AXT, Inc. (AXTI) Stock Forecast & Price Target

AXT is positioned to benefit from a powerful demand cycle in indium phosphide, with Q1 InP revenue of $13.6M up 70% sequentially and 258% year over year, and backlog above $100M signaling continued momentum. Its Q1 gross margin improved to 29.9% from 21.5% in Q4, driven by a richer InP mix, better factory absorption, and improving pricing, while Q2 guidance of about $34M revenue and $0.06-$0.08 non-GAAP EPS suggests a return to profitability. The outlook is further strengthened by capacity expansion funded by the $632.5M capital raise, with InP capacity targeted to double by year-end 2026 and management noting that additional export permits could unlock meaningful upside beyond guided results.

AXT is facing a negative fundamental setup because its growth opportunity is tied to InP supply constraints and the company still relies heavily on raw materials, which were $7.6M in Q1 and represented about 28% of total revenues versus a 5Y average of 25%. At the same time, ge revenues fell to $0.2M and remain pressured by aggressive pricing, while non-GAAP operating costs rose to $8.6M in Q1 and GAAP opex increased to $9.6M as R&D climbed to $3.0M for 6-inch InP development and other next-generation work. Execution risk is also elevated because the proposed Tongmei IPO on the STAR Market in China could be delayed or fail to list, and customer product programs could shift to alternative suppliers or technologies.