AXT, Inc.

A supplier of specialty chip materials

AXT, Inc. trades on Nasdaq under AXTI. It makes semiconductor wafer substrates from indium phosphide, gallium arsenide and germanium for uses such as optical communications, lasers and wireless devices. Its headquarters are in California, while manufacturing is in China. Beijing Tongmei Xtal Technology is its main manufacturing subsidiary.

The recovery in sales and profit

Three-month periods ended September 30, 2025, June 30, 2026 and September 30, 2026. Dollar amounts are millions. The June column is the previous quarter, while the September columns are the year-over-year comparison. Profit is reported under GAAP.

Metric	Q3 2025	Q2 2026	Q3 2026
Revenue	$28.0	$47.6	$73.4
Gross margin	22.3%	44.9%	56.0%
Operating income (loss)	($1.1)	$10.4	$28.4
Net income (loss) attributable to AXT	($1.9)	$11.1	$25.7

In October 2025, management described an opportunity to grow and return to profitability in 2026, rather than giving a numerical annual target in that release. AXT reported $35.2 million of net income attributable to the parent in the first nine months of 2026, compared with a $17.7 million loss a year earlier. The full year is not yet complete.

Cash and the capital already raised

AXT issued 9,844,357 new parent shares in its April 2026 offering, including the fully exercised underwriter option, raising approximately $632.5 million before fees. The stated uses included expanding Tongmei's indium phosphide capacity, research, working capital and general corporate purposes.

At September 30, the consolidated group had $485.5 million of cash and $299.2 million of short- and long-term investments. Restricted cash of $41.2 million was separate. Short-term bank loans were $72.5 million. These are group balances before the new Tongmei round, not cash held solely by the US parent.

The latest release does not include a cash flow statement. For the first half of 2026, the last available period in the filed quarterly accounts, operating cash flow was negative $0.9 million and capital spending was $8.6 million. Those six-month amounts should not be read as the third quarter's cash flow.

The listing plan has changed

In October 2025, Tongmei was still pursuing a Shanghai STAR Market listing and hoped to complete the process in the coming months. The application was withdrawn on July 8, 2026, and AXT shifted its efforts toward a Hong Kong listing.

The withdrawal activated an earlier investor group's right to request the return of about $49 million originally invested, without interest. As of the second-quarter filing, AXT and Tongmei were discussing whether those investors would stay or seek repayment. The newer financing has separate terms.

The October funding agreement

Tongmei's new outside investment is a conditional minimum of RMB1.91235 billion, approximately $285 million, and a maximum of about RMB3.66864 billion, approximately $545 million. AXT expects a December 2026 closing, subject to the required filings and other conditions.

At the maximum investment, AXT expects about 73.4% ownership and continued consolidation. Separately, AXT agreed to subscribe for $400 million worth of Tongmei shares before or at closing. The disclosed summary does not identify whether settlement uses cash, conversion of existing funding within the group, or a combination.

If no qualifying IPO occurs within three years of closing, the new investors can require Tongmei to repurchase their shares. A qualifying IPO must meet an eligible-exchange requirement and a price giving investors at least a 13% annualized return. The redemption formula uses the investment plus an 8% compounded annual return and unpaid declared or accrued distributions. Certain other contractual events also activate redemption rights.

AXT may choose to buy the investors' shares instead of Tongmei, with payment in AXT shares among the conditional options. This is a choice rather than a general parent guarantee. The summary says AXT intends to file the full agreements with its 2026 annual report.

The next checks are the actual closing and amount raised, the resulting ownership and cash balances, delivery of the capacity expansion and progress toward a qualifying listing. Export permits for indium phosphide and the US-China operating environment remain relevant risks.