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AXT's Inventory Rises Sharply: Will Working Capital Pressure Grow?
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Key Takeaways
AXT's inventory rose 18% to $96.3M by June 2026, driven by higher raw materials and work in process.
Inventory absorbed $12.2M in cash, while export permit uncertainty could delay sales and cash collections.
AXT's $100 million-plus backlog and $748.8M liquidity buffer help mitigate rising working-capital risks.
AXT, Inc. (AXTI - Free Report) faces growing working-capital requirements as its inventory rises amid expanding manufacturing operations and strong demand for indium phosphide (InP) substrates. The buildup is absorbing cash despite improving profitability, raising concerns about inventory conversion.
As of June 30, 2026, AXT's inventory increased to $96.3 million from $81.7 million at Dec. 31, 2025, representing an 18% increase. Raw-material inventory rose to $32 million from $24.1 million, while work in process increased to $60.5 million from $53.7 million. Finished goods remained relatively unchanged at $3.9 million.
During the first six months of 2026, inventory movements absorbed $12.2 million in cash, while accounts receivable movements used another $9.2 million. AXT reported $0.9 million in net cash used in operating activities despite returning to profitability. Continued inventory accumulation could constrain operating cash generation.
Export permit uncertainty presents an additional challenge. Management stated potential third-quarter revenue upside depended partly on permits for additional orders for which inventory was available. Delays could extend inventory holding periods and defer cash collections.
AXT’s reserve for excess and obsolete inventory rose to $32 million from $28.4 million at year-end 2025, highlighting potential valuation risks.
However, strong customer demand, a backlog exceeding $100 million and expanding InP capacity offer opportunities to convert inventory into revenues. AXT’s $748.8 million in cash, restricted cash, cash equivalents and investments provides a liquidity buffer, supported substantially by its equity offering.
Overall, working capital requirements may remain high, but robust demand and liquidity conditions are mitigating short-term risks.
How COHR and WOLF Intensify Competition
Coherent (COHR - Free Report) is expanding its indium phosphide production capacity to capitalize on surging AI data-center demand, targeting higher output and improved manufacturing yields. Its vertically integrated photonics portfolio and investment in advanced optical connectivity strengthen its competitive position against AXTI in compound semiconductor materials. However, COHR’s capacity expansion also highlights the importance of securing substrates and managing production inputs efficiently as demand accelerates.
Wolfspeed (WOLF - Free Report) competes with AXTI in specialty semiconductor substrates through its silicon carbide materials business and transition toward 200-millimeter wafers. The company is advancing substrate qualifications and leveraging vertically integrated manufacturing to pursue growth in AI data-center power applications. WOLF’s focus on manufacturing efficiency and inventory reduction also offers a useful contrast with AXTI’s rising inventory, underscoring how working-capital discipline can influence competitiveness in capital-intensive semiconductor materials markets.
Shares of AXTI have surged 279.1% year to date, significantly outperforming the broader Zacks Computer and Technology sector, which has gained 22.7%.
AXTI’s YTD Price Performance
Image Source: Zacks Investment Research
AXTI is trading at a premium, with a forward 12-month price-to-sales (P/S) ratio of 10.1X, higher than the Zacks Electronics – Semiconductors industry average of 4.9X. The company carries a Value Score of F.
AXTI’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AXTI’s 2026 and 2027 earnings is pegged at 86 cents and $2.20 per share, respectively. Both estimates remain unchanged over the past 30-day and 60-day periods. The estimates imply robust year-over-year growth of 309.8% and 155.8%, respectively.
View the Zacks #1 Rank List
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AXT's Inventory Rises Sharply: Will Working Capital Pressure Grow?
Key Takeaways
AXT, Inc. (AXTI - Free Report) faces growing working-capital requirements as its inventory rises amid expanding manufacturing operations and strong demand for indium phosphide (InP) substrates. The buildup is absorbing cash despite improving profitability, raising concerns about inventory conversion.
As of June 30, 2026, AXT's inventory increased to $96.3 million from $81.7 million at Dec. 31, 2025, representing an 18% increase. Raw-material inventory rose to $32 million from $24.1 million, while work in process increased to $60.5 million from $53.7 million. Finished goods remained relatively unchanged at $3.9 million.
During the first six months of 2026, inventory movements absorbed $12.2 million in cash, while accounts receivable movements used another $9.2 million. AXT reported $0.9 million in net cash used in operating activities despite returning to profitability. Continued inventory accumulation could constrain operating cash generation.
Export permit uncertainty presents an additional challenge. Management stated potential third-quarter revenue upside depended partly on permits for additional orders for which inventory was available. Delays could extend inventory holding periods and defer cash collections.
AXT’s reserve for excess and obsolete inventory rose to $32 million from $28.4 million at year-end 2025, highlighting potential valuation risks.
However, strong customer demand, a backlog exceeding $100 million and expanding InP capacity offer opportunities to convert inventory into revenues. AXT’s $748.8 million in cash, restricted cash, cash equivalents and investments provides a liquidity buffer, supported substantially by its equity offering.
Overall, working capital requirements may remain high, but robust demand and liquidity conditions are mitigating short-term risks.
How COHR and WOLF Intensify Competition
Coherent (COHR - Free Report) is expanding its indium phosphide production capacity to capitalize on surging AI data-center demand, targeting higher output and improved manufacturing yields. Its vertically integrated photonics portfolio and investment in advanced optical connectivity strengthen its competitive position against AXTI in compound semiconductor materials. However, COHR’s capacity expansion also highlights the importance of securing substrates and managing production inputs efficiently as demand accelerates.
Wolfspeed (WOLF - Free Report) competes with AXTI in specialty semiconductor substrates through its silicon carbide materials business and transition toward 200-millimeter wafers. The company is advancing substrate qualifications and leveraging vertically integrated manufacturing to pursue growth in AI data-center power applications. WOLF’s focus on manufacturing efficiency and inventory reduction also offers a useful contrast with AXTI’s rising inventory, underscoring how working-capital discipline can influence competitiveness in capital-intensive semiconductor materials markets.
AXTI’s Share Price Performance, Valuation & Estimates
Shares of AXTI have surged 279.1% year to date, significantly outperforming the broader Zacks Computer and Technology sector, which has gained 22.7%.
AXTI’s YTD Price Performance
Image Source: Zacks Investment Research
AXTI is trading at a premium, with a forward 12-month price-to-sales (P/S) ratio of 10.1X, higher than the Zacks Electronics – Semiconductors industry average of 4.9X. The company carries a Value Score of F.
AXTI’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for AXTI’s 2026 and 2027 earnings is pegged at 86 cents and $2.20 per share, respectively. Both estimates remain unchanged over the past 30-day and 60-day periods. The estimates imply robust year-over-year growth of 309.8% and 155.8%, respectively.
Image Source: Zacks Investment Research
AXT stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.