AXT earnings event and capacity agreements set the scene

AXT (AXTI) has drawn fresh attention after reporting second quarter 2026 earnings, record indium phosphide revenue tied to AI data center demand, and new long term supply deals with Lumentum, Coherent, and Casella.

AXT’s share price has reacted sharply to the AI data center story, with a 7 day share price return of 85.58% and a year to date share price return of 309.37%. The 1 year total shareholder return is very large, suggesting powerful but volatile momentum around these earnings and capacity agreements.

If you are tracking how AI hardware suppliers are moving, it can help to see what else is gaining attention through our screener of 56 AI infrastructure stocks

AXT’s surge now sits between a sharp reset of expectations and a simple rush into anything tied to AI data centers. The next step is to see how that move lines up against the company’s current valuation.

Most Popular Narrative: 28.9% Undervalued

AXT’s most widely followed narrative pegs fair value at $96.50, well above the last close of $68.61, which puts a lot of focus on what is driving that gap.

Leadership in high-quality substrate materials and easing export headwinds position AXT for strong revenue growth and higher margins in the AI and data connectivity markets.

Diversification into new markets and improved manufacturing processes are set to reduce risk, optimize costs, and support sustained long-term earnings growth.

Read the complete narrative. Read the complete narrative.

Want to see why this AXT valuation leans so heavily on future growth and margins? The narrative builds around aggressive revenue compounding and a much richer earnings profile. Curious how those profit assumptions and the chosen discount rate combine to reach a fair value so far above today’s price.

Result: Fair Value of $96.50 (UNDERVALUED)

However, AXT still faces meaningful pressures from export permit delays and heavy reliance on a concentrated Chinese customer base, which could quickly challenge this upbeat valuation story.

Another view on AXT using sales multiples

While the AI narrative around AXT points to a fair value of $96.50, its current P/S of 34.9x sits far above the estimated fair ratio of 23.7x and well above both the US Semiconductor industry at 6.6x and peer average at 4.5x. That kind of gap can reduce the margin of safety if sentiment cools.

For investors, the question is whether the AI capacity story justifies paying such a premium P/S today or whether it makes sense to wait for the ratio to move closer to the fair ratio and sector norms.

Next Steps

With such a strong mix of optimism and concern around AXT, it makes sense to move quickly and weigh the data yourself before sentiment shifts again. A clear next step is to review the 2 key rewards and 3 important warning signs

Looking for more investment ideas beyond AXT?

If the AXT story has your attention, do not stop here. Use the screener to see how other opportunities stack up on quality, risk, and income potential.

• Target stronger balance sheets by checking companies in the solid balance sheet and fundamentals stocks screener (50 results) that pair financial resilience with clear fundamentals.
• Hunt for potential mispriced opportunities through the 51 high quality undervalued stocks, so you are not relying on a single stock to carry your returns.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.