AXT INC 10-K

Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has been trading publicly on the NASDAQ Global Market (NASDAQ) under the symbol “AXTI” since May 20, 1998, the date we consummated our initial public offering, and beginning on January 3, 2011, our common stock began trading on the NASDAQ Global Select Market under the same symbol. As of March 2, 2026, there were 203 holders of record of our common stock. Because many shares of AXT’s common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners of our common stock. We have never paid or declared any cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We currently intend to retain all future earnings, if any, for use in the operations and expansion of the business. Any future determination as to the declaration and payment of cash dividends will be at the discretion of our Board of Directors and will depend on factors the Board of Directors deems relevant, including, among others, our results of operations, financial condition and cash requirements, business prospects, and the terms of our financing arrangements, if any. Accordingly, realization of a gain on stockholders’ investments will depend on the appreciation of the price of our common stock. There is no guarantee that our common stock will appreciate in value. Dividends accrue on our outstanding Series A preferred stock at the rate of $0.20 per annum per share of Series A preferred stock. The 883,000 shares of Series A preferred stock issued and outstanding as of December 31, 2025 are valued at $3,532,000 and are non-voting and non-convertible preferred stock with a 5.0% cumulative annual dividend rate payable when declared by our Board of Directors, and a $4.00 per share liquidation preference over common stock that must be paid before any distribution is made to the holders of our common stock. These shares of preferred stock were issued to shareholders of Lyte Optronics, Inc. in connection with the completion of our acquisition of Lyte Optronics, Inc. on May 28, 1999. By the terms of the Series A preferred stock, so long as any shares of Series A preferred stock are outstanding, neither the Company nor any subsidiary of the Company shall redeem, repurchase or otherwise acquire any shares of common stock, unless all accrued dividends on the Series A preferred stock have been paid. During 2013 and 2015, we repurchased shares of our outstanding common stock. As of December 31, 2015, the Series A preferred stock had cumulative dividends of $2.9 million and we include such cumulative dividends in “Accrued liabilities” in our consolidated balance sheets. No shares were repurchased during 2025, 2024 and 2023 under this program. If we are required to pay the cumulative dividends on the Series A preferred stock, our cash and cash equivalents would be reduced. We account for the cumulative year to date dividends on the Series A preferred stock when calculating our earnings per share. Comparison of Stockholder Return Set forth below is a line graph comparing the annual percentage change in the cumulative total return to the stockholders of the Company on our common stock with the CRSP Total Return Index for the Nasdaq Stock Market (U.S. Companies) and the RDG MidCap Technology Index for the period commencing December 31, 2018 and ending December 31, 2025. 49 Table of Contents Pursuant to SEC rules, our performance graph must include both a broad market equity index and a published industry or line-of-business index (or a self-constructed peer index) in addition to our common stock. The rules also require that if a registrant selects a different index from an index used for the immediately preceding fiscal year, it must (i) explain the reason for the change and (ii) compare the registrant’s total return with that of both the newly selected index and the index used in the immediately preceding fiscal year. With respect to the published industry index, in prior years, we used the Nasdaq Electronic Components Index; however, that index was discontinued in 2023. Accordingly, we have used the RDG MidCap Technology Index as a replacement for the discontinued index and because the Nasdaq Electronic Components Index was discontinued, we are unable to compare our cumulative total return with that index. 12/20 12/21 12/22 12/23 12/24 12/25 AXT, Inc. 100 92.06 45.77 25.08 22.68 170.85 NASDAQ Composite 100 122.18 82.43 119.22 154.48 187.14 RDG MidCap Technology 100 61.63 27.18 29.30 30.61 29.40 50 Table of Contents Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities ​ On October 27, 2014, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $5.0 million of our outstanding common stock. These repurchases can be made from time to time in the open market and are funded from our existing cash balances and cash generated from operations. During 2015, we repurchased approximately 908,000 shares at an average price of $2.52 per share for a total purchase price of approximately $2.3 million under the stock repurchase program. No shares were repurchased during 2025 or 2024 under this program. As of December 31, 2025 and 2024, approximately $2.7 m illion remained available for future repurchases under this program, respectively. Item 6. Reserved Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled Item 1A. “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Form 10-K. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Accordingly, we make estimates, assumptions and judgments that affect the amounts reported on our consolidated financial statements. These estimates, assumptions and judgments about future events and their effects on our results cannot be determined with certainty, and are made based upon our historical experience and on other assumptions that are believed to be reasonable under the circumstances. These estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a prolonged period of time. We have identified the policies below as critical to our business operations and understanding of our financial condition and results of operations. Critical accounting policies are material to the presentation of our consolidated financial statements and require us to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. They may require us to make assumptions about matters that are highly uncertain at the time of the estimate. Different estimates that we could have used, or changes in the estimate that are reasonably likely to occur, may have a material impact on our financial condition or results of operations. We also refer you to Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 51 Table of Contents Revenue Recognition and Sales Returns We manufacture and sell high-performance compound semiconductor substrates including indium phosphide, gallium arsenide and germanium wafers, and our consolidated subsidiaries sell certain raw materials, including high purity gallium (6N and 7N Ga), pyrolytic boron nitride (pBN) crucibles and boron oxide (B2O3). After we ship our products, there are no remaining obligations or customer acceptance requirements that would preclude revenue recognition. Our products are typically sold pursuant to purchase orders placed by our customers, and our terms and conditions of sale do not require customer acceptance. We account for a contract with a customer when there is a legally enforceable contract, which could be the customer’s purchase order, the rights of the parties are identified, the contract has commercial terms, and collectibility of the contract consideration is probable. The majority of our contracts have a single performance obligation to transfer products and are short term in nature, usually less than six months. Our revenue is measured based on the consideration specified in the contract with each customer in exchange for transferring products that are generally based upon a negotiated, formula, list or fixed price. Revenue is recognized when control of the promised goods is transferred to our customer, which is either upon shipment from our dock, receipt at the customer’s dock, or removal from consignment inventory at the customer’s location, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods. ​ We have elected to account for shipping and handling as activities to fulfill the promise to transfer the goods. As such, shipping and handling fees billed to customers in a sales transaction are recorded in revenue. Shipping and handling costs incurred are recorded in cost of revenue. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from revenue. ​ We do not provide training, installation or commissioning services. We accrue for future returns based on historical data, prior experience, current economic trends and changes in customer demand at the time revenue is recognized. We do not recognize any asset associated with the incremental cost of obtaining revenue generating customer contracts. As such, sales commissions and other related expenses are expensed as incurred, given that the expected period of benefit is less than one year. ​ Accounts Receivable and Allowance for Credit Losses Accounts receivable are recorded at the invoiced amount and are not interest bearing. We review at least quarterly, or when there are changes in credit risks, the likelihood of collection on our accounts receivable balances and provide an allowance for credit losses. We measure the expected credit losses on a collective (pool) basis when similar delinquency status exist. We evaluate receivables from U.S. customers with an emphasis on balances in excess of 90 days and for receivables from customers located outside the U.S. with an emphasis on balances in excess of 120 days and establish a reserve allowance on the receivable balances if needed. The reason for the difference in the evaluation of receivables between foreign and U.S. customers is that U.S. customers have historically made payments in a shorter period of time than foreign customers. Foreign business practices generally require us to allow customer payment terms that are longer than those accepted in the United States. ​ In accordance with Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses current expected credit loss impairment model, we exercise judgment when determining the adequacy of our reserves as we evaluate historical credit loss trends, general economic conditions in the United States and internationally, and reasonable and supportable forecasts of future economic conditions. Uncollectible receivables are recorded as provision for credit losses when a credit loss is expected through the establishment of an allowance, which would then be written off when all efforts to collect have been exhausted and recoveries are recognized when they are received. As of December 31, 2025 and 2024, our accounts receivable, net balance was $26.8 million and $25.6 million, respectively, which was net of an allowance of $164,000 and $147,000 as of December 31, 2025 and 2024, respectively. During 2025, we increased the allowance by $17,000. During 2024, we decreased the allowance by $432,000. If actual uncollectible accounts differ substantially from our estimates, revisions to the estimated allowance for credit losses would be required, which could have a material impact on our financial results for the future periods. ​ 52 Table of Contents Warranty Reserve We maintain a warranty reserve based upon our claims experience during the prior twelve months and any pending claims and returns of which we are aware. Warranty costs are accrued at the time revenue is recognized. As of December 31, 2025 and 2024, accrued product warranties totaled $411,000 and $451,000, respectively. The decrease in accrued product warranties is primarily attributable to decreased claims for quality issues experienced by customers. If actual warranty costs or pending new claims differ substantially from our estimates, revisions to the estimated warranty liability would be required, which could have a material impact on our financial condition and results of operations for future periods. Inventory Valuation Inventories are stated at the lower of cost (approximated by standard cost) or net realizable value. Cost is determined using the weighted average cost method. Our inventory consists of raw materials as well as finished goods and work-in-process that include material, labor and manufacturing overhead costs. We routinely evaluate the levels of our inventory in light of current market conditions in order to identify excess and obsolete inventory, and we provide a reserve for certain inventories based upon the age and quality of the product and the projections for sale of the completed products. As of December 31, 2025 and 2024, we had an inventory reserve o f $28.4 milli on and $24.1 million, respectively, for excess and obsolete inventory a nd $180,000 and $73,000, respectively, for lower of cost or net realizable value reserves. If actual demand for our products were to be substantially lower than estimated, additional inventory adjustments for excess or obsolete inventory might be required, which could have a material impact on our business, financial condition and results of operations. Impairment of Investments We classify marketable investments in debt securities as available-for-sale debt securities in accordance with ASC Topic 320, Investments — Debt Securities . All available-for-sale debt securities with a quoted market value below cost (or adjusted cost) are reviewed in order to determine whether the decline is other-than-temporary. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and our ability and intent to hold the debt securities for a period of time sufficient to allow for any anticipated recovery in market value. We also review our debt investment portfolio at least quarterly, or when there are changes in credit risks or other potential valuation concerns to identify and evaluate whether an allowance for expected credit losses or impairment would be necessary. We also invest in equity instruments of privately held raw material companies in China for business and strategic purposes. Investments in our unconsolidated PRC joint venture raw material companies are classified as other assets and accounted for under either the equity or fair value method, depending on whether we have the ability to exercise significant influence over their operations or financial decisions. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value may not be recoverable. Determination of impairment is highly subjective and is based on a number of factors, including an assessment of the strength of the subsidiary’s management, the length of time and extent to which the fair value has been less than our cost basis, the financial condition and near-term prospects of the subsidiary, fundamental changes to the business prospects of the subsidiary, share prices of subsequent offerings, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in our carrying value. For the year ended December 31, 2023, one of our PRC joint venture raw material companies assessed one of its equity investments was fully impaired. For the year ended December 31, 2023, we also divested our equity investment in a PRC joint venture. The impairment and divesture resulted in a total of $1.9 million in impairment charges in our financial results for the year ended December 31, 2023. For the year ended December 31, 2024, we had no impairment charges. During the year ended December 31, 2025, we recognized gains from the fair value remeasurement of an equity investment of $163,000. In the same period, one of our PRC joint venture raw material companies assessed one of its equity investments was impaired, resulting in an impairment loss of $48,000. 53 Table of Contents Fair Value of Investments ASC Topic 820, Fair Value Measurement establishes three levels of inputs that may be used to measure fair value. Level 1 instruments represent quoted prices in active markets. Therefore, determining fair value for Level 1 instruments does not require significant management judgment, and the estimation is not difficult. Level 2 instruments include observable inputs other than Level 1 prices, such as quoted prices for similar instruments in markets with insufficient volume or infrequent transactions (less active markets), issuer bank statements, credit ratings, non-binding market consensus prices that can be corroborated with observable market data, model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities, or quoted prices for similar assets or liabilities. These Level 2 instruments require more management judgment and subjectivity compared to Level 1 instruments, including: ● Determining which instruments are most comparable to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer, credit rating, and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced. ● Determining which model-derived valuations to use in determining fair value requires management judgment. When observable market prices for similar securities or similar securities are not available, we price our marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data or pricing models, such as discounted cash flow models, with all significant inputs derived from or corroborated with observable market data. Level 3 instruments include unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities. The determination of fair value for Level 3 instruments requires the most management judgment and subjectivity. We place short-term foreign currency hedges that are intended to offset the potential cash exposure related to fluctuations in the exchange rate between the United States dollar and Japanese yen. We measure the fair value of these foreign currency hedges at each month end and quarter end using current exchange rates and in accordance with generally accepted accounting principles. At quarter end any foreign currency hedges not settled are netted in “Accrued liabilities” on the consolidated balance sheet and classified as Level 3 assets and liabilities. As of December 31, 2025 and 2024, the net change in fair value from the placement of the hedge to settlement at each month end during the quarter had a de minimis impact to the consolidated results. Impairment of Long-Lived Assets We evaluate the recoverability of property, equipment and intangible assets in accordance with ASC Topic 360, Property, Plant and Equipment . When events and circumstances indicate that long-lived assets may be impaired, we compare the carrying value of the long-lived assets to the projection of future undiscounted cash flows attributable to such assets. In the event that the carrying value exceeds the future undiscounted cash flows, we record an impairment charge against income equal to the excess of the carrying value over the asset’s fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets held for sale are carried at the lower of carrying value or estimated net realizable value. We had no “Assets held for sale” or any impairment of long-lived assets on the consolidated balance sheets as of December 31, 2025 and 2024. Stock-Based Compensation We account for stock-based compensation in accordance with ASC Topic 718, Stock-based Compensation . Share-based awards granted include stock options and restricted stock awards. We utilize the Black-Scholes option pricing model to estimate the grant date fair value of stock options, which requires the input of highly subjective assumptions, including estimating stock price volatility and expected term. Historical volatility of our stock price was used while the expected term for our options was estimated based on historical option exercise behavior and post-vesting forfeitures of options, and the contractual term, the vesting period and the expected term of the outstanding options. Further, we apply an expected forfeiture rate in determining the amount of share-based compensation. We use historical forfeitures to estimate the rate of future forfeitures. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our stock compensation. The cost of restricted stock awards is determined using the fair value of our common stock on the date of grant. 54 Table of Contents The award of performance Restricted Stock covering Shares (the “Performance Award”) will be subject to vesting requirements relating to both the recipient of the Performance Award (the “Participant”) continuously remaining a Service Provider through specified dates and achievement of specified performance-based criteria (“Performance Criteria”). Any capitalized term not defined herein will have the meaning ascribed to such term in the 2025 Equity Incentive Plan. The financial Performance Criteria are metrics based upon prior year-end actual results as compared to the Company’s 2024 year-end actual results with respect to the 2024 Performance Awards or based upon the 2025 year-end actual results with respect to the 2025 Performance Awards. All performance shares, if earned, are still subject to annual vesting over a four-year period except that no shares are vested on the first anniversary because the performance measurement is based on year-end results for the entire year. We recognize the compensation costs net of an estimated forfeiture rate over the requisite service period of the options award, which is generally the vesting term of four years. Compensation expense for restricted stock awards is recognized over the vesting period, which is generally one, three or four years. Stock-based compensation expense is recorded in cost of revenue, research and development, and selling, general and administrative expenses. (see Note 1—Summary of Significant Accounting Policies—Stock-Based Compensation). Income Taxes We account for income taxes in accordance with ASC Topic 740, Income Taxes , which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. Our deferred tax assets have been reduced to zero by valuation allowance. We provide for income taxes based upon the geographic composition of worldwide earnings and tax regulations governing each region, particularly China. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws, particularly in foreign countries such as China. See Note 12—”Income Taxes” in the consolidated financial statements for additional information. Economic Challenges, Risks and Uncertainties The Company has been impacted by escalating trade tensions and regulations. On December 3, 2024, China issued further rules restricting exports of materials that can typically be used in military applications including antimony, gallium, germanium and other superhard materials. The effective date was December 3, 2024, the same day as the announcement itself. Reciprocally, the United States increased tariffs on many items from China from 25% to 50%, effective January 1, 2025. On February 1, 2025, the United States again further increased the tariff on imports of many products from China, including our wafer substrates, to 60%. On February 4, 2025, China added indium phosphide substrates to its export control list. On March 4, 2025, the United States further increased the tariff on imports of many products, including our wafer substrates, to 70%. InP export permits represent the most significant challenge we currently face. On February 20, 2026, the U.S. Supreme Court invalidated many of the global tariffs previously imposed under the International Emergency Economic Powers Act of 1977; however, tariffs imposed under other authorities remain in effect, and the U.S. government has indicted that it may pursue additional or replacement tariffs under alternative legal authorities, including temporary measures under Section 122 of the Trade Act of 1974. Due to the uncertainties pertaining to export restrictions in China and tariffs and tariff levels in the United States, it is difficult for us to reliably forecast the short-term or ongoing impact to our business or that of our customers but is expected that tariffs and export regulations will negatively impact our revenues, profitability and cash flows. We are closely monitoring the fluid nature of both export permits and their impact on our operations. More broadly, we will continue to monitor the macroeconomic conditions and evaluate the financial and operational impact of ongoing trade policies. 55 Table of Contents Previously, as of August 1, 2023, Tongmei was required to secure permits from the applicable Chinese authorities to export gallium arsenide and germanium substrates. Materials that could be used in military applications, specifically including weapons of mass destruction, are the primary focus. We have little or no germanium imports into the U.S. and historically a relatively small value of imports of gallium arsenide wafers into the U.S. Our primary revenue generator derived from imports into the U.S. is indium phosphide substrates. In 2024, approximately 8% of our revenue was generated by sales to customers in the U.S. On February 4, 2025, China added indium phosphide substrates to its export control list. As a result, the three wafer substrate product families manufactured by Tongmei all require permits from China’s Ministry of Commerce before they can be exported from China. The portal to apply for exports of indium phosphide from China opened in March 2025 and we immediately began to submit our applications. On June 11, Tongmei was informed that it had satisfied the applicable requirements for a permit to export indium phosphide and has received its initial export permits from the Ministry of Commerce of the People’s Republic of China to resume shipping indium phosphide substrates to certain customers in Europe and Japan. While we have received some permits as of the date of this report, we cannot predict when a permit application will be reviewed and approved. On December 27, 2025, the Standing Committee of the National People’s Congress of China (“NPC”) passed amendments to the Foreign Trade Law of the People’s Republic of China, which expands the scope of trade policy controls and response mechanisms and enhancing the Chinese government’s authority and policy tools in managing foreign trade. The fluidity of the export permit requirements and ongoing lack of surety creates anxiety for us and for our customers. To our knowledge, indium phosphide is rarely used in military applications and we can reasonably expect that export permits to ship our indium phosphide substrates to the U.S. will be granted. However, the timing for when permits will be granted remains uncertain, unclear and beyond our control. We are unable to estimate when we will receive the necessary export permits to resume shipping our indium phosphide substrates to the U.S. We are actively monitoring and following-up on the status of our applications. The political tensions between China and the U.S. remain high and tariffs and controls on exports are changing and fluid. There can be no assurances that Tongmei will receive the necessary China permits to export our wafer substrates or that China will not adopt additional export control regulations that affect our business, financial condition and results of operations. Reciprocally, there can be no assurance that the U.S. will allow products to be imported into the U.S. from China or what the tariff charge rate might be. We are actively evaluating the potential impacts of these proposed tariffs, as well as our ability to mitigate their related impacts. Tariffs and export restrictions clearly affect our revenue and operations. For additional discussion regarding these factors and other risks, please refer to “Item 1A. Risk Factors – Risks Related to International Aspects of Our Business. Board of Director Changes On July 11, 2025, Ms. Christine Russell, our independent director, Chair of the Audit Committee, member of the Compensation Committee and the Nominating and Corporate Governance Committee, passed away. On July 14, 2025, we notified The Nasdaq Stock Market LLC (“Nasdaq”) that due to the passing of Ms. Russell, our Audit Committee had been reduced to two independent directors, and we were not compliant with Nasdaq Listing Rule 5605(c)(2)(A), which requires the Audit Committee to be comprised of a minimum of three independent directors, and our non-compliance was confirmed by Nasdaq on July 18, 2025. On July 29, 2025, we appointed Mr. Jesse Chen to serve as the Chair of the Audit Committee. Mr. Chen currently serves as an independent director, lead director, Chair of the Nominating and Governance Committee, and a member of the Audit Committee and Compensation Committee. In addition, on July 29, 2025, we appointed Leonard J. Leblanc to the Board of Directors (the “Board”) to fill the vacancy on the Board due to the passing of Ms. Russell. Mr. Leblanc is serving as a Class III director with a maximum term expiring on July 29, 2027, or until his successor is duly elected and qualified. In connection with Mr. Leblanc’s appointment to the Board, the Board considered the compensation Mr. Leblanc previously received during his term as director emeritus, and determined that Mr. Leblanc is not independent under the Nasdaq Listing Rules as his total compensation exceeded $120,000 during January 1, 2022 to December 31, 2022. From January 1, 2023 to December 31, 2023, Mr. Leblanc’s total compensation did not exceed $120,000 and Mr. Leblanc did not receive any further compensation from us after December 29, 2023. As such, after December 31, 2022, Mr. Leblanc would not have received any compensation from us in excess of $120,000 during any period of twelve consecutive months in the three year look-back period preceding January 1, 2026, and he would therefore be considered independent under the Nasdaq Listing Rules on January 1, 2026. Other than the compensation previously received as director emeritus, the Board has determined that Mr. Leblanc meets all independence requirements for a member of the audit committee under Rule 10A-3 of the Securities and Exchange Act of 1934, as amended, and the other independence requirements under the Nasdaq Listing Rules. 56 Table of Contents The Board also considered Mr. Leblanc’s previous service as a director and chair of the Audit Committee. Based on Mr. Leblanc’s experience and previous service with us, the Board determined that Mr. Leblanc's familiarity with our operations, business, supply-chain and manufacturing strategies, and intricacies of our corporate structure was necessary to our current needs. The Board believed that the unforeseen passing of Ms. Russell during a critical period in our operations further necessitated the appointment of a director who is already familiar with our financial operations and our management under the current environment and economic conditions. Accordingly, the Board determined that the appointment of Mr. Leblanc to our Audit Committee as a non-independent director was in the best interests of the Company and our stockholders in reliance on the exception provided under applicable Nasdaq Listing Rules for membership on the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee under exceptional and limited circumstances. Based on the foregoing determination, the Board also appointed Mr. Leblanc to serve on the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee in reliance on the limited exception provided under the Nasdaq Listing Rules. Mr. LeBlanc’s independence under the Nasdaq Listing Rules will be re-evaluated by the Board on or after January 1, 2026. On January 26, 2026, the Board re-evaluated Mr. LeBlanc’s independence under the Nasdaq Listing Rules, and determined that Mr. LeBlanc is now independent under the Nasdaq Listing Rules. The Board has previously determined that Mr. LeBlanc meets all independence requirements for a member of the audit committee under Rule 10A-3 of the Securities and Exchange Act of 1934, as amended, and the other independence requirements under the Nasdaq Listing Rules. Upon the Board’s determination that Mr. LeBlanc is now independent under the Nasdaq Listing Rules, the Company’s Audit Committee will consist of three independent directors as required by Nasdaq Listing Rule 5605(c)(2)(A). On January 30, 2026, we received notification from the Nasdaq Listing Qualifications that we have regained compliance with Nasdaq Listing Rule 5605(c)(2). Effective upon Mr. LeBlanc’s determination as an independent director by the Board, Mr. Chen stepped down as Chair of the Audit Committee and the Board appointed Mr. LeBlanc as Chair of the Audit Committee. Mr. Chen will remain a member of the Audit Committee. The Board has determined that Mr. LeBlanc is an “audit committee financial expert” as defined by the rules and regulations of the SEC. Recent Financing On December 29, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with Northland Securities, Inc., as representative of the underwriters named therein (the “Underwriters”) related to the offer and sale of shares of the Company’s common stock (the “Offering”). The Underwriting Agreement provides for the offer and sale by the Company, and the purchase by the Underwriters, of 7,098,492 shares of the Company’s common stock (the “Base Shares”) at a price to the public of $12.25 per share. Pursuant to the Underwriting Agreement, the Company granted the Underwriters a 30-day option to purchase up to 1,064,773 additional shares of common stock at the public offering price. On December 29, 2025, the Underwriters exercised the over-allotment option in full. The Company received total gross proceeds of approximately $100 million, before deducting the underwriting discounts and commissions and other offering expenses. 57 Table of Contents Results of Operations Overview We were founded in 1986 to commercialize and enhance our proprietary VGF technology for producing high-performance compound semiconductor substrates or wafers. We have one operating segment and two product lines: specialty material substrates and raw materials used to make such substrates or other related products. We recorded our first substrate sales in 1990 and our substrate products currently include indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge) substrates used to produce semiconductor devices for use in applications such as fiber optic and wireless telecommunications, light emitting diodes (LEDs), lasers and for solar cells for space and terrestrial photovoltaic applications. Our two raw material companies sell, among other items, purified gallium and pBN crucibles. Operating Results We manufacture all of our products in the People’s Republic of China (PRC or China), which generally has favorable costs for facilities and labor compared with comparable facilities in the United States, Europe or Japan. In recent years, tariffs required by the U.S. and export permits required by China have negatively impacted our operating results. Our supply chain includes partial ownership of raw material companies in China (joint ventures). We believe this supply chain arrangement provides us with pricing advantages, reliable supply and enhanced sourcing lead-times for key raw materials which are central to our final manufactured products. Revenue Years Ended Dec. 31 2024 to 2025 2023 to 2024 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change Product Type: Substrates $ 58,900 $ 67,748 $ 47,466 $ (8,848 ) (13.1 )% $ 20,282 42.7 % Raw materials and other 29,426 31,613 28,329 (2,187 ) (6.9 )% 3,284 11.6 % Total revenue $ 88,326 $ 99,361 $ 75,795 $ (11,035 ) (11.1 )% $ 23,566 31.1 % Revenue decreased $11.0 million, or 11.1%, in 2025 from $99.4 million in 2024. The $8.8 million decrease in wafer substrate sales was the result of lower sales of our germanium wafers. Raw material costs needed for the germanium wafers increased substantially in 2025 but pricing remained competitive. As a result we deliberately reduced our sales of these wafers. Although demand for InP wafers increased in 2025, revenue declined because of the export permit requirements announced by China on February 4, 2025. GaAs revenue declined slightly. The $2.2 million raw materials revenue decrease as compared to the same period in 2024 was primarily the result of decreased sales of purified gallium, partially offset by increased revenue from pBN crucibles and pBN-based OLED manufacturing tools sold by BoYu, one of our consolidated raw material companies. 58 Table of Contents Revenue increased $23.6 million, or 31.1%, in 2024 from $75.8 million in 2023. The $20.3 million increase in wafer substrate sales was the result of higher demand for InP wafer substrates for 5G applications, data center upgrades (silicon photonics) and consumer related applications, GaAs wafer substrates as the result of increased demand for LED products, industrial lasers and other applications requiring low defect densities in the wafer substrate and higher demand for our Ge wafer substrates from our customers in China. The $3.3 million raw materials revenue increase as compared to the same period in 2023 was primarily the result of increased sales of purified gallium and increased revenue from pBN crucibles and pBN-based OLED manufacturing tools sold by our consolidated raw material companies. Revenue by Geographic Region Year Ended Dec. 31, 2024 to 2025 2023 to 2024 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) China $ 55,076 $ 56,119 $ 39,778 $ (1,043 ) (1.9 )% $ 16,341 41.1 % % of total revenue 62 % 56 % 53 % Taiwan 13,039 14,098 8,651 (1,059 ) (7.5 )% 5,447 63.0 % % of total revenue 15 % 14 % 11 % Japan 4,906 4,979 4,641 (73 ) (1.5 )% 338 7.3 % % of total revenue 5 % 5 % 6 % Asia Pacific (excluding China, Taiwan and Japan) 2,441 2,818 3,814 (377 ) (13.4 )% (996 ) (26.1 )% % of total revenue 3 % 3 % 5 % Europe (primarily Germany) 11,156 13,766 12,315 (2,610 ) (19.0 )% 1,451 11.8 % % of total revenue 13 % 14 % 16 % North America (primarily the United States) 1,708 7,581 6,596 (5,873 ) (77.5 )% 985 14.9 % % of total revenue 2 % 8 % 9 % Total revenue $ 88,326 $ 99,361 $ 75,795 $ (11,035 ) (11.1 )% $ 23,566 31.1 % Sales to customers located outside of North America represented approximately 98%, 92% and 90% of our revenue during 2025, 2024 and 2023, respectively. Revenue from customers in China decreased in 2025 by 1.9%, primarily due to reduced sales of germanium wafer substrates. As a result of an increase in the cost of raw materials needed we deliberately reduced our sales of these wafers. The reduction in germanium revenue was mitigated by increased InP revenue. Revenue from customers in Taiwan decreased in 2025 by 7.5%, primarily due to export permit requirements on InP established by China on February 4, 2025. Revenue from customers in Japan decreased in 2025 by 1.5% as a result of lower demand for our GaAs and InP wafer substrates used in wireless applications, partially offset by increased demand for pBN crucibles sold by one of our consolidated subsidiaries. Revenue from customers in Asia Pacific decreased by 13.4% as a result of decreased demand for GaAs and InP wafer substrates used in wireless applications and raw gallium sold by one of our consolidated subsidiaries, partially offset by increased demand for pBN crucibles sold by one of our consolidated subsidiaries. Revenue from customers in Europe decreased in 2025 by 19.0%, primarily due to lower demand for GaAs wafer substrates used in LED and wireless applications and Ge wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by increased demand for InP wafer substrates. Revenue from customers in North America decreased in 2025 by 77.5% primarily due to export permit requirements on InP established by China on February 4, 2025. 59 Table of Contents Revenue from customers in China increased in 2024 by 41.1%, primarily due to higher demand for GaAs, InP and Ge wafer substrates used in wireless and LED applications, pBN crucibles sold by one of our consolidated subsidiaries and refined gallium sold by another of our consolidated subsidiaries. Revenue from customers in Taiwan increased in 2024 by 63.0%, primarily due to higher demand for GaAs wafer substrates and InP wafer substrates used in wireless applications, partially offset by decreased demand for Ge wafer substrates. Revenue from customers in Japan increased in 2024 by 7.3% as a result of higher demand for our InP wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by decreased demand for our GaAs wafers used in LED and wireless applications and refined gallium. Revenue from customers in Asia Pacific decreased by 26.1% as a result of decreased demand for GaAs wafer substrates used in wireless applications and pBN crucibles sold by one of our consolidated subsidiaries, partially offset by increased demand for raw gallium. Revenue from customers in Europe increased in 2024 by 11.8%, primarily due to higher demand for GaAs wafer substrates used in LED and wireless applications, InP and Ge wafer substrates, partially offset by lower demand for pBN crucibles sold by one of our consolidated subsidiaries. Revenue from customers in North America increased in 2024 by 14.9% primarily due to higher demand for InP wafer substrates, partially offset by decreased demand for GaAs wafer substrates and pBN crucibles sold by one of our consolidated subsidiaries. Gross Margin 2024 to 2025 2023 to 2024 Year Ended Dec. 31, Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Gross profit $ 11,242 $ 23,836 $ 13,318 $ (12,594 ) (52.8 )% $ 10,518 79.0 % Gross Profit % 12.7 % 24.0 % 17.6 % Gross profit decreased $12.6 million in 2025 as compared to 2024. Gross margin in 2025 was 12.7% as compared to 24.0% in 2024. The decrease in gross margin is attributed to lower revenue resulting in fixed costs being spread over fewer units and manufacturing variances, particularly in the first half of the year. ​ Gross profit increased $10.5 million in 2024 as compared to 2023. Gross margin in 2024 was 24.0% as compared to 17.6% in 2023. The increase in gross profit is attributed to higher revenue resulting in fixed costs being spread over more units and a favorable change in product mix. Selling, General and Administrative Expenses 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Selling, general and administrative expenses $ 24,169 $ 24,096 $ 22,806 $ 73 0.3 % $ 1,290 5.7 % % of total revenue 27.4 % 24.3 % 30.1 % Selling, general and administrative expenses increased $73,000, or 0.3%, to $24.2 million for 2025 compared to $24.1 million for 2024. The higher selling, general and administrative expenses were primarily from higher personnel related expenses, partially offset by lower professional service expenses, travel related expenses and office related expenses. Selling, general and administrative expenses increased $1.3 million, or 5.7%, to $24.1 million for 2024 compared to $22.8 million for 2023. The higher selling, general and administrative expenses were primarily from higher legal expenses, professional service expenses and outside commissions, partially offset by lower insurance costs and allowance for credit losses. 60 Table of Contents Research and Development Expenses 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Research and development $ 9,049 $ 14,543 $ 12,081 $ (5,494 ) (37.8 )% $ 2,462 20.4 % % of total revenue 10.2 % 14.6 % 15.9 % Research and development expenses decreased $5.5 million, or 37.8%, to $9.0 million in 2025 from $14.5 million in 2024. The decrease in research and development expenses in 2025 was primarily due to less material usage related to development for 8-inch GaAs and 6-inch InP wafer substrates and the development of new features for certain of our GaAs and InP wafer substrates and new product testing, partially offset by higher personnel-related expenses and stock compensation expense. ​ Research and development expenses increased $2.5 million, or 20.4%, to $14.5 million in 2024 from $12.1 million in 2023. The increase in research and development expenses in 2024 was primarily due to higher development expenses for 8-inch GaAs and 6-inch InP wafer substrates and the development of new features for certain of our GaAs and InP wafer substrates and new product testing, partially offset by lower personnel-related expenses. Interest Expense, Net 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Interest expense, net $ 1,257 $ 1,340 $ 1,527 $ (83 ) (6.2 )% $ (187 ) (12.2 )% % of total revenue 1.4 % 1.3 % 2.0 % Interest expense, net decreased in 2025 as compared to the same period in 2024, primarily due to increased investment balances, primarily from loan proceeds temporarily held in interest bearing accounts. Interest expense, net decreased in 2024 as compared to the same period in 2023, primarily due to decreased borrowings in 2024. Equity in Income of Unconsolidated Joint Venture Companies 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Equity in income of unconsolidated joint ventures $ 765 $ 3,439 $ 1,884 $ (2,674 ) (77.8 )% $ 1,555 82.5 % % of total revenue 0.9 % 3.5 % 2.5 % Equity in income of unconsolidated joint ventures is the aggregate net income (loss) from our minority-owned supply chain joint venture companies that are not consolidated. Equity in income of unconsolidated joint ventures decreased $2.7 million to an income of $0.8 million in 2025 from an income of $3.4 million in 2024. The decrease is the result of export restrictions from China on gallium resulting in lower revenue and profit from international sales. Further, gallium suppliers in China reduced their pricing as they competed for market share within their domestic market. Equity in income of unconsolidated joint ventures increased $1.6 million to an income of $3.4 million in 2024 from an income of $1.9 million in 2023 as our unconsolidated joint ventures reported better net income in 2024 as compared to 2023. 61 Table of Contents Other Income, Net 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Other income, net $ 924 $ 2,047 $ 2,179 $ (1,123 ) (54.9 )% $ (132 ) (6.1 )% % of total revenue 1.0 % 2.1 % 2.9 % Other income, net decreased $1.1 million to an income of $0.9 million for 2025 as compared to an income of $2.0 million in 2024, primarily due to reduced Chinese government grants in 2025 compared to 2024. Other income, net decreased $0.1 million to an income of $2.0 million for 2024 as compared to an income of $2.2 million in 2023, primarily due to foreign exchange gains of $0.1 million in 2024 compared to foreign exchange gains of $0.2 million in 2023. Provision for Income Taxes 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Provision for income taxes $ 1,658 $ 1,134 $ 160 $ 524 46.2 % $ 974 608.8 % % of total revenue 1.9 % 1.1 % 0.2 % Provision for income taxes for 2025 and 2024 were $1.7 million and $1.1 million, respectively, which were mostly related to our consolidated wafer substrate subsidiaries in China and our two partially owned consolidated raw material companies. No income taxes or benefits have been provided for AXT as the income in the U.S. had been fully offset by utilization of federal and state net operating loss carryforwards. Additionally, there is uncertainty of generating future profit in the U.S., which has resulted in our deferred tax assets being fully reserved. AXT-Tongmei incurred no income tax liability for the year ended December 31, 2025 due to the loss. Our estimated tax rate can vary greatly from year to year because of the change or benefit in the mix of taxable income between our U.S. and China-based operations. Due to uncertainty regarding our future profitability, we recorded a valuation allowance against our net deferred tax assets of $27.2 million and $20.7 million for the years 2025 and 2024, respectively. Net loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests 2024 to 2025 2023 to 2024 Years Ended Dec. 31 Increase Increase 2025 2024 2023 (Decrease) % Change (Decrease) % Change ($ in thousands) Net loss attributable to noncontrolling interests and redeemable noncontrolling interests $ 1,942 $ 167 $ 1,312 $ 1,775 1062.9 % $ (1,145 ) (87.3 )% % of total revenue 2.2 % 0.2 % 1.7 % The increase in noncontrolling interests and redeemable noncontrolling interests’ share of loss for 2025 as compared to 2024 was primarily due to increased losses at one of our consolidated subsidiaries in China and by a lower profit from our other consolidated subsidiaries in China. The decrease in noncontrolling interests and redeemable noncontrolling interests’ share of loss for 2024 as compared to 2023 was primarily due to reduced losses at four of our consolidated subsidiaries in China and by a profit from our other consolidated subsidiary in China. 62 Table of Contents Liquidity and Capital Resources Year Ended December 31, 2025 2024 2023 ($ in thousands) Net cash provided by (used in): Operating activities $ (12,783 ) $ (12,112 ) $ 3,403 Investing activities (6,832 ) (4,445 ) (2,604 ) Financing activities 107,095 (536 ) 8,613 Effect of exchange rate changes 7,075 790 (646 ) Net change in cash, restricted cash and cash equivalents 94,555 (16,303 ) 8,766 Cash, restricted cash and cash equivalents—beginning year 33,811 50,114 41,348 Cash, restricted cash and cash equivalents —end of year 128,366 33,811 50,114 Short and long-term investments—end of year — — 2,140 Total cash, restricted cash, cash equivalents and short-term and long-term investments $ 128,366 $ 33,811 $ 52,254 We consider cash and cash equivalents, short-term investments and long-term investments as liquid and available for use within two years in our current operations. Short-term investments and long-term investments are comprised of money market accounts, certificates of deposit, corporate bonds and notes, and government securities. As of December 31, 2025, we and our consolidated joint ventures held approximately $27.0 million in cash and investments in bank accounts outside the United States. Total cash, restricted cash and cash equivalents increased by $94.6 million in 2025. As of December 31, 2025, our principal source of liquidity was cash, restricted cash and cash equivalents of $128.4 million. In 2025, cash, restricted cash and cash equivalents increased by $94.6 million. The increase in cash, restricted cash and cash equivalents of $94.6 million in 2025 was primarily due to net cash provided by financing activities of $107.1 million and positive effect of exchange rate changes of $7.1 million, partially offset by net cash used in operating activities of $12.8 million and investing activities of $6.8 million. Total cash, restricted cash and cash equivalents, short-term and long-term investments decreased by $18.4 million in 2024. As of December 31, 2024, our principal source of liquidity was $33.8 million. In 2024, cash, restricted cash and cash equivalents decreased by $16.3 million and short-term investments decreased by $2.1 million. The decrease in cash, restricted cash and cash equivalents of $16.3 million in 2024 was primarily due to net cash used in operating activities of $12.1 million, investing activities of $4.4 million and net cash used in financing activities of $0.5 million, partially offset by the positive effect of exchange rate changes of $0.8 million. Net cash used in operating activities of $12.8 million for 2025 was primarily comprised of our net loss of $23.2 million, net change in operating assets and liabilities of $2.0 million, equity in income of unconsolidated joint ventures of $0.8 million and deferred tax assets of $0.1 million, partially offset by adjustment of non-cash items of depreciation and amortization of $9.1 million, stock-based compensation of $3.3 million and return of equity method investments as dividends of $0.9 million. The $2.0 million net change in operating assets and liabilities primarily resulted from a $6.6 million decrease in other long-term liabilities, including royalties, a $3.1 million increase in other assets and an increase in accounts receivable of $0.4 million, partially offset by a $6.3 million decrease in inventories, a $1.4 million decrease in other current assets, a $0.2 million increase in accrued liabilities and a $0.1 million increase in accounts payable. 63 Table of Contents Net cash used in operating activities of $12.1 million for 2024 was primarily comprised of our net loss of $11.8 million, net change in operating assets and liabilities of $11.7 million and income from equity method investments of $3.4 million, partially offset by adjustment of non-cash items of depreciation and amortization of $9.0 million, return of equity method investments (dividends) of $2.4 million, stock-based compensation of $3.1 million, deferred tax assets of $0.3 million and loss on disposal of equipment of $0.1 million. The $11.7 million net change in operating assets and liabilities primarily resulted from an increase in accounts receivable of $6.9 million, a $6.0 million increase in prepaid expenses and other current assets, a $3.4 million decrease in other long-term liabilities, including royalties, and a $0.7 million increase in inventories, partially offset by an increase in accounts payable of $3.0 million, a $1.3 million decrease in other assets, and a $1.0 million increase in accrued liabilities. Net cash used in operating activities of $3.4 million for 2023 was primarily comprised of net change in operating assets and liabilities of $7.0 million, adjustment of non-cash items of depreciation and amortization of $8.7 million, return of equity method investments (dividends) of $4.3 million, stock-based compensation of $3.5 million, deferred tax assets of $0.6 million, provision for credit losses of $0.3 million and loss on sale of equity investment of $0.2 million, offset in part by our net loss of $19.2 million and income from equity method investments of $2.1 million. The $7.0 million net change in operating assets and liabilities primarily resulted from a decrease in accounts receivable of $9.3 million, a $1.1 million decrease in inventories and a $0.4 million decrease in other assets, offset in part by a $1.9 million decrease in accrued liabilities, a $1.0 million decrease in other long-term liabilities, including royalties, a $0.7 million increase in prepaid expenses and other current assets, and a decrease in accounts payable of $0.2 million. Net cash used in investing activities of $6.8 million for 2025 was primarily due to property, plant and equipment of $6.0 million in preparation for our new manufacturing sites, additional equipment for our Beijing site and equipment and facility costs incurred by our consolidated subsidiaries and investments in non-marketable equity investments of $0.8 million. Net cash used in investing activities of $4.4 million for 2024 was primarily due to property, plant and equipment of $5.8 million in preparation for our new manufacturing sites, additional equipment for our Beijing site and equipment and facility costs incurred by our consolidated subsidiaries and investments in non-marketable equity investments of $0.8 million, which were partially offset by proceeds from maturities and sales of available-for-sale debt securities of $2.2 million. Net cash used in investing activities of $2.6 million for 2023 was primarily due to property, plant and equipment of $10.5 million in preparation for our new manufacturing sites, additional equipment for our Beijing site and equipment and facility costs incurred by our consolidated subsidiaries and investments in non-marketable equity investments of $2.5 million, which were partially offset by proceeds from maturities and sales of available-for-sale debt securities of $9.6 million and proceeds from sales of equity securities of $0.8 million. Net cash provided by financing activities was $107.1 million for 2025 which mainly consisted of the net proceeds of $95.2 million received from the public offering of 8,163,265 shares of our co mmon stock in December 2025, proceeds of $58.5 million from short-term loans in China, and $3.5 million from long-term loans in China, which are partially offset by payments on short-term loans of $48.6 million and payments on long term loans of $1.5 million. Net cash used in financing activities was $0.5 million for 2024 which mainly consisted of payments on short-term loans of $60.0 million and payments on long term loans of $0.8 million, which were partially offset by the proceeds of $54.5 million from short-term loans in China, and $5.8 million from long-term loans in China. Net cash provided by financing activities was $8.6 million for 2023 which mainly consisted of the proceeds of $56.5 million from short-term loans in China, $0.7 million from the capital increase in subsidiary shares from noncontrolling interest, and $0.6 million from a long-term loan in China, which were partially offset by payments on short-term loans of $49.2 million. 64 Table of Contents On October 27, 2014, our Board of Directors approved a stock repurchase program pursuant to which we may repurchase up to $5.0 million of our outstanding common stock. These repurchases can be made from time to time in the open market and are funded from our existing cash balances and cash generated from operations. During 2015, we repurchased approximately 908,000 shares at an average price of $2.52 per share for a total purchase price of approximately $2.3 million under the stock repurchase program. No shares were repurchased during 2025, 2024 and 2023 under this program. As of December 31, 2025, approximately $2.7 million remained available for future repurchases under this program. Currently, we do not plan to repurchase additional shares. Dividends accrue on our outstanding Series A preferred stock, and are payable as and when declared by our Board of Directors. We have never paid or declared any dividends on the Series A preferred stock. By the terms of the Series A preferred stock, so long as any shares of Series A preferred stock are outstanding, neither the Company nor any subsidiary of the Company shall redeem, repurchase or otherwise acquire any shares of common stock, unless all accrued dividends on the Series A preferred stock have been paid. During 2013 and 2015, we repurchased shares of our outstanding common stock. As of December 31, 2015, the Series A preferred stock had cumulative dividends of $2.9 million and we included this amount in “Accrued liabilities” in our consolidated balance sheets. At the time we pay this accrued liability, our cash and cash equivalents would be reduced. We account for the cumulative year to date dividends on the Series A preferred stock when calculating our earnings per share. See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in Part II. Occasionally, one of our PRC subsidiaries or PRC raw material joint ventures declares and pays a dividend. These dividends generally occur when the PRC joint venture declares a dividend for all of its shareholders. Dividends paid to the Company are subject to a 10% PRC withholding tax. The Company is required to obtain approval from SAFE to transfer funds in or out of the PRC. SAFE requires a valid agreement to approve the transfers, which are processed through a bank. Other than PRC foreign exchange restrictions, the Company is not subject to any PRC restrictions and limitations on its ability to distribute earnings from its businesses, including its PRC subsidiaries and PRC joint ventures, to the Company and its investors as well as the ability to settle amounts owed by the Company to its PRC subsidiaries and PRC joint ventures. If SAFE approval is denied the dividend payable to the Company would be owed but would not be paid. For the years ended December 31, 2025, 2024 and 2023, the aggregate dividends paid to us, directly or to an intermediate entity within our corporate structure, by our PRC subsidiaries and PRC raw material joint ventures were approximately $0.9 million, $2.4 million and $4.3 million, respectively. In April 2023 and November 2023, Xiaoyi XingAn distributed a dividend of $1.8 million, and JiYa distributed dividends of $2.0 million and $0.5 million, respectively. In May 2024 and November 2024, Xiaoyi XingAn distributed a $2.1 million dividend to us, and JiYa distributed a dividend of 0.3 million. In April 2025, JiYa Semiconductor Material Co. Ltd. ("JiYa") distributed a dividend of $0.9 million. For the years ended December 31, 2025 and 2024, there were no dividends paid to minority shareholders by our PRC subsidiaries or PRC raw material joint ventures. We have no current intentions to distribute to our investors earnings under our corporate structure. We settle amounts owed under our transfer pricing arrangements in the ordinary course of business. The cash generated from one PRC subsidiary is not used to fund another PRC subsidiary’s operations. None of our PRC subsidiaries has ever faced difficulties or limitations on its ability to transfer cash between our subsidiaries. AXT has cash management policies that dictate the amount of such funding. As one of the first steps in the process of listing Tongmei on the STAR Market and going public, we sold approximately 7.28% of Tongmei to private equity investors for approximately $49 million in the aggregate. Pursuant to the Capital Investment Agreements with the Investors, each Investor has the right to require AXT to redeem any or all Tongmei shares held by such Investor at the original purchase price paid by such Investor, without interest, in the event the IPO fails to pass the audit of the Shanghai Stock Exchange, is not approved by the CSRC or Tongmei cancels the IPO application. The aggregate redemption amount is approximately $49 million. 65 Table of Contents Tongmei submitted its IPO application to the Shanghai Stock Exchange, and it was formally accepted for review on January 10, 2022. The Shanghai Stock Exchange approved the IPO application on July 12, 2022. On August 1, 2022, the CSRC accepted for review Tongmei’s IPO application. The STAR Market IPO remains subject to review and approval by the CSRC and other authorities. The process of going public on the STAR Market includes several periods of review and, therefore, is a lengthy process. Subject to review and approval by the CSRC and other authorities, Tongmei hopes to accomplish this goal in the coming months. The listing of Tongmei on the STAR Market will not change the status of AXT as a U.S. public company. We believe that we have adequate cash to meet our operating needs and capital expenditures over the next twelve months. If our sales decrease, however, our ability to generate cash from operations will be adversely affected which could adversely affect our future liquidity, require us to use cash at a more rapid rate than expected, and require us to seek additional capital. On November 7, 2025, we filed with the SEC a registration statement on Form S-3, pursuant to which we may offer up to $100 million of common stock, preferred stock, debt securities, depositary shares, warrants, subscription rights, purchase contracts and/or units in one or more offerings and in any combination , which became effective in accordance with the provisions of Section 8(a) of the Securities Act on November 27, 2025. On December 29, 2025, we filed a prospectus supplement relating to an offering of 7,098,492 shares of our common stock at a public offering price of $12.25 per share and up to 1,064,773 shares of common stock subject to an option to purchase additional shares granted to the underwriters of the offering at the public offering price (the “Offering”). The closing of the Offering occurred on December 30, 2025, including the full exercise of the underwriters’ option. Net proceeds from the offering, after deducting underwriting discounts, commissions, and other offering costs, were $93.9 million. We intend to use the net proceeds from this offering to financially support our subsidiary Tongmei in its efforts to increase its manufacturing capacity to produce indium phosphide substrates for export worldwide, for research and development of new or improved products, for working capital and for general corporate purposes. Cash from operations could be affected by various risks and uncertainties, including, but not limited to those set forth below under Item 1A. “Risk Factors” above. 66 Table of Contents Bank Loans and Line of Credit Our bank loans and credit facilities, which are entered into by our subsidiaries, typically have a term of 12 months or less and are included in “Short-term loan” in our consolidated balance sheets. The following table represents Short-term bank loans as of December 31, 2025 and 2024 (in thousands, except interest rate data): Interest December 31, December 31, Bank Rate Start Date Due Date 2025 2024 Bank of China (1) 2.3 % September-24 September-25 $ — $ 1,096 2.4 % December-24 December-25 — 274 2.7 % January-25 January-26 722 — 2.7 % March-25 March-26 605 — 2.6 % July-25 July-26 114 — 2.6 % September-25 September-26 722 — 2.4 % September-25 September-26 1,433 — 2.2 % September-25 September-26 858 — Bank of China (3) 2.4 % September-24 September-25 — 1,370 2.4 % November-24 November-25 — 1,370 2.7 % November-24 November-25 — 685 2.5 % February-25 February-26 2,582 — Bank of Communications (1) 3.0 % May-24 May-25 — 1,644 3.0 % June-24 May-25 — 2,466 2.6 % June-25 June-26 2,861 — 2.4 % December-25 June-26 1,433 — China Merchants Bank (1) 3.5 % January-24 January-25 — 1,370 3.5 % February-24 February-25 — 685 3.5 % April-24 April-25 — 685 2.9 % January-25 January-26 3,275 — 2.9 % March-25 March-26 1,022 — 2.4 % June-25 June-26 432 — 2.3 % September-25 September-26 1,003 — Bank of Beijing (2) 3.0 % March-24 February-25 — 3,565 3.0 % June-24 June-25 — 3,565 2.7 % March-25 March-26 2,295 — 2.6 % June-25 March-26 1,430 — 2.6 % June-25 June-26 3,716 — Industrial Bank (1) 3.9 % September-24 September-25 — 2,740 3.9 % October-24 October-25 — 2,679 3.2 % November-24 November-25 — 1,440 2.7 % November-24 November-25 — 1,370 3.1 % September-25 September-26 145 — 2.7 % October-25 October-26 5,474 — 2.7 % November-25 November-26 1,672 — 2.2 % November-25 November-26 1,433 — Industrial Bank (5) 3.1 % October-25 October-26 149 — 3.1 % November-25 November-26 158 — 3.1 % December-25 December-26 190 — Industrial Bank (4) 3.8 % March-25 March-26 1,433 — NingBo Bank (1) 4.3 % January-24 January-25 — 1,630 4.3 % May-24 March-25 — 1,255 3.9 % November-24 November-25 — 1,822 3.9 % December-24 December-25 — 550 3.9 % January-25 January-26 1,655 — 3.9 % March-25 March-26 722 — 3.9 % Apr-25 March-26 645 — 3.8 % June-25 June-26 593 — 3.8 % July-25 July-26 645 — 3.8 % August-25 July-26 436 — 3.2 % December-25 December-26 1,315 — Industrial and Commercial Bank of China (1) 3.3 % September-24 September-25 — 2,740 2.8 % September-24 September-25 — 1,370 2.4 % August-25 August-26 1,433 — 2.4 % September-25 August-26 1,433 — 2.2 % September-25 September-26 1,433 — 2.3 % September-25 September-26 286 — 2.3 % October-25 September-26 2,575 — China Citic Bank (1) 2.9 % June-24 June-25 — 2,740 2.9 % July-24 July-25 — 2,740 2.9 % September-24 September-25 — 1,370 2.3 % September-25 September-26 5,005 — Agricultural Bank of China (1) 2.6 % November-24 November-25 — 1,235 2.6 % December-24 December-25 — 137 2.3 % December-25 December-26 929 — Bank of Hangzhou (1) 2.5 % September-25 September-26 4,288 — NanJing Bank (1) 2.8 % December-24 December-25 — 1,370 Loan Balance $ 58,550 $ 45,963 Collateral for the above bank loans and line of credit (1) Not collateralized. (2) AXT time deposit. (3) Baoding Tongmei’s land use rights and its building located at its facility in Dingxing, China. (4) ChaoYang JinMei’s land use rights and its building located at its facility in Kazuo, China. (5) ChaoYang XinMei's manufacturing facility in Kazuo, China. 67 Table of Contents On January 30, 2024, the Company secured a new line of credit amounting to $9.7 million, structured as a five-year bank loan. The credit facility bears interest at a rate of 6.5% per annum on the amount drawn from the line of credit. The credit facility is collateralized by the real estate properties owned by ChaoYang Tongmei. In January 2024, the Company borrowed $5.8 million against the credit facility. The intended use of the credit facility is for construction of fixed assets. As of December 31, 2025, $4.7 million is included in “Other long-term liabilities” and $0.7 million is included in “Short-term loans” in our consolidated balance sheets. ​ In December 2023, one of our consolidated subsidiaries, ChaoYang XinMei secured a loan of approximately $2.1 million from an unrelated financing company. According to the agreement, ChaoYang XinMei temporarily transferred ownership of its production line and related equipment to the financing company, while retaining the right to use the property for production. At the end of the 30-month contractual period, ChaoYang XinMei holds the option to repurchase the production line and related equipment for $14.00. As of December 31, 2025, $0.6 million is included in “Short-term loans” in our consolidated balance sheets. In February 2025, the Company secured a fourteen-month unsecured bank loan totaling $2.7 million at an interest rate of 3.2%. As of December 31, 2025, $2.7 million is included in “Short-term loans” in our condensed consolidated balance sheets. In September and November 2025, the Company entered into a four-year bank loan totaling $0.7 million at an interest rate of 3.1%. The loan is secured by the real estate properties owned by JinMei. As of December 31, 2025, $0.5 million is included in “Other long-term liabilities” and $0.2 million is included in “Short-term loans” in our condensed consolidated balance sheets. Off-Balance Sheet Arrangements We did not have any off-balance sheet financing arrangements and have never established any special purpose entities as defined under SEC Regulation S-K Item 303(a)(4)(ii). We have not entered into any options on non-financial assets. Contractual Obligations We lease certain equipment, office space, warehouse and facilities under long-term operating leases expiring at various dates through November 2029. The majority of our lease obligations relate to our lease agreement for our facility in Fremont, California with approximately 19,467 square feet, which was scheduled to expire in 2020. Under the terms of the facility lease agreement, in May 2020, we were granted an extension to the term of the lease for an additional three years. Furthermore, in September 2023, we entered into another agreement to extend the lease for an additional five years, commencing December 2023. There are no variable lease payments, residual value guarantees or any restrictions or covenants imposed by the facility lease. The remainder relate to our lease agreements for a nitrogen system and a facility. The nitrogen system is used during the manufacturing process by our facility in Dingxing, China. The equipment lease became effective in August 2019 and will expire in July 2029. The facility, located in Tongzhou, China, has a lease effective from December 2024 and expiring in November 2029. There are no variable lease payments, residual value guarantees or any restrictions or covenants imposed by the equipment lease. All other operating leases have a term of 12 months or less. Total rent expenses under these operating leases charged to selling, general and administrative were approximately $597,000, $624,000 and $510,000 for the years ended December 31, 2025, 2024 and 2023, respectively, primarily related to our Fremont facility. Total rent expenses under these operating leases charged to cost of revenue were approximately $273,000, $275,000 and $285,000 for the years ended December 31, 2025, 2024 and 2023, respectively, primarily related to the nitrogen system at our facility in Dingxing. In 2020, we and a competitor entered into the Cross License Agreement, which has a term that begins on January 1, 2020 and expires on December 31, 2029. The Cross License Agreement is a fixed-cost cross license and not a variable-cost cross license that is based on revenue or units. Under the Cross License Agreement, we are obligated to make annual payments over a 10-year period. For the years ended December 31, 2025 and 2024, the royalty expense under the Cross License Agreement was not considered material to our consolidated financial statements. ​ 68 Table of Contents Land Purchase and Investment Agreement We have established a wafer processing production line in Dingxing, China. In addition to a land rights and building purchase agreement that we entered into with a private real estate development company to acquire our new manufacturing facility, we also entered into a cooperation agreement with the Dingxing local government. In addition to pledging its full support and cooperation, the Dingxing local government will issue certain tax credits to us as we achieve certain milestones. We, in turn, agreed to hire local workers over time, pay taxes when due and eventually demonstrate a total investment of approximately $90 million in value, assets and capital. The investment will include cash paid for the land and buildings, cash on deposit in our name at local banks, the gross value of new and used equipment (including future equipment that might be used for indium phosphide and germanium substrates production), the deemed value for our customer list or the end user of our substrates (for example, the end users of the 3-D sensing VCSELs), a deemed value for employment of local citizens, a deemed value for our proprietary process technology, other intellectual property, other intangibles and additional items of value. There is no timeline or deadline by which this must be accomplished, rather it is a good faith covenant entered into between AXT and the Dingxing local government. Further, there is no specific penalty contemplated if either party breaches the agreement, however the agreement does state that each party has a right to seek from the other party compensation for losses. Under certain conditions, the Dingxing local government may purchase the land and building at the appraised value. We believe that such cooperation agreements are normal, customary and usual in China and that the future valuation is flexible. We have a similar agreement with the city of Kazuo, China, although on a smaller scale. The total investment targeted by AXT in Kazuo is approximately $15 million in value, assets and capital. ​ Purchase Obligations with Penalties for Cancellation In the normal course of business, we issue purchase orders to various suppliers. In certain cases, we may incur a penalty if we cancel the purchase order. As of December 31, 2025, we do not have any outstanding purchase orders that will incur a penalty if canceled by the Company. Recent Accounting Pronouncements ​ Recent accounting pronouncements are detailed in Note 1 to our consolidated financial statements included in this Annual Report on Form 10-K.