AXT's 9.4% Decline and $300M Volume at 463rd Place Highlight AI Expansion Amidst Earnings Shortfall and Approval Setbacks

Market Overview

On February 26, 2026, shares of AXT (AXTI) dropped by 9.4%, accompanied by a 24.6% decrease in trading volume to $0.3 billion, placing it 463rd in market activity rankings. This notable decline came after the company released mixed quarterly results: fourth-quarter 2025 revenue reached $23.04 million, but the net loss for the quarter was $3.55 million, and the full-year loss widened to $21.26 million. Although company leadership expressed confidence in ongoing demand for indium phosphide wafers—especially for AI and data center applications—the disappointing earnings and increasing annual losses led investors to adopt a more cautious stance.

Main Factors Influencing Performance

AXT’s fourth-quarter results showed some improvement in quarterly losses, but the overall annual outlook worsened, with the company’s yearly deficit expanding to $21.26 million. The business remains focused on supplying indium phosphide substrates for AI and data center markets, but faces ongoing execution challenges. Management has outlined plans to double manufacturing capacity by 2026, following a 25% increase since October 2025. However, this growth is contingent on securing timely export permits from China—a recurring issue that could heighten revenue fluctuations and put pressure on profit margins.

The latest earnings release highlighted a split among analysts regarding AXT’s future. Some forecasts are optimistic, predicting $154 million in revenue and $4 million in earnings by 2028. Others are more reserved, pointing to risks such as export permit delays and heavy reliance on a small group of customers. A recent analysis from Simply Wall St valued the stock at $9.50—67% below its current price—based on an estimated $16.6 million in 2028 earnings. In contrast, other fair value assessments suggest the stock could reach $26.00, reflecting confidence in the company’s AI-driven growth potential. These differing perspectives underscore the sector’s volatility and the company’s vulnerability to regulatory and operational challenges.

Strong demand for indium phosphide wafers, fueled by advancements in AI and co-packaged optics, continues to support AXT’s business. The CEO reported a $49 million order backlog and a 40% market share in this segment, with non-GAAP gross margins rising to 22.4% in the third quarter of 2025. Nevertheless, the company’s dependence on a limited customer base and the necessity for prompt export approvals remain significant concerns. The company’s revenue guidance for Q4 2025, projected at $27–30 million, fell short of some expectations, adding to worries about short-term execution.

The investment outlook for AXT centers on its ability to transform robust demand into lasting profitability while managing regulatory and operational obstacles. Management’s capacity expansion plans are in line with anticipated growth in the 6-inch indium phosphide market, but delays in shipments could intensify financial challenges. Analysts also warn that a high concentration of customers—especially in China—may leave the company exposed to abrupt changes in demand or regulatory intervention.

In conclusion, AXT’s share price reflects a balance between optimism about long-term AI-driven growth and concerns over near-term execution risks. The company’s ambitious expansion strategy and strong position in the indium phosphide market could enable it to capitalize on industry trends, but ongoing issues with export permits and earnings disappointments continue to dampen investor confidence. Achieving sustainable profitability will depend on overcoming regulatory hurdles and consistently converting increased capacity into revenue.