3 Catalysts That Could Ignite AXTI Stock on Oct. 29 (And 1 Huge Risk)
AXT shares have shed more than a quarter of their value in a single month, yet analysts expect the company to flip from loss to profit when it reports on Oct. 29. Three specific catalysts could send the stock surging,…
AXT (NASDAQ:AXTI) reports third-quarter results on Oct. 29. Its indium phosphide (InP) wafers now feed AI data center optics. Shares fell 28.05% over the past month, so this report will show whether demand still exceeds supply.
A Record Quarter Raised the Bar
Last quarter, revenue hit $47.6 million, the best in AXT’s history. That beat consensus by 39.63%, and non-GAAP EPS of $0.19 exceeded the $0.072 estimate. InP revenue set a record at $30.7 million, and gross margin rose to 44.9% from 8.0% a year earlier.
The stock jumped 28.74% on earnings day but has since cooled. At $52.51, it is still up 221.16% year to date. Management forecast Q3 non-GAAP EPS to $0.30 to $0.32, supported by about $66 million of revenue that already has an export permit or doesn’t need one.
Consensus Points to a Sharp Swing to Profit
| Metric | Consensus | Year-Ago Actual | YoY Growth |
|---|---|---|---|
| Q3 Normalized EPS | $0.308 | -$0.03 | N/M (turn to profit) |
| Q3 Revenue | $66.0M | $27.96M | 136.1% |
| FY2026 EPS | $0.868 | -$0.41 | N/M (turn to profit) |
| FY2026 Revenue | $217.98M | $88.33M | 146.8% |
Three Catalysts: Capacity, Backlog and Margins
1. Capacity execution. AXT committed to doubling InP capacity in 2026 and says it is ahead of schedule. The target is about $60 million of quarterly InP capacity by year-end. Updates on the plan to double capacity again in 2027 and on progress with 6-inch substrates will be worth tracking.
2. Backlog conversion. Backlog is “well over $100 million” and extends into 2027. Coherent (NYSE:COHR | COHR Price Prediction) prepaid $25.4 million, and the new Lumentum (NASDAQ:LITE) deal adds more volume. Business development VP Timothy Bettles said, “We will see a bigger impact in Q3.”
3. Margin leverage. Reports put a price increase on AI-laser substrates at about 10%, and the InP line is fully used. Together, those could push margins higher. In July, CFO Gary Fischer said gross margin could eventually start with “a 5”. The key question is how far Q3 moves toward that goal.
One Huge Risk: Export Permits Out of China
Fischer warned, “We cannot predict the future timing of permits or success in obtaining them for any specific customer or individual order.” When permits stall, revenue gets pushed out. Tongmei, AXT’s China-based subsidiary, also moved its IPO to Hong Kong. That move gave private equity investors the right to redeem a $49 million stake, and inventory has rose to $96.3 million.
Supply Discipline Will Decide the Next Leg
The Q3 EPS estimate has rose from $0.102 a week ago to about match guidance, so the outlook will matter most. AXT’s last four beats averaged a 20.8% gain on earnings day. The focus will be whether capacity, permits and margins improve together, because that would support Q4 consensus revenue of $77.45 million.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
