AXTI · AXT

The thesis

AXT, Inc.'s indium-phosphide (InP) substrate business is still delivering, and the shares are more likely than not to beat the S&P 500 over three months if fourth-quarter shipments match the guide of about $90 million. The shares closed at $46.97 on 11 November 2026, down 39.4% over three months, below both the 50-day average ($63.07) and the 200-day average ($65.83), and 67.2% below the 52-week intraday high of $143.16 set on 26 May. The fourth-quarter report and any change in orders from Lumentum, now being bought by Marvell, settle the case.

AXT reported record third-quarter revenue of $73.41 million on 29 October against a $66.0 million estimate, and guided the fourth quarter to about $90 million against a $76.8 million estimate. AXT received the $43.5 million Lumentum wafer prepayment in the third quarter, according to a TechNews summary of the call. Backlog exceeds $500 million, per a Finviz review of the report.

The shares fell anyway. They closed at $47.54 on 4 November, then at $36.72 on 5 November, and finished the week at $38.88 on 6 November. They rose to $42.91 on 9 November, fell to $39.31 on 10 November and jumped to $46.97 on 11 November, the session in which 24/7 Wall St. reported that Applied Optoelectronics rose 12%, Lumentum 11% and Coherent 7% after CoreWeave's results. The swings track the optics group; no AXT-specific news accounts for them.

Bullish and bearish views on AXT Inc

The bull case on AXT Inc (AXTI), in brief: results beat on every line. The bear case: the largest customer is being absorbed.

Bull case

• Results beat on every line. AXT reported on 29 October third-quarter revenue of $73.41 million, up about 162% year over year. Non-GAAP gross margin was 56.1% and adjusted earnings per share were $0.41 against a $0.31 estimate.
• InP is now most of the business. InP revenue was $54.3 million in the third quarter against $30.7 million in the second, per the same Finviz review. The CFO described a gross margin in the 60% range for the fourth quarter.
• The guide sits far above estimates. AXT guided to about $90 million of revenue and non-GAAP earnings of $0.57 to $0.59 per share, against estimates of $76.8 million and $0.36. TechNews reports the guide comes from products that either have shipment approval or need none.
• Analysts remain constructive. TIKR lists Wedbush at a $93 target (reiterated 30 October), Needham at $90 and a five-analyst consensus target of $92. B. Riley, at Neutral, raised its target to $56 from $55 on 30 October. Nomura initiated coverage with a Buy rating on 4 November.
• Tongmei financing funds capacity. AXT announced on 28 October that its subsidiary Tongmei could raise up to RMB 3.67 billion (about $545 million). AXT would keep about 73.4% of Tongmei at the maximum raise, and capacity is set to double again in 2027.

Bear case

• The largest customer is being absorbed. TIKR notes that Lumentum makes InP lasers in its own fabs and that the open question is whether Marvell–Lumentum orders more substrates or pushes for lower prices. Marvell agreed on 2 November to buy Lumentum for $115 billion in stock.
• China permits remain structural. AXT manufactures its substrates in China, InP exports need Ministry of Commerce permits, and management models China at 40–60% of revenue. The fourth-quarter guide carries no permit caveat, but later quarters can.
• Dollar growth is slowing. The implied fourth-quarter sequential gain of about $16.6 million is smaller than the third quarter's roughly $25.8 million, per Finviz, because capacity limits output. Finviz also lists rising indium costs and low initial 6-inch yields as margin pressures.
• Dilution continues. Diluted shares rose to 65.9 million in the third quarter from 43.8 million in the second, per Finviz. Authorized common stock rose to 120 million shares in June.
• Insiders have sold. SEC Form 4 filings show director Leonard Leblanc sold 4,000 shares at $96.07 on 17 August and 2,500 shares at an average $88.57 between 10 June and 7 August. The two 27 October Form 4 filings for the CEO (23,350 shares) and CFO (8,524 shares) are grants, not open-market purchases.

Price setup

The shares closed at $46.97 on 11 November, under the 50-day average of $63.07 and the 200-day average of $65.83. The 5 November close of $36.72 is the lowest close in the past week of sessions, and the close of $47.54 on 4 November is the nearest reference above the current price.

Over the last six sessions the closes ranged from $36.72 to $47.54, a wide band for a company whose reported results have not changed in that time. Single-stock leveraged and inverse exchange-traded funds track AXTI and can amplify daily moves.

At the 2 November close, TIKR put forward valuation at about 21 times earnings, on 2026 and 2027 normalized earnings estimates of $1.18 and $2.65 per share. The price has since fallen, so the market is paying less for the same estimates. The price reflects the customer-consolidation and permit risks more than the October results.

Catalysts ahead

• ~December 2026 (est.): Expected closing of Tongmei's up-to-$545M financing. Closing fixes AXT's ownership share of Tongmei and funds the 2027 capacity doubling.
• ~February 2027 (est.): Fourth-quarter 2026 results. Shows whether shipments reached the roughly $90M guide and whether gross margin reached the 60% range.

What would change the view

A daily close below $35, under the 5 November close of $36.72, which would show the optics selloff overriding the October results. Fourth-quarter revenue below the roughly $90 million guide, a cut in Lumentum orders, or a failed Tongmei financing would also break the case.

The risks this note tracks, each with what would confirm it:

• Marvell's purchase of Lumentum reduces or reprices InP substrate orders from AXT's largest named customer. Confirmed by: Marvell or Lumentum signals in-house or alternative substrate sourcing, or AXT discloses a changed Lumentum agreement.
• Export-permit limits keep contracted InP demand from becoming shipments. Confirmed by: AXT discloses a permit denial affecting committed shipments, or fourth-quarter revenue falls short of the about $90M guide with permits cited.
• The Tongmei financing dilutes AXT's stake or fails to close. Confirmed by: the financing is delayed beyond December 2026, repriced, or closes below the maximum raise.
• Low initial 6-inch yields and rising indium costs hold back the margin guide. Confirmed by: fourth-quarter gross margin below the 60% range the CFO described on the 29 October call.
• The optics group keeps selling off and drags AXT regardless of its own results. Confirmed by: further large one-day falls in Lumentum, Coherent and Applied Optoelectronics with no AXT company news.

What it trades with

AXT trades with the AI optics group. TIKR tied the late-October and early-November drops to Coherent, Lumentum and Marvell rather than to company news, and 24/7 Wall St. tied the 11 November rebound to CoreWeave's results. Lumentum is a customer under an agreement running through 31 December 2031, and the target of the Marvell deal, so AXT's stock and Lumentum's now react to related news. AI data-center spending and US–China export policy reach AXT through demand and permits.