AXT (AXTI) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $27.9 million, up 23% sequentially and 50% year-over-year, driven by strong demand for indium phosphide, gallium arsenide, and germanium substrates, especially in AI, data center, and optical network applications.

• Gross profit rose to $7.7 million, with gross margin improving to 27.4% from 9.2% in Q2 2023, reflecting higher unit volumes and favorable product mix.

• Non-GAAP net loss narrowed to $0.8 million ($0.02/share), and GAAP net loss was $1.5 million ($0.04/share), both improving significantly year-over-year.

• The company continues to pursue the IPO of its subsidiary Tongmei on the STAR Market in China, with the process under regulatory review and positive feedback from the exchange.

• Management highlighted tangible signs of market recovery and successful execution in a dynamic technology landscape.

Financial highlights

• Q2 2024 revenue: $27.9 million, up from $22.7 million in Q1 2024 and $18.6 million in Q2 2023.

• Gross margin: 27.4% (GAAP), up from 9.2% in Q2 2023; non-GAAP gross margin: 27.6%.

• Non-GAAP operating loss: $1.2 million; GAAP operating loss: $1.9 million, both improved year-over-year.

• Cash, equivalents, and investments: $43.3 million as of June 30, 2024; cash and cash equivalents: $27.8 million; short-term investments: $1.7 million.

• Inventory at June 30, 2024: $85.8 million, with reserves for excess and obsolete inventory at $23.1 million.

Outlook and guidance

• Q3 2024 revenue expected between $25.0 million and $27.0 million.

• Non-GAAP net loss projected at $0.06–$0.08/share; GAAP net loss at $0.07–$0.09/share.

• Management expects continued growth opportunities in AI and optical transceivers, with some quarter-to-quarter variability as end markets normalize.

• The company believes it has adequate cash and investments to meet operating needs and capital expenditures over the next 12 months.

• Indium phosphide and raw material revenues expected to hold steady; gallium arsenide and germanium to moderate due to order timing and inventory digestion.