AXT, Inc. (AXTI): Business Model Canvas [Dec-2025 Updated]

So, you want the real story on AXT, Inc.'s business model right now? Forget the noise; this is a classic, high-stakes bet on the AI data center gold rush, built entirely on non-silicon materials like Indium Phosphide. As your former BlackRock colleague, I see a company whose entire near-term fate hinges on managing its complex, China-centric supply chain-those ten raw material Joint Ventures are everything. With Q1 2025 revenue showing 83% concentration in Asia Pacific and the top five customers driving 35.9% of sales, this isn't a slow-and-steady utility; it's a pure-play material science play forecasting about $79.13 million for the full year. Dive below to see exactly how their Key Resources and Key Activities are structured to either capture this massive opportunity or buckle under the pressure.

AXT, Inc. (AXTI) - Canvas Business Model: Key Partnerships

You're looking at the foundation of AXT, Inc.'s material supply, which is heavily concentrated in China and subject to significant geopolitical friction. The Key Partnerships block here is less about co-creation and more about securing the physical inputs and regulatory access needed to operate.

Ten raw material Joint Ventures (JVs) in China for supply chain control

AXT, Inc. maintains a direct stake in its upstream supply chain through ownership in China. Specifically, as part of its supply chain strategy, the Company has partial ownership in ten companies in China producing raw materials for its manufacturing process. This structure is designed to give AXT, Inc. more control over the sourcing of critical inputs.

The financial contribution from this partnership structure is visible in segment revenue. For instance, in the first quarter of 2025, revenue from its raw material joint venture in China was $8.3 million. The company expected flat growth in revenues from these raw materials for the third quarter of 2025.

Critical relationships with Chinese regulatory bodies for export permits

The relationship with Chinese regulatory bodies, particularly the Ministry of Commerce, is a near-term operational risk, as evidenced by recent revenue impacts. The company is required to apply for approval to export certain substrates.

Here are the key regulatory timelines and impacts:

• Restrictions on Gallium Arsenide (GaAs) exports began in August 2023.
• Restrictions on Indium Phosphide (InP) exports began in February 2025.
• The first export license for InP was received in June 2025, allowing a shipment of nearly $700 thousand outside of China that month.
• The company estimates InP permits take approximately 60 business days, or about three months, to process.
• In August 2025, the subsidiary, Beijing Tongmei Xtal Technology Co., received permits to resume InP shipments, potentially generating several million dollars in revenue outside the Q3 forecast.
• Permits for germanium substrate sales outside of China have been difficult to obtain, with revenue expected to remain at a lower-level rate through the second half of 2025.

Suppliers of key elements like Indium, Gallium, and Germanium

The output from AXT, Inc.'s manufacturing facilities, which rely on these sourced raw materials, shows the relative importance and current sales performance of the key elements. The Q3 2025 results give a clear picture of the material flow post-permit approvals.

The revenue breakdown for the third quarter of 2025 highlights the recovery in Indium Phosphide:

For comparison, Q2 2025 revenues were: InP $3.6 million, GaAs $6.2 million, and Germanium substrates $1.5 million.

Research institutions for advanced compound semiconductor R&D

While specific financial commitments to external research institutions aren't detailed, the focus on cost management suggests a tight rein on discretionary spending, including R&D. Operating expenses in the second quarter of 2025 were $7.6 million, a reduction from $8.5 million in the prior quarter. This reduction was partly driven by R&D spending falling by $1.25 million. The company remains highly focused on driving gross margin recovery and expansion, which implies R&D efforts are being scrutinized for near-term return.

Finance: draft 13-week cash view by Friday.

AXT, Inc. (AXTI) - Canvas Business Model: Key Activities

You're looking at the core engine of AXT, Inc. (AXTI) right now, which is all about turning raw materials into the high-performance substrates the AI and data center markets desperately need. The key activities revolve around complex material science and navigating tricky international trade rules. Honestly, their ability to execute on these four areas defines their near-term success.

Manufacturing high-purity Indium Phosphide (InP) and Gallium Arsenide (GaAs) substrates.

AXT, Inc. develops and manufactures compound and single element semiconductor wafer substrates, specifically indium phosphide (InP), gallium arsenide (GaAs), and germanium (Ge). These are the materials you use when standard silicon just won't cut it for demanding applications like 5G infrastructure, data center connectivity, and passive optical networks (PON). The manufacturing output for the third quarter of 2025 shows where the focus is, especially with InP demand surging globally.

Here's the quick math on their Q3 2025 substrate revenue, which directly reflects their manufacturing activity:

The company has stated they have adequate capacity today for Indium Phosphide, estimated around $20 million/quarter.

Managing a vertically integrated raw material supply chain in China.

A significant part of their operational activity involves controlling the inputs. AXT, through its subsidiary Tongmei and its subsidiaries, collectively holds partial ownership in ten companies in China that produce raw materials. This vertical integration is key to securing supply. Revenue generated from these consolidated raw material joint venture companies in Q3 2025 was $6.7 million. This activity supports the overall material flow for their substrate production.

Securing and processing export control permits for finished wafers.

This is a major, non-negotiable activity given the trade restrictions imposed by the China government on GaAs in August 2023 and InP in February 2025. AXT must actively manage the process of obtaining export permits for customer orders, which is critical for international sales. In Q3 2025, success in obtaining these permits drove a massive sequential rebound in InP revenue.

Key metrics related to this activity include:

• Permit processing time for indium phosphide is approximately 60 business days, or about three months.
• The company is actively building a healthy backlog for both indium phosphide and gallium arsenide materials due to these ongoing permit requirements.
• Permit progress is cited as a primary catalyst for anticipated revenue growth.

If onboarding takes 14+ days, churn risk rises, and for AXT, permit processing time directly impacts revenue recognition.

Continuous R&D to enhance material quality and crystal growth.

To maintain a competitive edge, AXT must continuously invest in the science behind the substrates. They emphasize superior product performance in specifications like low etch pit density (EPD). This R&D focus is what allows them to supply new Tier-1 customers.

While specific 2025 R&D spending figures aren't explicitly stated for the full year, we know from late 2024 that R&D expenses increased, relating to investment in low-EPD GaAs crystal growth and the development of 6-inch Indium Phosphide. Furthermore, management has quantified future manufacturing expansion as an R&D/CapEx activity:

• Capacity can be raised by approximately 25% in ~3 months with an estimated $10-$15 million incremental Capital Expenditure (CapEx).
• Doubling capacity is estimated to take approximately 9 months.

Finance: draft 13-week cash view by Friday.

AXT, Inc. (AXTI) - Canvas Business Model: Key Resources

You're looking at the core assets AXT, Inc. (AXTI) relies on to operate in the compound semiconductor substrate market as of late 2025. These aren't just office buildings; they are specialized, high-barrier-to-entry capabilities.

The foundation of AXT, Inc. (AXTI) rests on its intellectual property surrounding crystal growth. This includes the proprietary crystal growth technology and material science expertise used to produce high-performance compound and single element semiconductor substrate wafers, specifically indium phosphide (InP), gallium arsenide (GaAs), and germanium (Ge). The company pioneered the Vertical Gradient Freeze (VGF) crystal growth method, which represents substantial process technology and intellectual property.

Physical assets are concentrated across the US and China, supporting both corporate functions and core manufacturing.

The supply chain strategy involves a sophisticated model where AXT, Inc. (AXTI) maintains ownership interests in external raw material suppliers. This portfolio includes partial ownership in ten companies in China producing raw materials for the manufacturing process.

• ChaoYang KaiMei: Tongmei's ownership remained at 40% as of March 31, 2025, following additional equity investments totaling $550,000 in April and May 2025.
• Emeishan Jia Mei High Purity Metals Co., Ltd. ("Jia Mei"): Ownership was reduced to 10% in May 2023 after selling a portion for approximately $827,000.

Indium Phosphide (InP) substrate capacity and sales have become a critical asset, especially given the strong uptick in demand from global data center applications. The ability to ship this material internationally was significantly enhanced after obtaining the first export permits in June 2025.

The financial performance of InP clearly shows its current importance:

• Q3 2025 InP revenue reached a three-year high of $13.1 million.
• This represented a 250% sequential rebound from $3.6 million in Q2 2025.
• Q3 2025 InP revenue nearly doubled the $6.8 million reported in Q3 2024.
• Conversely, Q1 2025 saw a 58 percent reduction in InP sales quarter-over-quarter due to trade restrictions.

The company expects the capability to achieve total revenue of $27-$30 million in Q4 2025, with incremental growth likely coming from InP and GaAs substrates.

AXT, Inc. (AXTI) - Canvas Business Model: Value Propositions

You're looking at the core offerings that AXT, Inc. provides to its customers, which are clearly driving the recent financial reacceleration. The value proposition centers on materials that outperform standard silicon, which is why you see the recent revenue surge.

The company's position as a leading manufacturer of compound semiconductor wafer substrates means its value is intrinsically tied to performance gaps in typical silicon substrates. For Q3 2025, total revenue hit $28.0 million, up 18% year-over-year, showing the market is responding to these specialized materials.

Here is a look at how the key product lines contributed to that top line in the third quarter of 2025:

This table shows you that the value proposition for data centers, specifically via Indium Phosphide, is the current financial engine, contributing $13.1 million of the total revenue.

Non-silicon compound semiconductor substrates for high-performance devices.

• These substrates are supplied when typical silicon simply cannot meet the required performance of the end device.
• The company is highly focused on driving gross margin recovery, which hit 22.4% on a non-GAAP basis in Q3 2025, up significantly from 8.2% in Q2 2025.
• AXT, Inc. currently employs 1,341 full-time employees to support this specialized manufacturing.

Foundational materials for high-speed optical interconnects in AI data centers.

This is where the recent export permit approvals really mattered. The Indium Phosphide revenue of $13.1 million in Q3 2025 was a three-year high, directly tied to this demand. The current backlog for Indium Phosphide stands at a healthy $49 million, indicating strong near-term demand visibility, provided export approvals continue.

Indium Phosphide (InP) for next-gen silicon photonics applications.

The value here is enabling the data center upgrade cycle. Management noted that the InP permits are taking approximately 60 business days, or about three months, to process, which customers are now adjusting their ordering patterns for. The company believes it has tremendous opportunity in 2026 to drive meaningful growth here.

Gallium Arsenide (GaAs) for 5G wireless and LiDAR sensors.

The $7.5 million in GaAs revenue in Q3 2025 was primarily driven by demand for semi-insulating wafers used in wireless RF devices, showing continued strength outside of the data center focus. This material also supports LiDAR for robotics and autonomous vehicles, another high-growth end market for AXT, Inc.

AXT, Inc. (AXTI) - Canvas Business Model: Customer Relationships

You're managing a company that sells highly specialized compound semiconductor wafer substrates, so your customer relationships aren't about volume; they're about deep technical integration with global giants in telecom and data centers. AXT, Inc. runs a direct sales model targeting these major technology and telecom companies worldwide.

AXT, Inc. structures its customer-facing operations with its worldwide headquarters in Fremont, California, which houses the sales, administration, and customer service functions. To serve its dominant Asia Pacific market, which accounted for 83% of revenue in Q1 2025, the company maintains its Asia headquarters in Beijing, China, alongside manufacturing facilities in three separate locations there.

The relationship goes beyond just shipping product; it requires significant technical support and consulting for substrate integration. When you're dealing with materials like indium phosphide (InP) and gallium arsenide (GaAs) used in sophisticated applications, customers need assurance that your material will perform flawlessly in their next-generation devices. This deep engagement is supported by AXT, Inc.'s supply chain strategy, where it maintains partial ownership in ten companies in China producing raw materials, giving them a level of control and insight into the material quality that feeds directly into customer confidence.

Transparency is a key component of maintaining relationships with the financial community, which means AXT, Inc. is subject to SEC oversight. You'll find the company actively managing its investor relations, regularly filing its Form 10-K and 10-Q reports, and providing governance details to maintain credibility with analysts and shareholders. For instance, the company schedules earnings releases, such as the one for Q3 2025 on October 30, 2025, and participates in investor conferences, like the Northland Securities Growth Conference scheduled for December 2, 2025.

To lock in demand and provide stability against market fluctuations-like the trade restriction challenges faced earlier in 2025-AXT, Inc. relies on long-term supply agreements with top customers. These agreements are critical for securing future revenue streams, though customer concentration remains a focus area for monitoring. Here's how the concentration has looked across the first three quarters of 2025:

The Q1 2025 figure shows that the Top 5 customers were 35.9% of Q1 2025 revenue, a figure that tightened slightly to 30.9% in Q2 2025, where one customer crossed the 10% threshold. This mix of direct sales, deep technical involvement, and formalized agreements forms the bedrock of AXT, Inc.'s customer engagement strategy.

You should track the following elements of their customer engagement:

• Focus on securing export permits for indium phosphide sales outside China.
• Support for next-generation data center connectivity and 5G infrastructure.
• Managing customer inventory levels, which impacted Q2 2025 gallium arsenide orders.
• Driving gross margin recovery through effective execution on existing orders.

Finance: draft 13-week cash view by Friday.

AXT, Inc. (AXTI) - Canvas Business Model: Channels

You're looking at how AXT, Inc. gets its high-performance compound semiconductor wafer substrates into the hands of customers globally. The channel strategy is a mix of direct engagement and leveraging its significant footprint in China through its subsidiary.

The direct sales team operates globally, but the revenue concentration tells a clear story about where the action is. For the third quarter of 2025, AXT, Inc. reported total revenue of $28.0 million. The geographic distribution of that revenue shows a heavy reliance on the Asian market, which is channeled through its local operations.

The Asia Pacific region accounted for a dominant 87% of Q3 2025 revenue, translating to approximately $24.36 million. Europe contributed 12%, or $3.36 million, while North America represented a small fraction at just 1%, or $0.28 million, of that quarter's total. This geographic split highlights the primary sales focus.

The worldwide headquarters in Fremont, CA, handles the core sales, administration, and customer service functions, including the North American sales effort. This office is the nerve center for the company's global strategy, even if its direct revenue contribution in Q3 2025 was only 1%.

Asia Pacific sales and manufacturing are anchored by the Tongmei subsidiary, Beijing Tongmei Xtal Technology Co., Ltd. Tongmei maintains similar functions to the Fremont HQ and operates the $\mathbf{three}$ manufacturing facilities AXT, Inc. has in China. The strategic importance of Tongmei is underscored by its ongoing effort to complete its initial public offering on the Shanghai Stock Exchange's STAR Market.

The supply chain strategy incorporates vertical integration through raw material sourcing. AXT, Inc., through Tongmei and its subsidiaries, maintains partial ownership in ten companies in China that produce necessary raw materials. These raw material joint venture companies also contribute directly to AXT, Inc.'s top line, selling excess materials on the open market. In Q3 2025, revenue from these consolidated raw material joint venture companies was $6.7 million. To give you a clearer picture of the Q3 2025 revenue flow across products and geography, here's the breakdown:

The sales channels are clearly segmented by material type, but the geographic channel is where the bulk of the final product revenue lands. The following list details the geographic revenue split for AXT, Inc. in the third quarter of 2025:

• Asia-Pacific: 87% of total revenue.
• Europe: 12% of total revenue.
• North America: 1% of total revenue.

The top five customers generated approximately 45.2% of the total Q3 2025 revenue, with two specific customers exceeding the 10% threshold of total revenue. The company is actively building backlog, reporting a backlog of $49 million, which is expected to support future Indium Phosphide capacity expansion. If onboarding takes 14+ days, churn risk rises, but for AXT, Inc., the channel risk seems tied more to export permit issuance, which delayed Q2 2025 revenue.

Finance: draft 13-week cash view by Friday.

AXT, Inc. (AXTI) - Canvas Business Model: Customer Segments

You're looking at the core customer base for AXT, Inc. as of late 2025, based on their Q1 2025 performance and stated strategic focus. This is where the demand for their high-performance compound semiconductor wafer substrates originates.

Data Center and Cloud Infrastructure providers are a key driver, specifically fueling the demand for Indium Phosphide (InP) substrates. In the first quarter of 2025, AXT, Inc. reported $3.8 million in revenue from indium phosphide, which was explicitly stated to be primarily from Passive Optical Network (PON) and data center applications. Management also noted incremental opportunities from China data center connectivity and the LiDAR markets, which are critical for autonomous driving technologies.

The segment covering Wireless and 5G equipment manufacturers is another vital area, with a focus on Gallium Arsenide (GaAs) substrates. AXT, Inc. generated $6.7 million from gallium arsenide in Q1 2025. The company believes there is a sizeable opportunity for these GaAs substrates in Heterojunction Transistor (HBT) devices specifically for the wireless market, both inside and outside of China.

For Optoelectronics and sensor manufacturers, the demand spans several applications where typical silicon wafers fall short. This includes components for LEDs, lasers, and various sensors. The company's overall material portfolio, including InP and GaAs, targets these high-performance needs.

Geographically, AXT, Inc.'s customer concentration is heavily skewed toward Asia Pacific. For the first quarter of 2025, revenue from the Asia Pacific region accounted for 83% of total revenue. Europe represented 11%, and North America accounted for the remaining 6%.

Here's a look at the product revenue mix from Q1 2025, which directly reflects the output sold into these customer segments:

Customer relationship stability within these segments is relatively dispersed, though reliant on a few major players. As of Q1 2025, the top 5 customers generated approximately 35.9% of total revenue, but importantly, no single customer exceeded the 10% threshold of total revenue.

The core customer types AXT, Inc. serves include:

• Data Center and Cloud Infrastructure providers.
• Wireless and 5G equipment manufacturers.
• Manufacturers of advanced sensors, including LiDAR systems.
• Producers of high-performance lasers and LEDs.

AXT, Inc. (AXTI) - Canvas Business Model: Cost Structure

You're looking at the core expenses that keep AXT, Inc. running, which are heavily weighted toward material science and its China-based manufacturing footprint. These costs directly impact the path back to consistent profitability, something management is clearly focused on as of late 2025.

High cost of goods sold (COGS) for raw material sourcing and processing is a persistent factor, especially given the reliance on specialized materials like Indium Phosphide (InP) and Gallium Arsenide (GaAs). For the third quarter of 2025, with revenue at $28.0 million, the implied GAAP Cost of Revenue was approximately $21.756 million, based on the reported 22.3 percent GAAP gross margin.

To give you a sense of the annual scale, the Cost of Revenue for the full fiscal year 2024 was $75,525 thousand, against total revenue of $99,361 thousand.

The cost structure is sensitive to raw material inputs and processing efficiency, as seen when Q1 2025 saw a negative gross profit of negative $1.2 million, partly due to lower ingot starts and crystal growth.

Manufacturing and operational costs in China are central to the cost base. AXT, Inc. operates manufacturing facilities through its subsidiary, Tongmei, in China. The company also has partial ownership in ten raw material producing companies in China, which contributes to its supply chain cost structure. For instance, in Q1 2025, revenue from the raw material joint venture in China was reported at $8.3 million, indicating significant embedded costs or revenues within that segment.

Operational efficiency in manufacturing directly hits the gross margin. In Q2 2025, the non-GAAP gross margin fell to 8.2 percent, partly attributed to under-absorption of manufacturing overhead due to lower substrate sales.

R&D expenses to maintain material technology leadership are a necessary, non-negotiable cost for AXT, Inc. given its focus on high-performance compound semiconductor substrates. For the full year 2024, Research and Development expenses totaled $14,543 thousand. This compares to the 2023 figure of $12,081 thousand, showing an increased investment year-over-year.

Management noted in Q4 2024 that R&D expenses increased due to investment in low EPD gallium arsenide crystal growth and development of 6-inch Indium Phosphide.

Operating expenses (OpEx) for sales, general, and administrative functions show management's focus on discipline, though costs fluctuate with legal matters and strategic investment. Total non-GAAP operating expense in Q2 2025 was $7,600,000, down from $8,500,000 in Q1 2025, and significantly lower than the $9.9 million reported in Q4 2024.

The full-year 2024 breakdown for Operating Expenses shows:

• Sales, General and Admin: $24,096 thousand
• Research and Development: $14,543 thousand

The total GAAP operating expense for Q2 2025 was $8,200,000.

Here's a quick look at the latest reported financial metrics for context on the cost base:

The company is actively working to reduce inventory and improve operating expense discipline, which you can see in the sequential drop of non-GAAP OpEx from Q1 2025 to Q2 2025.

You should watch the raw material joint venture's performance, as its contribution to the overall cost structure is material, and its separate IPO process adds complexity.

Finance: draft 13-week cash view by Friday.

AXT, Inc. (AXTI) - Canvas Business Model: Revenue Streams

You're looking at how AXT, Inc. (AXTI) actually brings in the cash flow as of late 2025, which really boils down to their specialized semiconductor materials. Honestly, the revenue streams are quite concentrated in their wafer sales and joint venture activities.

Here's a quick look at the key components driving the top line, based on the third quarter results you're tracking. We'll map out the main product lines and the contribution from their strategic partnerships.

The core of the business remains the sale of these compound semiconductor wafers. If onboarding takes 14+ days, churn risk rises, but for AXT, Inc. (AXTI), supply chain stability for these materials is the real lever right now.

To be defintely clear on the product mix driving these figures, you can see the breakdown:

• Sale of Indium Phosphide (InP) substrates: $13.1 million in Q3 2025.
• Sale of Gallium Arsenide (GaAs) substrates: $7.5 million in Q3 2025.
• Revenue from consolidated raw material JVs: $6.7 million for Q3 2025.

Looking ahead for the full fiscal year 2025, the expectation for total revenue is forecasted around $79.13 million. That full-year number gives you the scale we are working with against these quarterly snapshots.

Finance: draft 13-week cash view by Friday.