Bryson: Awesome. that is really helpful. Second question, Gary, my math has gross margins staying relatively stable in Q3. Is that roughly the right way to think about things? And I guess as part of that, is there any more given how tight indium phosphide seems, is there any more room for price appreciation in our models? Gary L. Fischer: Well, it is it is, you know, a moving target. And, of course, I know you guys are going to quote to me that I would always say You can go to 35%. But that is not management's target. Management's target is a number that begins with a 4. I am delighted that we got here as fast as we did. I think I would recommend stick close to what we are at right now. But I have to say again, management's target is better than that. And let's see what we can do. there is you know, there you know, when you add more volume, that helps. On your gross margin because the fixed cost get absorbed over more units. And, also, when you added more volume, in manufacturing business, you get better at it. So we are just experiencing a lot of positive influences right now. To push this over 40%. And, stay at 45% for now. But put your seat belts on. Morris S. Young: Well, I know I cannot help myself, but make a comment. You know, I am a CEO, but I know my number. Okay? Look. Everybody knows our indium phosphide business has better margin than the other 2 business. The gallium and JVs. Okay? As we grow for next quarter, it is obviously all the growth happening in indium phosphide. So just by simple math, the gross margins could be better. Matt Bryson: Right. Because the sales of indium phosphide is increasing, and the other stuff is not increasing as fast. So we are optimistic. No. that is that is really Yeah. Gary L. Fischer: But, you know, we try and be conservative on this kind of a discussion. So Yeah. Timothy J. Bettles: I want to add another point as well. You know, the market is moving to larger diameters here too. So we are seeing a migration from 2-inch to 3-inch, 3-inch to 4-inch. And, of course, now there is a there is a big push towards 6-inch for the future. This gives us a great opportunity to increase our gross margins. Morris S. Young: Yeah. Let's not spend on the bullet, but let me give you another 1. Because the demand is so strong, The whole indium phosphide, like, line is fully utilized. Let me give you an example. In the past, you know, some of the let's say, smaller diameter 2-inch, they are not in favor, so they are not sold out. And the big demand is on 3-inch. Now because the demand is so strong, the customer are forced or they want everything. So whatever we can produce, we can sell. That also will help us in terms of margin. Operator: All the Next question, please. Matt Bryson: Answers my question. Thank you so much. Operator: Your next question comes from the line of Richard Shannon with Craig Hallum. Richard, your line is open. Please go ahead. Richard Shannon: Well, hi, guys. Thanks for taking my questions, and I will add congratulations on an awesome quarter. Keep up the great work here. I guess my first question is, the language you used for the backlog, maybe it was slightly different use the same number of $100 million. I think you are just saying a lot more than $100 million. Wonder if you clarify, that number anymore. And then specifically comment how much of your calendar 2027 is? Is covered by backlog? Morris S. Young: I am gonna let Timothy answer that. So go ahead, Timothy. Timothy J. Bettles: Yeah. I do not want to go into a lot of details about how big exactly our backlog is, but I can tell you that it, it is growing. And I can tell you it continues to grow. Even as we ship more material. So demand can just completely outpaces our ability to increase capacity. Even though with increased capacity or we are about to increase capacity 3x this year. Just simply cannot keep up with it. So backlog continues to grow. As I say, beyond $100 million right now In terms of 2027, Yeah. We are we are covered with backlog going out into 2027. Obviously, a lot of our customers, if we could deliver the majority of that today, they would take it today. But that does cover going out to 2027. And, of course, we have these long term supply agreements. That take us out into 2027 and beyond as well. So we have we have we have got a lot of next year and beyond covered with LTSAs. And even in some cases backlog. Morris S. Young: Look. I think the other answer, why we are not giving out the backlog Perhaps he said we are not taking orders if customer wants to place order. We are looking at whether we can deliver Because once we take the order, we are gonna put them on the production queue. Right now, it is full. So it is difficult to know how much the backlog is. In fact, I think we open up the floodgate, it is gonna be huge. So we are not counting on it. And as far as 2027 is concerned, I think if we want to sign up a lot of well, team is working on other long term supply agreement. But that does not mean that 2027 is all spoken off. That is we are measuring how much we are expanding how much we want we are gonna sign up for long term supply agreement, And some of them, we wanna reserve for customers coming in. So I think right now, order is not a problem. Mostly is how fast we can grow. Richard Shannon: Okay. I appreciate that perspective. More questions for me. I will jump on the line here. The next 1 is on the new 5 here, and specifically, how much of that was shipped into China versus rest of the world? And how do you see that going over the next, say, couple of years or so? And I ask this because you have obviously signed up an agreement with a Chinese laser company, but then also 2 North American based laser companies here. And while I am sure those are not the only customers you are gonna have for indium phosphide here, I would love to get a sense of how this ratio changes over time Kind of what is the peak from China, and what do you see as kind of that long term stable share between China and the rest of the world. Timothy J. Bettles: that is a great question, Richard. So there is certainly a lot of market opportunity in China right now. As we have said, we are we are we are doubling our capacity, actually tripling our capacity in 2026. And China is definitely taking some of that capacity as we move forward. What we are what we are seeing with the permits and with the demand globally. This is a global market, remember. We are seeing growth across all sectors. So China right now is definitely above 50% of our revenue in Q2. I would anticipate that we would see a revenue split moving forward somewhere in that 40% to 60% range as we build up both capacity and, we build up long term supply agreements both within China and throughout the rest of the world. So, yeah, I would kinda model that as a as a China being 40% to 60% of our revenue. Richard Shannon: Okay. Thanks for that, Timothy. And last question for me is on the topic of gross margins. I know there was a previous question on this topic. I will ask it slightly differently, Gary, which is you know, we have -- and I think even Morris commented today, and we have heard many times in the past where it indium phosphide has a positive Mixed dynamic, and only seemingly getting better given the pricing comments you have mentioned here. But, also, we are gonna see from your capacity expansions and depreciation costs here, And so we would love to get a sense of from the number you just reported in the second quarter, which is utterly fantastic. How much more can it go? Can you get to a number that starts with a 5? Gary L. Fischer: Eric, Well, let's see. Can we get there? It would be a record for us. that is for sure. But, yes, further increases in volume and improvements in productivity as well as continued favorable mix moving towards larger diameter substrates? We should definitely be targeting a number that begins with a 5. But I do not want you to, Richard. Okay? Let's keep this first. Richard Shannon: I will not. I just want to know, you know? Gary L. Fischer: We all think of these we all think of these to the finish line. I will not, and I never have here. Richard Shannon: I just wanna understand how close to the asymptote we are. Gary L. Fischer: Yeah. You have been with us for a long time to cover us, and obviously, it this is as Morris said, it is sort of more than an inflection point. This is a huge step up. So we are you know, we will try and be as specific and accurate as we can. But it is it is it is moving pretty fast. So yeah, we wanna be careful what we tell you. So but, yeah, we are going to target something that begins with a 5. So Yeah. Richard Shannon: Understood. Makes sense. And that is all the questions for me. Thank you. Gary L. Fischer: Thanks. Appreciate it. Operator: Kenneth, next. Your next question comes from the line of Charles Shi with Needham. Charles, your line is open. Please go ahead. Charles Shi: Hi. Hey. Good morning. I guess you guys are in China right now. So the question first question I have regarding the capacity exiting the year raising from basically $35 million per quarter. $35 million per quarter. to $60 million. And then next year, basically, raising from $70 million per quarter to $130 million per quarter. Are those number correct? And I think previously, on the previous capacity numbers, you plan to spend Well, I am looking at my numbers. $14 million in CapEx this year, $100 million in CapEx next year. Do you have -- what is the new CapEx number because it does look like the capacity growth, it has upsized a lot. I want to get some thoughts on CapEx. Thank you. Timothy J. Bettles: Yeah. Thanks, Charles. So the capacity is growing faster. Than we thought. Certainly, you know, in terms of revenue, that comes out from a number of factors as well. Said. We have we have been able to accelerate the actual physical capacity that we have here. We are moving to larger diameter substrates which, of course, helps the revenue. And we are seeing greater productivity. As Gary mentioned, moving to larger and larger volumes, increases the productivity of the facility. We have seen this time and time again. So part of the capacity increase that we are we are seeing here is not just a CapEx spend but it is it is a productivity, and a product mix. Change here. And that is what is really allowing us to grow the revenue quicker than we anticipated. So there is a lot going on here. Now, you know, when you are looking at CapEx spend to get this additional capacity, There is actually not a lot of additional CapEx spend here. You know, as I said, there is as we are gaining capacity through other factors rather than just hardware deployment, it means that we can we can gain capacity without huge additional CapEx spend on that. Charles Shi: Okay. So basically, you sounds like they are reaffirming the CapEx plan you previously communicated. Is that right? Timothy J. Bettles: that is correct. that is correct. Charles Shi: Okay. Okay. The second question, once again, on backlog, you know, Maurice, I understand what you said. You only wanna book the order. that is what I heard. You only wanna book the order Only a booked order can be put in backlog. When you can commit to ship the to the customers given that you are probably still trying to catch up with the demand by increasing supply. 100 million plus backlog, but I think I am looking at you are already shipping $30-plus million this quarter. Looks like implied. For September quarter, probably will be able to ship $50 million I wonder if you can give us a little bit more. How much more than $100 million you actually can see? Because it sounds a little bit too low to me that your backlog only covers a little bit over 2 quarters of the next 2 quarters of the expected indium phosphide revenue. At the implied Q3 run rate. So wanna get some thoughts. What exactly is your visibility now? And why do not you book more orders? And we would like to see -- maybe the backlog can be a little bit higher than what you just communicated. Thank you. Timothy J. Bettles: Yeah. The backlog, as I say, we are not giving actual backlog numbers out here. it is I can say that it is it is well over a 100 million. It exceeds 2 quarters for sure. I just do not wanna give out too much information about that at this time. And the backlog is also covered with a lot of long term supply agreements that are in place. To that there is a lot of commitment going out well beyond 2 quarters, both in terms of backlog and long term supply agreements. So I really do not worry that this is a short term thing. And remember, lot of this backlog here is, of course, is a factor of the permits As we wait for permits, and it does not include a lot of the China business. So, we can turn the China business a lot quicker than we can turn the permitting business. As Gary said, permits are certainly getting freer They are getting quicker, but it still takes time to apply for a permit. And we cannot apply for a permit without an order in place. Morris S. Young: Yeah. So let me comment on the backlog issue. When our visibility was not good, then usually, it is only 1 quarter or maybe 2 quarters issue. But right now, visibility is so good that it extend out 3 or 4 quarters So it is not a fair comparison, in a way. And the other thing is that we are actually honestly, we are not taking orders. When customer give us the demand, we look at what we can you know, plan the production capacity will be and talk to customers about, okay. You can place this order, and we have now planned capacity. We can accommodate this order. But beyond that, we are not taking orders. So the backlog can be much bigger if we take all the orders, but then we are not expanding the So why would we be taking an order? You understand what I am saying? So it does not make any sense to give you all. We could have $150 million backorder. it is not the same measure anymore. Charles Shi: Got it. So, Morris, just clarify, backlog is not that, quote, unquote, issue. I think you have proven that is not an issue. Just wanna clarify on that. But okay. The maybe a third question I have maybe a technology question, maybe for Morris. Morris, you guys also have a pretty strong gallium arsenide product line. And I am sure you have heard about potential use of VCSEL for scale up rather than use indium phosphide for scale up. it is a shorter distance, VCSEL probably has some advantages there. And I wonder if you have any customer discussion around the VCSEL, around maybe supplying the gallium arsenide substrates there and how the any of conversation going so far. Thank you. Morris S. Young: Yeah. Well, we have customers in China who are developing VCSEL solutions. And in fact, that is a US customer also talking to us about using our arsenide for VCSEL solutions. Correct? Timothy J. Bettles: Yeah. Correct. We are we are currently a supplier to gallium arsenide VCSELs for 2 large data center companies or laser companies. So, yeah, we do have some visibility out there. And we are we are seeing that these technologies coexist. Right? So the people that are deploying gallium arsenide VCSELs are also very, very strongly focused on indium phosphide as well. I am I am seeing more focus on the indium phosphide side of the business than the VCSELs. But as I say, there is the VCSEL technology has been out there for a long time, and I do not see it going away. I see an indium phosphide lasers, silicon photonics, and gallium arsenide based VCSELs coexisting in this marketplace. Morris S. Young: So from what I understand, looks like it is a speed is the killer and is in favor of indium phosphide. VCSEL, I think, is more difficult to reach 200G. Both in terms of laser, emitter, as well as detectors. So when you go to 200G, it has to be indium phosphide detectors and also indium phosphide laser work better. Well, I am in favor of indium phosphide for sure. The reason is that indium phosphide, we got more margins out of the supply chain. And we are a dominant player in indium phosphide. So that is the issue. Thanks, Morris and Timothy, for the insights. Charles Shi: Thank you. Appreciate the answers. Operator: We have another question from Timothy Savageaux from Northland Capital Markets. Timothy, your line is open. Please go ahead. Tim Savageaux: Hey. Thanks for the follow-up. Wanted to kind of stick with that 1-question, 1-follow-up thing before Suppose that is somewhat of an outlier. But, the question is and maybe this sort of syncs up with your China commentary. To what extent were the new deals long term supply agreements you have announced in recent weeks contributors either to the Q2 results or Q3 guide or do we have a fair bit of that in front of us? Timothy J. Bettles: that is a great question, Timothy. The latter is the answer. We have a fair bit of that in front of us. We are supplying materials to backup those long term supply agreements. To get qualified and get ready for them. So They do not move the needle too much on Q2. We are gonna see a bigger impact in Q3. And then we are gonna see further growth moving out through Q4 and into next year. And beyond? Morris S. Young: In the Kasela deal, Great. Gary L. Fischer: Does not start until 27. Right. Morris S. Young: that is a good point. that is that is not even happening right now in terms of that contract even though we are selling stuff to them. Tim Savageaux: But Great. Great. I probably should have known that. But anyway, I appreciate that. Cheers. Operator: There are no further questions at this time. I will now turn the call back to Leslie Green for closing remarks. Leslie Green: Thank you for participating in our conference call. We will be participating in the Needham Virtual Investor Conference in August and the B. Riley Securities Consumer and TMT Conference in September, and we hope to see many of you there. As always, feel free to contact us if you would like to set up a call, and we look forward to speaking with you in the near future. Operator: This concludes today's call. Thank you for attending. May now disconnect. Before you buy stock in AXT, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and AXT wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $397,081!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,166,221!* That performance is why people listen. 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AXT (AXTI) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

AXT, Inc. AXTI reported second-quarter 2026 non-GAAP earnings of 19 cents per share, beating the Zacks Consensus Estimate of 7 cents by 171.43%. The company had recorded a loss of 15 cents per share in the year-ago quarter.Revenues surged 164.8% year over year to $47.6 million and surpassed the consensus mark of $34 million by 39.41%. Record indium phosphide sales, strong AI data-center demand and improved manufacturing productivity drove the results. Backlog increased to well above $100 million. Indium phosphide (InP) revenues reached a company-record $30.7 million in the reported quarter. Demand was primarily tied to data-center applications, including the transition to 800G and 1.6T optical transceiver modules.Management expects indium phosphide demand to remain ahead of available supply as hyperscalers deploy increasingly dense computing architectures. These systems require faster and more power-efficient optical links to move data between processors and across data centers. AXT Inc price-consensus-eps-surprise-chart | AXT Inc Quote Gallium arsenide revenues totaled $6.6 million, supported by semiconductor wafer demand for industrial robotics and data-center laser applications. The company also continued to see demand for semi-insulating wafers used in wireless radio-frequency devices.Germanium substrate revenues were $272,000. Revenues from consolidated raw-material joint ventures reached $10 million, reflecting the strategic value of AXT's vertically integrated supply chain. The five largest customers generated approximately 30% of total revenues, while no single customer accounted for more than 10%. In the second quarter, non-GAAP gross margin expanded to 45% from 29.9% in the prior quarter of 2026 and 8.2% in the year-ago quarter. The improvement reflected higher production volumes, better fixed-cost absorption and a richer mix led by indium phosphide products.Non-GAAP operating expenses increased to $10.2 million from $8.6 million in the preceding quarter and $7.6 million a year earlier. Despite the higher cost base, the company delivered non-GAAP operating income of $11.2 million, compared with an operating loss of $0.55 million in the previous quarter and $6.1 million in the year-ago period. AXT is on track to more than triple its quarterly indium phosphide revenue opportunity by the end of 2026. Management expects quarterly capacity to reach roughly $60 million as the company adds production lines, improves furnace designs and raises manufacturing output.AXT plans to more than double capacity again in 2027, targeting approximately $130 million in quarterly revenue capacity by year-end. Larger-diameter wafers are also supporting the expansion. Customers are migrating from two-inch to three- and four-inch substrates, while the company continues developing six-inch indium phosphide wafers. The company recently signed long-term supply agreements with Casela, Coherent and Lumentum. AXT received wafer prepayments of $22.3 million from Casela and $25.4 million from Coherent during the quarter. These amounts will be recognized as revenues as products are shipped under the agreements.Management said the agreements should contribute more meaningfully beginning in the third quarter and continue supporting growth through 2027 and beyond. The Casela contract formally begins in 2027. Backlog extends into next year, while customer demand continues to exceed the company's production capacity. As of June 30, 2026, Cash, cash equivalents and investments were $748.8 million, higher than $123.2 million as of March 31, 2026. This growth was primarily reflecting approximately $632 million in gross proceeds from an April stock offering. AXT has approximately $66 million of third-quarter revenues for which it already possesses export permits or does not require permits. Management expressed high confidence in recognizing this amount and noted that additional permit approvals could create significant upside.For the third quarter of 2026, the company projects non-GAAP earnings of 30-32 cents per share and GAAP earnings of 29-31 cents. Non-GAAP operating expenses are expected to be approximately $10.5 million, while GAAP operating expenses are projected at nearly $11 million. The estimated share count is 66.5 million. Currently, AXT carries a Zacks Rank #3 (Hold).Onto Innovation ONTO, Nova Ltd. NVMI and Paycom Software PAYC are among the better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Currently, Onto Innovation sports a Zacks Rank #1 (Strong Buy), while Nova and Paycom Software carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.Onto Innovation shares have surged 58.7% year to date. ONTO is scheduled to report its second-quarter 2026 results on Aug. 6.Nova shares have gained 20% year to date. NVMI is scheduled to report its second-quarter 2026 results on Aug. 6.Paycom Software shares have returned 1.4% year to date. PAYC is scheduled to report its second-quarter 2026 results on Aug. 5. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AXT Inc (AXTI) : Free Stock Analysis Report Nova Ltd. (NVMI) : Free Stock Analysis Report Paycom Software, Inc. (PAYC) : Free Stock Analysis Report Onto Innovation Inc. (ONTO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: $47.6 million in Q2 2026, the highest quarterly revenue in AXT's history, up nearly 77% from $26.9 million in Q1 2026 and up 164% from $18.0 million in Q2 2025. Indium Phosphide Revenue: $30.7 million, also the highest in company history, primarily driven by data center applications. Gallium Arsenide Revenue: $6.6 million in Q2 2026. Germanium Substrates Revenue: $272,000 in Q2 2026. Raw Material Joint Venture Revenue: $10.0 million from consolidated raw material joint venture companies in Q2. Non-GAAP Gross Margin: 45.0% in Q2 2026, compared with 29.9% in Q1 2026 and 8.2% in Q2 2025. GAAP Gross Margin: 44.9% in Q2 2026, compared with 29.6% in Q1 2026 and 8.0% in Q2 2025. Non-GAAP Operating Profit: $11.2 million in Q2 2026, compared with a non-GAAP operating loss of $550,000 in Q1 2026 and a non-GAAP operating loss of $6.1 million in Q2 2025. GAAP Operating Profit: $10.4 million in Q2 2026, compared with an operating loss of $1.6 million in Q1 2026 and an operating loss of $6.7 million in Q2 2025. Non-GAAP Net Profit: $11.9 million, or $0.19 per diluted share, in Q2 2026, compared with a non-GAAP net loss of $585,000, or $0.01 per share, in Q1 2026 and a non-GAAP net loss of $6.4 million, or $0.15 per share, in Q2 2025. GAAP Net Profit: $11.1 million, or $0.17 per diluted share, in Q2 2026, compared with a net loss of $1.6 million, or $0.03 per share, in Q1 2026 and a GAAP net loss of $7.0 million in Q2 2025. Cash and Investments: Increased by $625.6 million to $748.8 million as of June 30, primarily due to a secondary public offering of common stock that closed on April 22, generating approximately $632 million before expenses. Prepayments from Supply Agreements: Received prepayments of $22.3 million from Casella and $25.4 million from Coherent under long-term supply agreements. Net Inventory: Increased by approximately $6.2 million in Q2 to $96.3 million. Depreciation and Amortization: $2.5 million in Q2 2026. Stock Compensation: Total stock comp was $0.8 million in Q2 2026. Q3 2026 Guidance: Non-GAAP net income expected in the range of $0.30 to $0.32 per share, with GAAP net income in the range of $0.29 to $0.31 per share. Warning! GuruFocus has detected 5 Warning Signs with AXTI. Is AXTI fairly valued? Test your thesis with our free DCF calculator. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record Q2 2026 revenue of $47.6 million, up 77% sequentially and 164% year-over-year, driven by indium phosphide sales for AI data centers. Non-GAAP gross margin surged to 45.0% from 29.9% in Q1, reflecting improved product mix and higher volumes. Returned to profitability with non-GAAP net income of $11.9 million ($0.19 per share), a significant turnaround from losses in prior quarters. Signed strategic long-term supply agreements with Casella, Coherent, and Lumentum, including prepayments of $22.3 million and $25.4 million, securing future revenue. Indium phosphide capacity expansion is ahead of schedule, with revenue opportunity expected to more than triple by end of 2026 and double again in 2027. Backlog exceeds $100 million and continues to grow, with customer demand outpacing supply, providing strong visibility into 2027. Strong progress in 6-inch indium phosphide substrate development, positioning for higher-value products and future growth. China revenue for indium phosphide lasers more than doubled in Q2, with continued strong growth expected in Q3. Cash position strengthened to $748.8 million following a secondary offering, providing ample liquidity for expansion and potential redemptions. Gross margin guidance suggests further improvement, with management targeting a number beginning with '5' as volumes and mix improve. Export permits for shipping products out of China remain unpredictable, creating uncertainty for revenue timing and recognition. Customer demand continues to outpace supply, limiting the company's ability to accept all orders and potentially constraining near-term revenue growth. The shift of Tongmei's IPO from the STAR market to the Hong Kong Exchange creates a redemption right for PE investors, though they currently intend to continue. Operating expenses increased to $10.2 million (non-GAAP) in Q2, up from $8.6 million in Q1, reflecting higher costs associated with growth. Inventory levels rose by $6.2 million to $96.3 million, indicating potential working capital strain or slower turnover in some product lines. Gross margin improvement is partially dependent on favorable product mix and volume absorption, which could be impacted by future capacity additions and depreciation costs. The company faces intense competition in the indium phosphide market, though it believes it is well-positioned to expand capacity. Geopolitical tensions and trade tariffs could affect the company's ability to export products and increase costs. The company's reliance on a few key customers for a significant portion of revenue (top five customers ~30%) poses concentration risk. Guidance for Q3 includes a high degree of confidence in $66 million revenue, but upside is contingent on receiving additional export permits, which are uncertain. Q: Can you confirm the new targets for indium phosphide capacity exiting 2026 and 2027, and can you provide details on the size of the recently announced Lumentum deal? A: Tim Bettles (VP of Business Development) confirmed that the company is on track to reach approximately $60 million in quarterly indium phosphide revenue capacity by the end of 2026, up from a prior target of $35-40 million. For 2027, they are planning to more than double again, targeting around $130 million per quarter. Regarding the Lumentum agreement, Bettles noted that while they received prepayments, they are not disclosing the total revenue impact of the deal at this time. Morris Young (CEO) added that the 2027 target is a moving target and could be exceeded if demand continues to mount. Q: Given the strong demand and your success in obtaining export permits, can you discuss how the permit process has changed and how you have more confidence in shipping out of China? A: Tim Bettles (VP of Business Development) explained that permits remain a consideration, but the process is showing more regularity, especially in certain geographic regions. The company is focusing with greater intensity on capacity and allocation and is driving more permit applications through the Ministry of Commerce. He noted that while they cannot predict the exact timing or certainty of permits, the increased regularity is a positive sign. Q: My math suggests gross margins will stay relatively stable in Q3. Is that the right way to think about it, and is there more room for price appreciation given how tight indium phosphide is? A: Gary Fischer (CFO) stated that while he recommends sticking close to the current 45% margin, management's target is higher. He cited volume increases absorbing fixed costs and improved manufacturing efficiency as positive influences. Morris Young (CEO) added that since all growth is coming from indium phosphide, which has better margins than other product lines, simple math suggests gross margins will improve. Tim Bettles (VP of Business Development) also noted that the market is migrating to larger diameter substrates (2-inch to 3-inch to 4-inch, with a push towards 6-inch), which provides an opportunity to increase gross margins further. Q: Can you clarify the size of the backlog, which you said is over $100 million, and how much of calendar 2027 is covered by backlog? A: Tim Bettles (VP of Business Development) declined to give exact backlog numbers but confirmed it is growing and exceeds $100 million, covering shipments into 2027. He noted that long-term supply agreements (LTSAs) also extend into 2027 and beyond. Morris Young (CEO) added that the company is not taking all orders because production capacity is full, and if they opened the floodgates, the backlog would be much larger. He emphasized that order intake is not a problem; the constraint is how fast they can grow capacity. Q: How much of your indium phosphide revenue was shipped into China versus the rest of the world, and how do you see this ratio evolving over the next couple of years? A: Tim Bettles (VP of Business Development) stated that China represented over 50% of Q2 revenue. He anticipates a revenue split moving forward in the 40-60% range as they build capacity and long-term supply agreements both within China and globally. He emphasized that this is a global market with growth across all sectors. Q: Given the positive mix dynamics and pricing, can gross margins reach a number that starts with a five? A: Gary Fischer (CFO) confirmed that with further increases in volume, improvements in productivity, and a continued favorable mix towards larger diameter substrates, the company should definitely be targeting a gross margin number that begins with a five. He noted this would be a record for the company. Q: The capacity growth has been upsized significantly. Are you reaffirming your previously communicated CapEx plan of $14 million this year and $100 million next year? A: Tim Bettles (VP of Business Development) confirmed that the company is reaffirming its CapEx plan. He explained that the revenue capacity growth is not solely from hardware deployment but also from productivity gains and product mix changes (moving to larger diameter substrates). This allows them to gain capacity without significant additional CapEx spend. Q: The backlog of over $100 million seems low relative to your expected revenue run rate. Can you provide more color on your visibility and why you aren't booking more orders? A: Tim Bettles (VP of Business Development) explained that the backlog exceeds two quarters of revenue and is supplemented by long-term supply agreements. He noted that the backlog is partly a factor of waiting for export permits, while China business can be turned around quicker. Morris Young (CEO) added that visibility now extends three to four quarters, and the company is deliberately not taking all orders because they are managing production capacity. He stated that the backlog could be much larger if they accepted all orders, but it doesn't make sense to take orders they can't fulfill. Q: Can you discuss the potential use of VCSELs (gallium arsenide-based) for scale-up versus indium phosphide, and any customer discussions around this? A: Morris Young (CEO) noted that they have customers in China and the US developing VCSEL solutions. Tim Bettles (VP of Business Development) added that they are currently a supplier of gallium arsenide VCSELs to two large data center laser companies. He believes these technologies will coexist, but there is more focus on indium phosphide. Morris Young (CEO) explained that speed favors indium phosphide, as VCSELs are more difficult to reach 200G speeds for both lasers and detectors, making indium phosphide the preferred material for higher-speed applications. Q: To what extent did the new long-term supply agreements (with Casella, Coherent, and Lumentum) contribute to Q2 results or the Q3 guide? A: Tim Bettles (VP of Business Development) stated that the latter is the answermost of the impact is in front of them. The agreements did not move the needle much in Q2, but there will be a bigger impact in Q3, with further growth through Q4 and into next year. Morris Young (CEO) clarified that the Casella deal doesn't start until 2027. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

FREMONT, Calif., July 30, 2026--(BUSINESS WIRE)--AXT, Inc. (NasdaqGS: AXTI), a leading manufacturer of compound semiconductor wafer substrates, today reported financial results for the second quarter, ended June 30, 2026. Management Qualitative Comments "This is an incredibly exciting time for AXT," said Morris Young, chief executive officer. "We have reached an inflection point in our business where strong customer demand for data center optical connectivity coupled with our continued success in adding manufacturing capacity and improving productivity are driving a step-function increase in our revenue. In Q2, we recorded our highest quarterly indium phosphide revenue to date. We are working closely with our direct customers as well as major end customers to understand their expected demand and roadmaps. We believe AXT is entering one of the most consequential chapters in our company’s history. The investments we are making today—in capacity, in technology, and in our uniquely integrated supply chain—position us to meet the extraordinary demand we see building across the optical and AI infrastructure markets." Second Quarter 2026 Results Revenue for the second quarter of 2026 was $47.6 million, compared with $26.9 million for the first quarter of 2026 and $18.0 million for the second quarter of 2025. GAAP gross margin was 44.9 percent of revenue for the second quarter of 2026, compared with 29.6 percent of revenue for the first quarter of 2026 and 8.0 percent for the second quarter of 2025. Non-GAAP gross margin, after excluding charges for stock-based compensation, was 45.0 percent of revenue for the second quarter of 2026, compared with 29.9 percent of revenue for the first quarter of 2026 and 8.2 percent for the second quarter of 2025. GAAP net income, after minority interests, for the second quarter of 2026 was a net income of $11.1 million, or $0.17 diluted income per share, compared with a net loss of $1.6 million, or $0.03 per share, for the first quarter of 2026 and a net loss of $7.0 million, or $0.16 per share, for the second quarter of 2025. Non-GAAP net income for the second quarter of 2026 was a net income of $11.9 million, or $0.19 per share, compared with a net loss of $0.6 million, or $0.01 per share, for the first quarter of 2026 and a net loss of $6.4 million, or $0.15 per share, for the second quarter of 2025. Conference Call The company will host a conference call to discuss these results today at 1:30 p.m. PT. The conference call can be accessed at (833) 461-5787 (passcode 630205921). The call will also be simulcast at www.axt.com. The webcast will be available at http://www.axt.com until July 30, 2027. Additional investor information can be accessed at http://www.axt.com. About AXT, Inc. AXT is a material science company that develops and manufactures high-performance compound and single element semiconductor substrate wafers comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge). The company’s substrate wafers are used when a typical silicon substrate wafer cannot meet the performance requirements of a semiconductor or optoelectronic device. End markets include 5G infrastructure, data center connectivity (silicon photonics), passive optical networks, LED lighting, lasers, sensors, power amplifiers for wireless devices and satellite solar cells. AXT’s worldwide headquarters are in Fremont, California where the company maintains sales, administration and customer service functions. AXT has its Asia headquarters in Beijing, China and manufacturing facilities in three separate locations in China. In addition, as part of its supply chain strategy, the company has partial ownership in ten companies in China producing raw materials for its manufacturing process. For more information, see AXT’s website at https://investors.axt.com. Safe Harbor Statement This press release contains certain statements that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. For example, our plans and ability to increase manufacturing capacity and to enable our industry to meet future demands and needs for our indium phosphide wafer substrates. Statements relating to our expectations regarding the receipt of export permits for our indium phosphide substrates, results of operations, market and customer demand for our products, our ability to expand our markets or increase sales, emerging applications using chips or devices fabricated on our substrates, including the use of indium phosphide wafer substrates in artificial intelligence ("AI") applications, product yields and gross margins, expense levels, our investments in capital projects, ramping production at our sites, our ability to utilize or increase our manufacturing capacity, and our belief that we have adequate cash and investments to meet our needs are also forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "could," "would," "project," "plan," "potentially," "likely," and similar expressions and variations thereof are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These statements appear in this press release and elsewhere, include statements regarding the intent, belief or current expectations of our management that are subject to known and unknown risks, uncertainties and assumptions which could cause actual results to differ materially from those expressed or implied in the forward-looking statement. These risks, uncertainties and assumptions include, but are not limited to, the receipt of export permits for our indium phosphide substrates, the withdrawal, cancellations or requests for redemptions by private equity funds in China of their investments in Tongmei, the administrative challenges in satisfying the requirements of various government agencies in China in connection with the investments in Tongmei, geopolitical tensions between China and the United States, and other factors described and captioned "Risk Factors" in the company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q and other filings made with the Securities and Exchange Commission. Each of these factors is difficult to predict and many are beyond the company’s control. The company does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. View source version on businesswire.com: https://www.businesswire.com/news/home/20260730124233/en/ Contacts Gary FischerChief Financial Officer(510) 438-4700 Leslie GreenGreen Communications Consulting, [email protected]