AXT Inc. (AXTI) surged 27% after reporting record second-quarter 2026 earnings that crushed analyst expectations, driven by surging demand for indium phosphide wafers used in AI data center optical connectivity. The semiconductor materials company reported Q2 revenue of $47.6 million, far exceeding the consensus estimate of $34.1 million and jumping 164% from the same quarter last year, according to the company’s earnings announcement released July 30.
The company swung to profitability with GAAP net income of $11.1 million, or $0.17 per diluted share, compared with a net loss of $7.0 million, or $0.16 per share, in the second quarter of 2025. Non-GAAP net income reached $11.9 million, or $0.19 per share, beating analyst expectations. Gross margin expanded dramatically to 44.9% from just 8.0% a year earlier, reflecting improved manufacturing efficiency and favorable product mix.
The standout driver was indium phosphide revenue, which hit $30.7 million in Q2—the highest quarterly total in company history. Indium phosphide substrates are a critical material for high-speed optical transceivers that connect AI infrastructure and hyperscaler data centers, a supply chain bottleneck as major cloud providers race to expand their artificial intelligence capabilities.
Chief Executive Officer Morris Young called the quarter “an incredibly exciting time for AXT,” noting in the earnings release that the company has “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.” The company has a record backlog exceeding $100 million for indium phosphide wafers, providing visibility into future quarters.
AXT is aggressively expanding production to meet this demand. The company plans to lift quarterly indium phosphide capacity to approximately $60 million by year-end 2026 and potentially around $130 million by the end of 2027, more than tripling its revenue opportunity within 18 months. The expansion is funded in part by a $632.5 million capital raise completed in April 2026, which supported capacity investments at the company’s subsidiary Tongmei in Beijing.
The indium phosphide boom reflects a broader semiconductor surge tied to the AI infrastructure buildout. The Philadelphia Semiconductor Index surged roughly 74% in the second quarter of 2026, its best quarter ever, driven by AI demand, according to industry reports. Analysts at Wedbush highlighted AXT’s results as evidence of continued strength in AI-driven optical and indium phosphide markets, citing the company’s long-term customer agreements and capacity expansion as catalysts for sustained growth.
The company’s success comes as China’s export controls on indium phosphide have tightened supply globally. In June 2026, China’s controls pushed 6-inch wafer prices up 250% to $5,000, according to industry sources, concentrating demand at companies like AXT that have integrated supply chains and manufacturing footprint in China. This structural advantage gives AXT pricing power and customer lock-in as hyperscalers compete for scarce optical connectivity materials.
Sources
- Business Wire — AXT’s official Q2 2026 earnings announcement with revenue, profitability, and CEO commentary
- Yahoo Finance — Stock price movement and revenue beat confirmation
- Robinhood — Q2 revenue and consensus estimate data
- SeekingAlpha — Wedbush analyst commentary on Q2 results and optical demand outlook
- Seeking Alpha — Q2 earnings preview with guidance and indium phosphide revenue expectations
- Financial Modeling Prep — Indium phosphide backlog and AI demand context
- Mexico Business News — China export controls and wafer pricing impact
- Market Beat — Capacity expansion targets and year-end 2026 guidance
