AXTI Pre-Earnings Thoughts

Summary

After previously being critical of AXT, the author now sees the company as a more durable investment thanks to long-term supply agreements with Coherent, Lumentum, and Casela, along with permit progress and China demand. He has taken a small position at $37, acknowledging high current valuation but betting on a 2027-2028 revenue ramp. The near-term focus is Q2 earnings and Q3 guidance as key catalysts.

•AXT signed long-term agreements with Coherent ($22.3M prepayment for 6-inch InP capacity), Lumentum ($43.5M deposits through 2031), and Casela (~$25.4M for InP substrates).
•Author expects Q2 revenue between $34M (base) and $40M (strong), with gross margin ideally 31-32% or above 33% signaling pricing leverage.
•Author's prior doubt about AXT's necessity and permit issues has eased as laser makers aggressively secure substrates and permit workarounds via epihouses emerge.
•Author took a small position in AXTI at $37, with market cap ~$2.4B, viewing the stock as expensive on current revenue but hinged on a 2027-2028 growth inflection.
•Key swing factors for the call: Q3 revenue guidance, permit-cleared revenue visibility, and updates on direct U.S. permits vs. alternative shipment routes.
•Author wants clarity on minimum purchase commitments, pricing terms, capacity already reserved for 2027-2028, and competition in China.

Read time 7 min

Length 7,866 chars

Category finance

Ideas

Gaetano Substack author, Gaetano

Author has changed his view on AXT from critical to constructive, citing major long-term agreements with Coherent, Lumentum, and Casela, improved permit prospects, and domestic China demand. He sees a durable 2027-2028 ramp story and took a small position at $37 despite near-term volatility.

Ideas

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