AXT, Inc. reported a significant decline in its financial performance for the second quarter of 2025, with total revenue falling to $17.97 million, a decrease of 35.6% compared to $27.92 million in the same period last year. For the first half of 2025, revenue also dropped by 26.2% to $37.33 million from $50.61 million in the prior year. The company attributed this decline primarily to reduced demand for indium phosphide (InP) wafer substrates used in data centers and passive optical networks, as well as decreased sales of gallium arsenide (GaAs) and germanium substrates due to export restrictions imposed by the Chinese government.
The company's gross profit for the second quarter plummeted to $1.43 million, down 81.3% from $7.65 million in the previous year, reflecting a gross margin of 8.0%. For the first half of 2025, gross profit was $192,000, a stark contrast to $13.75 million in the same period of 2024. This decline was largely driven by unfavorable yields in the gallium arsenide production lines and the impact of export restrictions on product mix and total substrate revenue. Operating expenses also saw a decrease, with selling, general, and administrative expenses totaling $5.65 million for the quarter, down 2.2% year-over-year.
In terms of operational developments, AXT's cash and cash equivalents increased to $27.01 million as of June 30, 2025, compared to $22.83 million at the end of 2024. The company reported net cash used in operating activities of $7.92 million for the first half of 2025, primarily due to a net loss of $17.69 million. AXT's employee headcount remained stable, with no significant changes reported in staffing levels. The company continues to focus on its supply chain strategy, which includes investments in raw material companies in China to secure critical materials for its substrate business.
Looking ahead, AXT remains cautious about the impact of ongoing trade tensions and export restrictions between the U.S. and China, which could further affect its operations and financial performance. The company is actively monitoring the situation and has begun submitting applications for export permits for its InP substrates. AXT's management expressed optimism about the potential for future growth, particularly in the context of increasing demand for high-speed data transfer in data centers driven by artificial intelligence applications. However, the uncertainty surrounding regulatory approvals and market conditions poses significant risks to the company's outlook.
About AXT INC
AXT, Inc. develops and manufactures high-performance compound and single-element semiconductor substrates, including indium phosphide (InP), gallium arsenide (GaAs), and germanium (Ge) wafers. These specialty substrates serve advanced semiconductor and optoelectronic applications such as data centers, 5G, fiber optics, LEDs, and solar cells. Operating primarily in China, AXT integrates raw material production with wafer manufacturing, leveraging proprietary technology and a vertically integrated supply chain to deliver low-defect, customized substrates globally.
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