Key Highlights

  • Third quarter Revenue hit a record $73.4 million, up 162% from $28.0 million a year earlier.
  • Revenue grew 54% from $47.6 million in the second quarter of 2026.
  • GAAP gross Margin came in at 56.0%, versus 22.3% in the third quarter of 2025.
  • GAAP Net Income reached $25.7 million, or $0.39 per diluted share, compared with a net loss of $1.9 million.
  • Non-GAAP net income was $26.8 million, or $0.41 per share.

Record sales powered by indium phosphide demand

AXT (NASDAQ:AXTI), a materials science company based in Fremont, California, makes compound and single element semiconductor wafer substrates from indium phosphide, gallium arsenide and germanium. These substrates serve applications where a standard silicon wafer cannot meet the performance requirements of a semiconductor or optoelectronic device.

Third quarter 2026 results were released on October 29, 2026. Revenue hit a record $73.4 million, versus $47.6 million in the second quarter of 2026 and $28.0 million in the third quarter of 2025.

Chief Executive Morris Young described the period as pivotal and exciting. He said revenue rose 54% sequentially and 162% year over year, driven by exceptionally strong customer Demand for indium phosphide material.

Gross margin climbs to 56.0%

GAAP gross margin reached 56.0% of revenue, up from 44.9% in the second quarter and 22.3% in the same quarter a year ago. On a non-GAAP basis, which excludes stock-based compensation, the margin was 56.1%, compared with 45.0% and 22.4%.

That represents an improvement of roughly 33.7 percentage points year over year on a calculated GAAP basis. Applying the 56.0% margin to $73.4 million of revenue implies Gross Profit of about $41.1 million on a calculated basis, versus about $6.2 million a year earlier.

The company reports on both GAAP and non-GAAP bases, and its non-GAAP results exclude stock-based compensation expense. Reconciliation tables are included in the financial statements in the release.

Net income reaches $25.7 million

GAAP net income after minority interests came to $25.7 million, or $0.39 per diluted share. That compares with $11.1 million, or $0.17 per share, in the second quarter of 2026, and a net loss of $1.9 million, or $0.04 per share, in the third quarter of 2025.

Non-GAAP net income was $26.8 million, or $0.41 per share, against $11.9 million, or $0.19, in the second quarter and a non-GAAP net loss of $1.2 million, or $0.03, a year earlier.

Sequentially, GAAP net income rose roughly $14.6 million, or about 131%, on a calculated basis, as revenue grew 54% and gross margin widened.

Calculated growth and share count

On a calculated basis, revenue increased $25.8 million from the second quarter and $45.4 million from a year earlier. GAAP net income of $25.7 million at $0.39 per diluted share implies about 66 million diluted shares, and non-GAAP net income topped GAAP by $1.1 million.

Because non-GAAP figures adjust only for stock-based compensation, the nearly identical gross margins of 56.0% on a GAAP basis and 56.1% on a non-GAAP basis show how small that charge is relative to revenue.

Capacity expansion and what comes next

Mr. Young said the company began 2026 committed to doubling its indium phosphide capacity. The quarter's results indicate that demand is running ahead of the capacity the company had in place a year earlier.

The company held a conference call at 1:30 p.m. Pacific Time on October 29, 2026, and said the webcast would remain available until October 29, 2027.

Investors following the stock will likely track how capacity additions turn into shipments, whether gross margin holds near 56.0%, and how the sequential growth rate compares with the 54% reported here.