AXT's indium phosphide backlog tops $500 million, five times April's level, as revenue jumps 162%
AXT's record quarter and Nomura's $90 target both rest on a shortage of indium phosphide wafers. Every one is grown in China, every export needs Beijing's license, and a $545 million raise is cutting AXT's stake in the plants.
Vincent Jiangthree-minute read
Revenue tripled in a year on one material
AXT, the Fremont, California substrate maker listed on Nasdaq as AXTI, booked third-quarter revenue of $73.4 million, up 162% from a year earlier, with GAAP gross margin of 56.0% against 22.3% and net income of $25.7 million where the year-ago quarter lost $1.9 million 1.
Indium phosphide, the crystal sliced into wafers that host the lasers inside AI data-center optical transceivers, carried $54.3 million of that, about three quarters of sales 2. Chief executive Morris Young put the indium phosphide backlog above $500 million, spanning multiyear contracts and spot orders 2; Nomura's initiation note had it at $100 million in April 3.
Lumentum−3.21% — Lumentum, down 3.21 percent today, an optical-components maker, signed a supply agreement in the quarter backed by a $43.5 million prepayment 2. The stock closed at $46.97 on November 11, up 19.49%, after a month down 43.9% and a year up 506.3% 43.
Revenue doubled twice in a year, and the fourth-quarter guide is another record
- Revenue
- Estimate
Data
| Revenue | |
|---|---|
| Q3 '24 | $23.65M |
| Q4 '24 | $25.11M |
| Q1 '25 | $19.36M |
| Q2 '25 | $17.97M |
| Q3 '25 | $27.96M |
| Q4 '25 | $23.04M |
| Q1 '26 | $26.92M |
| Q2 '26 | $47.59M |
| Q3 '26 | $73.4M |
| Q4 '26 guide (estimate) | $90M |
Nomura sees wafer supply short through 2028
Nomura started coverage on November 3 at Buy with a $90 target, 44.6 times its 2027 estimate of $2.02 a share 3. Its model puts 2028 demand for laser chips in 800G-and-faster transceivers at 1,650 million units against supply of 1,542 million, a 7% shortfall easing from 17% this year and 12% in 2027 3.
Nomura counts AXT−7.35% — AXT, down 7.35 percent today among three makers of the wafer at quality and scale, and figures a new supplier needs one to two years of customer certification 3. For the fourth quarter, AXT guided roughly $90 million of revenue realisable from products whose export permits are already in hand or that need none, at 57 to 59 cents of non-GAAP earnings a share 2.
Nomura's modeled laser-chip shortfall falls from 17% to 7% but never closes
- Supply shortfall
- Estimate
Data
| Supply shortfall | |
|---|---|
| 2026 (estimate) | 17% |
| 2027 (estimate) | 12% |
| 2028 (estimate) | 7% |
Beijing licenses every export while the fab's ownership thins
Every wafer comes from Beijing Tongmei, AXT's subsidiary, at plants in and around Beijing and in Liaoning province, and each export needs a license from China's commerce ministry, granted case by case 35.
AXT's August 13 filing said it could not estimate when permits to resume United States-bound indium phosphide shipments would arrive, and called permits its most significant challenge 6.
The capacity fix now runs through Tongmei's own shares: a private-equity raise of roughly $285 million to $545 million, set to close in December, would leave AXT about 73.4% of the fab, from 85.51%, while Tongmei pursues a Hong Kong listing 73.
The bears say the backlog is customers ordering twice
The redemption rights attached to those investors were covered in The Inference's November 10 reporting 258. Management told analysts customer demand shows no 2027 overcapacity 2; the counterpoint, from MarketWatch citing LightCounting, is that customers are double ordering and inflating optics backlogs, and Zacks puts the stock at 24.4 times forward earnings against an 8.8 times industry 58.
Two queues set the next print: wafers out of Tongmei's furnaces, and files out of the license desk.
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