AXT (AXTI) Stock Price Slides As Q3 Earnings Flash Profit Surge

AXT just delivered a Q3 2026 earnings jolt that clashes sharply with the latest price slide. The stock dropped about 10% today to roughly US$55, even as the company posted about US$73.4m in quarterly revenue and around US$0.40 in basic earnings per share. That move takes place after a choppy few months for the share price, yet the latest results show a business that has pushed firmly into profitability. Right now the market looks fixated on a richly valued story, while the income statement points to a different mood entirely.

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Q3 2026 Earnings Summary

• Revenue (Q3 2026 vs. Q3 2025): US$73.41m vs. US$27.96m (very large increase, more than 2.5x).
• Net income, excluding extra items (Q3 2026 vs. Q3 2025): profit of US$25.72m vs. loss of US$1.95m (moved from loss to profit).
• Basic EPS (Q3 2026 vs. Q3 2025): US$0.40 per share vs. loss of US$0.04 per share (turned profitable on a per share basis).
• Non-GAAP gross margin (Q3 2026 vs. Q3 2025): 56.1% vs. prior period not disclosed here (indicates strong profitability on each dollar of sales).

Prefer clean visuals over squinting at walls of earnings tables and raw figures? See AXT's full financial picture, including how the current valuation compares with its recent profitability shift, in the interactive company report for AXT.

AXT Capacity Story Meets First Profit Milestones

AXT’s bullish pitch hinges on turning tight indium phosphide supply into a much larger, higher margin business over the next few years.

"AXT’s plan to exit 2026 with roughly US$60 million in quarterly indium phosphide capacity and around US$130 million in quarterly revenue capacity exiting 2027 opens room for a much larger revenue base than typically modelled if AI optical demand keeps drawing on this expanded footprint. Operating leverage could potentially feed through to earnings."

The latest quarter shows early proof points. InP driven revenue reached US$73.4m with non GAAP gross margin at 56.1%. Backlog above US$500m and Q4 guidance of roughly US$90m revenue plus higher EPS suggest operating leverage is already starting to appear, even before the full capacity plan is built out.

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AXT Bear Case: Capacity Wins, Contract Risks Linger

Bearish investors worry that AXT’s rapid expansion and long contracts could later trap the business in weaker terms once the upfront cash is spent.

"Although long term indium phosphide wafer agreements with Coherent, Casela and Lumentum provide prepayments and demand visibility out to 2031, the large upfront cash inflow and capacity reservations could mean that any later renegotiation, volume shortfall or price reset leaves AXT with higher fixed costs and weaker pricing power, which would cap revenue and net margin contribution from these contracts."

Q3 performance pushes against that fear. Backlog above US$500m, rising spot and short term orders, and strong non GAAP gross margin suggest customers are still accepting higher pricing and are not forcing visible concessions at this stage.

Hunt For Mispriced Earnings Power

AXT shows how strong earnings can coincide with muted share price reactions. The real opportunity is finding stocks that could be undervalued before the market corrects them.

• Company 1 - 42% below our estimate - sell modular data center systems shifting toward higher margin integrated solutions, software and services for large AI infrastructure projects.
• Company 2 - 37% below our estimate - build a broader regional banking platform by combining acquired lenders and emphasizing lower cost, more diversified deposits alongside targeted efficiency improvements.
• Company 3 - 20% below our estimate - grow a cross border payments and money platform as more customers adopt accounts, cards, asset features and embedded financial services through partner banks.

Those are three of them. See all 29 potentially undervalued companies →

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