What changed in this filing

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Item 1A. Risk Factors

2026-05-14 compared with 2025-11-13 · 167 added, 156 removed, 702 unchanged (32% of the section changed)

8 unchanged sentences

Global economic and political conditions, including trade tariffs, import-export restrictions, and other restrictions, may have a negative impact on our business and financial results.

China's requirement of export permits for InP is an example.

We are subject to a number of unique legal and operational risks associated with our corporate structure.

2 unchanged sentences

Our NASDAQ stock price is volatile and our stock price could decline.

Unpredictable fluctuations in our operating results, changes and events in our end markets and global trends cause volatility in our stock price.

Unpredictable fluctuations in our operating results, export permit requirements, changes and events in our end markets and global trends cause volatility in our stock price.

We face litigation and legal proceedings which could adversely affect our business, financial condition, results of operations or cash flows.

25 unchanged sentences

Global economic and political conditions, including trade tariffs, import-export restrictions, and other restrictions, may have a negative impact on our business and financial results.

China's requirement of export permits for InP is an example.

In September 2018, the United States announced a list of thousands of categories of goods that became subject to Section 301 tariffs when imported into the United States from China.

4 unchanged sentences

This required Tongmei to seek permits from the applicable Chinese authorities to export gallium arsenide and germanium substrates.

Since that time, a general escalation has been underway with further increases to the tariffs from the US and additional export controls from China.

Since that time, a general escalation has been underway with further increases to the tariffs from the US and additional export controls from China, including for InP wafers.

The escalating requirements resulted in a new layer of administration within our company.

8 unchanged sentences

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 began to require export permits on InP wafers.

This requirement remains major concern for AXT.

On March 4, 2025, the United States further increased the tariff on imports of many products, including our wafer substrates, to 70%.

In the first half of April 2025, we observed high volatility in tariffs put in place by the United States.

At least four separate tariffs were imposed by the United States on products from China.

Tariffs on our products increased to 100%.

On December 27, 2025, the Standing Committee of the National People’s Congress of China (“NPC”) enacted substantial revisions to the Foreign Trade Law of the People’s Republic of China, effective March 1, 2026 (the “Foreign Trade Law”).

The revisions to the Foreign Trade Law provide, among other things, enhanced power vested in governmental agencies to prohibit or restrict the import or export of goods and technologies for a variety of reasons set forth in Article 18 of the Foreign Trade Law, including, but not limited to, (i) safeguarding national security, (ii) where there is a domestic shortage of supply or to protect potentially depleted natural resources, (iii) in order to establish or accelerate the establishment of specific domestic industries, and (iv) other circumstances where it is necessary to prohibit or restrict the import or export of relevant goods or technologies, or take other necessary measures.

The revisions also include a chapter on intellectual property introducing new trade sanctions for the infringement of intellectual property rights when such infringement endangers the order of foreign trade and targets specific licensing practices that prohibit the challenge of a license’s validity or portfolio licensing bundling.

The specific prohibitions and restrictions on the import and export of goods and technologies are delegated to the Ministry of Commerce of the People’s Republic of China, among other agencies.

While we do not believe that the revisions will have any additional material adverse effects on our wafer substrate products beyond the current restrictions and licensing requirement, however, with the Foreign Trade Law’s enhanced power over import and export prohibitions and restrictions, no assurances can be given that additional restrictions will not be imposed in the future.

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 (the "IEEPA") and the U.S.

Customs and Border Protection subsequently announced that IEEPA-based tariff provisions would be terminated effective February 24, 2026.

However, tariffs imposed under other authorities, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, 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.

If maintained, these announced new tariffs, as well as related measures that could be taken by other countries and the potential escalation of trade disputes, could affect our business and results of operations.

Indium phosphide substrates are the primary revenue generator derived from imports into the U.S.

This revenue has been impacted by additional tariffs imposed by the United States and by export controls implemented by China.

In 2024, 8% of our total worldwide revenue was from sales in North America, primarily in the U.S.;

however, in 2025, only approximately 2% of our revenue was generated by sales to customers in North America.

All of our wafer substrates are manufactured in China.

In the years 2025, 2024 and 2023, approximately 2%, 8% and 10% of our revenue, respectively, were generated by sales to customers in North America, primarily in the U.S.

In the first three quarters of 2025, approximately 2% of our revenue was generated from sales to customers in North America, primarily on the U.S.

In the first three quarters of 2025, we paid approximately $271,000 in tariffs.

In the years 2025, 2024 and 2023, we paid approximately $0.3 million, $1.0 million and $1.0 million, respectively, in tariffs.

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An important factor in our success is the extent to which we are able to utilize the available capacity in our manufacturing facilities.

A number of factors and circumstances may reduce utilization rates, including periods of industry overcapacity, low levels of customer orders, operating inefficiencies, mechanical failures and disruption of operations due to expansion, power interruptions, fire, flood, other natural disasters or calamities or government-ordered mandatory factory shutdowns, including as a result of the COVID-19 pandemic.

Severe air pollution in Beijing can trigger mandatory factory shutdowns.

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In addition, lead times required by our customers are shrinking, which reduces our ability to forecast orders and properly balance our capacity utilization.

Cyber-attacks, system security risks and data protection issues could disrupt our internal operations and cause a reduction in revenue, increase in expenses, negatively impact our results of operation or result in other adverse consequences.

Like most technology companies, we could be targeted in cyber-attacks.

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Cyber-attacks could use fraud, trickery or other forms of deception.

In addition, the rapid evolution of AI has the potential to disrupt existing business models and markets and could result in a material adverse effect on our business.

The increased adoption of AI technologies may also increase our cybersecurity risks.

A cyber-attack could expose us to a risk of loss or misuse of information, result in litigation and potential liability, damage our reputation or otherwise harm our business.

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Delayed sales, lower margins or lost customers could adversely affect our financial results and reputation.

We may become subject to risks associated with artificial intelligence and machine learning technologies.

Artificial intelligence, including machine learning technology (collectively, “AI”), is complex and rapidly evolving.

While the full extent of current or future risks related thereto is not possible to predict, AI could significantly disrupt the business models and markets in which we operate and subject us to increased competition, legal and regulatory risks and compliance costs, any of which could have a material adverse effect on our business, financial condition and results of operations.

Although we do not currently utilize AI to a significant extent in our operations, any future potential integration of AI technologies into our operations, any new regulations related to AI may also impose on us certain obligations and costs related to monitoring and compliance, and we could be subject to regulatory actions if we or they are deemed not to have complied.

We face risks related to health epidemics and other outbreaks, which could significantly disrupt our business operations.

The spread of a novel strain of coronavirus (COVID-19) around the world in the first quarter of 2020, which was declared a pandemic by the World Health Organization in March 2020, significantly impacted our operations and financial performance.

In early 2020, in response to intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included, among others, ordering companies to remain close after the traditional Lunar New Year holiday ended, which included our subsidiaries in China, and restricting travel between China and the U.S..

In early 2020, in response to intensifying efforts to contain the spread of COVID-19, the Chinese government took a number of actions, which included, among others, ordering companies to remain closed after the traditional Lunar New Year holiday ended, which included our subsidiaries in China, and restricting travel between China and the U.S..

In December 2022, the PRC government ended its zero-COVID policy.

If there is a future outbreak in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.

If there are future outbreaks or future health epidemics in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.

If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations.

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Our products are manufactured using complex crystal growth and wafer processing technologies, and the number of usable wafer substrates we produce can fluctuate as a result of many factors, including:

poor control of furnace temperature and pressure;

poor control of furnace temperature and pressure during crystal growth;

impurities in the materials used;

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in addition, if we are deemed to be the most financially viable of the partners, plaintiffs may decide to pursue us for damages.

Our financial performance can be adversely affected if there are unfavorable financial results in any of our raw material companies.

The raw material companies in our vertically integrated supply chain have historically made a positive contribution to our financial performance.

However, if there are unfavorable changes in revenue, average selling prices, gross margins or operating expenses in one or more of the consolidated companies, then this can result in a negative impact on our consolidated revenue, gross margin and profitability.

For unconsolidated, minority-owned joint ventures, these changes can result in a reduction in Equity in Income of Unconsolidated Joint Venture.

In 2025 and 2024, these unconsolidated joint ventures contributed gains of $0.8 million and $3.4 million, respectively, to our consolidated financial statements.

The last time the companies accounted for under the equity method of accounting contributed a loss was 2019 with a loss of $1.9 million.

Unforeseen manufacturing issues and restrictions at the new manufacturing sites could occur.

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As a result of the newly published list, we were required to seek additional permits.

If we do not successfully develop new product features and improvements and new products that respond to customer requirements, our ability to generate revenue, obtain new customers, and retain existing customers may suffer.

Our success depends on our ability to offer new product features, improved performance characteristics and new products, such as larger diameter substrates, low defect density substrates, thicker or thinner substrates, substrates with extreme surface flatness specifications, substrates that are manufactured with a doped crystal growth process or substrates that incorporate leading technology and other technological advances.

This is an ongoing iterative research and development process performed by our China team in collaboration with our product marketing managers.

New products must meet customer needs and compete effectively on quality, price and performance.

The markets for our products are characterized by rapid technological change, changing customer needs and evolving industry standards.

If our competitors introduce products employing new technologies or performance characteristics, our existing products could become obsolete and unmarketable.

Over time, we have seen our competitors selling more substrates manufactured using a crystal growth technology similar to ours, which has eroded our technological differentiation.

The development of new product features, improved performance characteristics and new products can be a highly complex process, and we may experience delays in developing and introducing them.

Any significant delay could cause us to fail to timely introduce and gain market acceptance of new products.

Further, the costs involved in researching, developing and engineering new products could be greater than anticipated.

If we fail to offer new products or product enhancements or fail to achieve higher quality products, we may not generate sufficient revenue to offset our development costs and other expenses or meet our customers’ requirements.

The loss of one or more of our tier one substrate customers would significantly hurt our operating results.

From time to time, sales to one or more of our tier one customers individually represent more than 10% of our revenue and if we were to lose a major customer the loss would negatively impact our revenue.

Our customers are not obligated to purchase a specified quantity of our products or to provide us with binding forecasts of product purchases.

In addition, our customers may reduce, delay or cancel orders.

In the past, we have experienced a slowdown in bookings, significant push-outs and cancellation of orders from customers.

If we lose a major customer or if a customer cancels, reduces or delays orders, our revenue would decline.

In addition, customers that have accounted for significant revenue in the past may not continue to generate revenue for us in any future period.

Any loss of customers or any delay in scheduled shipments of our products could cause revenue to fall below our expectations and the expectations of market analysts or investors, causing our stock price to decline.

Defects in our products could diminish demand for our products.

Our wafer products are complex and may contain defects, including defects resulting from impurities inherent in our raw materials or inconsistencies in our manufacturing processes.

We have experienced quality control problems with some of our products, which caused customers to return products to us, reduce orders for our products, or both.

If we experience quality control problems, or experience other manufacturing problems, customers may return product for credit, cancel or reduce orders or purchase products from our competitors.

We may be unable to maintain or increase sales to our customers and sales of our products could decline.

Defects in our products could cause us to incur higher manufacturing costs and suffer product returns and additional service expenses, all of which could adversely impact our operating results.

If new products developed by us contain defects when released, our customers may be dissatisfied and we may suffer negative publicity or customer claims against us, lose sales or experience delays in market acceptance of our new products.

Demand for our products may decrease if demand for the end-user applications decrease or if manufacturers downstream in our supply chain experience difficulty manufacturing, marketing or selling their products.

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In the second half of 2022, many companies purchased more inventory than needed, in part due to fears of shortages resulting from COVID.

This triggered an inventory correction cycle and our revenue declined as customers worked down their inventory level, We expect similar cycles of strong demand followed by lower demand will occur for various InP, GaAs or Ge substrates in the future.

Our financial performance can be adversely affected if there are unfavorable financial results in any of our raw material companies.

The raw material companies in our vertically integrated supply chain have historically made a positive contribution to our financial performance.

If the companies are accounted for under the equity method, then these changes can result in a reduction in Equity in Income of Unconsolidated Joint Venture Companies.

In 2024 and 2023, the companies accounted for under the equity method of accounting contributed a gain of $3.4 million and $1.9 million, respectively, to our condensed consolidated financial statements.

The 2023 total includes impairment charges of $1.9 million.

The last time the companies accounted for under the equity method of accounting contributed a loss was 2019 with a loss of $1.9 million.

This triggered an inventory correction cycle and our revenue declined as customers worked down their inventory level.

We expect similar cycles of strong demand followed by lower demand will occur for various InP, GaAs or Ge substrates in the future.

Intense competition in the markets for our products could prevent us from increasing revenue and achieving profitability.

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Our efforts may not allow us to keep pace with competitive pricing pressures which could adversely affect our margins.

There is no assurance that any changes affected by us will result in sufficient cost reductions to allow us to reduce the price of our products to remain competitive or improve our gross margins.

The loss of one or more of our tier one substrate customers would significantly hurt our operating results.

Our customers are not obligated to purchase a specified quantity of our products or to provide us with binding forecasts of product purchases.

In addition, our customers may reduce, delay or cancel orders.

In the past, we have experienced a slowdown in bookings, significant push-outs and cancellation of orders from customers.

If we lose a major customer or if a customer cancels, reduces or delays orders, our revenue would decline.

In addition, customers that have accounted for significant revenue in the past may not continue to generate revenue for us in any future period.

There is no assurance that any changes implemented by us will result in sufficient cost reductions to allow us to reduce the price of our products to remain competitive or improve our gross margins.

We have made and may continue to make strategic investments in raw materials suppliers, which may not be successful and may result in the loss of all or part of our investment.

4 unchanged sentences

In the first quarter of 2019, we incurred an impairment charge of $1.1 million for a germanium materials company in China in which we had a 25% ownership interest, writing down our investment to zero value.

During the second quarter of 2023, one of our equity investments assessed one of its equity investments was fully impaired, leading to a $754,000 impairment charge in our financial results for the second quarter of 2023.

During the second quarter of 2023, one of our equity investments determined that one of its equity investments was fully impaired, leading to a $754,000 impairment charge in our financial results for the second quarter of 2023.

In the fourth quarter of 2023, we divested another equity investment, incurring a net impairment charge of $1.1 million.

13 unchanged sentences

If we are unable to recover from a fire or natural disaster, our business and operating results could be materially and adversely affected.

Defects in our products could diminish demand for our products.

Our wafer products are complex and may contain defects, including defects resulting from impurities inherent in our raw materials or inconsistencies in our manufacturing processes.

We have experienced quality control problems with some of our products, which caused customers to return products to us, reduce orders for our products, or both.

If we experience quality control problems, or experience other manufacturing problems, customers may return product for credit, cancel or reduce orders or purchase products from our competitors.

We may be unable to maintain or increase sales to our customers and sales of our products could decline.

Defects in our products could cause us to incur higher manufacturing costs and suffer product returns and additional service expenses, all of which could adversely impact our operating results.

Our substrate products have a long qualification cycle that makes it difficult to forecast revenue from new customers or for new products sold to existing customers.

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This may adversely affect our results of operations and the value of our business.

A recent example of a cyclical downcycle took shape in the second half of 2022 and has continued into 2024.

A recent example of a cyclical downcycle took shape in the second half of 2022 and continued into 2024.

Early in its history, COVID began to impact supply chains resulting in shortages.

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If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses or fixed manufacturing costs for that quarter, which would harm our operating results.

This is an ongoing iterative research and development process performed by our China team in collaboration with our manufacturing managers.

New products must meet customer needs and compete effectively on quality, price and performance.

The markets for our products are characterized by rapid technological change, changing customer needs and evolving industry standards.

If our competitors introduce products employing new technologies or performance characteristics, our existing products could become obsolete and unmarketable.

Over time, we have seen our competitors selling more substrates manufactured using a crystal growth technology similar to ours, which has eroded our technological differentiation.

The development of new product features, improved performance characteristics and new products can be a highly complex process, and we may experience delays in developing and introducing them.

Any significant delay could cause us to fail to timely introduce and gain market acceptance of new products.

Further, the costs involved in researching, developing and engineering new products could be greater than anticipated.

We purchase critical raw materials and parts for our equipment from single or limited sources, and could lose sales if these sources fail to fill our needs.

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Escalating and volatile trade tariffs, import restrictions, export restrictions, Chinese regulations or other trade barriers may materially harm our business.

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.

InP export permits represent the most significant challenge we currently face.

The portal to apply for exports of indium phosphide from China opened in March 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 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.

The specific prohibitions and restrictions on the import and export of goods and technologies are delegated to the Ministry of Commerce of the People’s Republic of China, among other agencies.

As mentioned above, the three wafer substrate product families manufactured by Tongmei all require permits from the Ministry of Commerce before they can be exported from China.

Consequently, we do not believe that the revisions will have any additional material adverse effects on our wafer substrate products beyond the current restrictions and licensing requirement.

However, with the Foreign Trade Law’s enhanced power over import and export prohibitions and restrictions, no assurances can be given that additional restrictions will not be imposed in the future.

The fluidity of the export permit requirements and ongoing lack of surety 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.

But the timing for receiving permits remains uncertain, unclear and beyond our control.

We are actively monitoring and following up on the status of our applications.

In September 2018, the United States announced a list of thousands of categories of goods that became subject to Section 301 tariffs when imported into the United States from China.

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On March 4, 2025, the United States further increased the tariff on imports of many products, including our wafer substrates, to 70%.

In the first half of April 2025, we observed high volatility in tariffs put in place by the United States.

At least four separate tariffs were imposed by the United States on products from China.

Tariffs on our products increased to 100%.

In 2024, 8% of our total worldwide revenue was from sales in North America, primarily in the U.S.

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 (the "IEEPA") and the U.S.

Customs and Border Protection subsequently announced that IEEPA-based tariff provisions would be terminated effective February 24, 2026.

However, tariffs imposed under other authorities, including Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, 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.

Indium phosphide substrates are the primary revenue generator derived from imports into the U.S.

This revenue has been impacted by additional tariffs imposed by the United States and by export controls implemented by China.

As such, in the third quarter of 2025, only approximately 1% of our revenue was generated by sales to customers in North America.

In 2024, 8% of our total worldwide revenue was from sales in North America, primarily in the U.S.;

however, in 2025, only approximately 2% of our revenue was generated by sales to customers in North America.

We have little or no germanium imports into the U.S.

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have yet been approved.

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.

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.

The portal to apply for exports of indium phosphide from China opened in March and we immediately began to submit our applications.

On June 11, Tongmei was informed that it has satisfied the applicable requirements for a permit to export indium phosphide and 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.

More recently, we have also obtained export permits for indium phosphide shipments to the UK and Canada.

However, the timing for when permits will be granted remains uncertain and 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.

All of our wafer substrates are manufactured in China.

In the years 2024, 2023 and 2022, approximately 8%, 10% and 14% of our revenue, respectively, were generated by sales to customers in North America, primarily in the U.S.

In the first three quarters of 2025, approximately 2% of our revenue was generated by sales to customers in North America, primarily in the U.S.

In the first three quarters of 2025, we paid approximately $271,000 in tariffs.

All of our wafer substrates are manufactured in China and in the years 2025, 2024 and 2023, approximately 2%, 8% and 10% of our revenue, respectively, were generated by sales to customers in North America, primarily in the U.S.

In the years 2025, 2024 and 2023, we paid approximately $0.3 million, $1.0 million and $1.0 million, respectively, in tariffs.

The future impact of tariffs and trade wars is uncertain.

Because of the tariffs enacted and currently in effect, we may be required to raise prices, which could result in the loss of customers and our business, financial condition and results of operations may be materially harmed.

We may be required to raise prices, which could result in the loss of customers and our business, financial condition and results of operations may be materially harmed.

Additionally, it is possible that our business could be adversely impacted by further retaliatory trade measures taken by China or other countries in response to existing or future tariffs.

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Further, the continued threats of tariffs and other trade restrictions could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales.

We continue to monitor developments closely, including pending legal challenges to certain tariff authorities, updated guidance from regulators, retaliatory measures, resolution of trade agreements and ongoing negotiations with additional trade partners.

In addition, ongoing uncertainty regarding the mechanisms, timing and amount of any refunds or other relief relating to previously paid duties may affect our cash flows and results in future periods.

We cannot predict the scope, timing or ultimate impact of these developments on our business.

The trade and political tensions between China and the U.S.

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Consequently, prolonged trade tensions or supply chain disturbances could significantly increase our operating costs which may require us to consider alternative manufacturing options.

There is no guarantee that we can quickly secure alternative manufacturing facilities to meet customer demand of our products.

There is no guarantee that we can secure alternative manufacturing facilities to meet customer demand of our products.

Any failure to manage these international trade and supply chain risks could materially and adversely affect our business, financial condition, and results of operations.

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The PRC central government is a single party form of government with virtually unlimited authority and power to intervene in or influence commercial operations in China.

In the past, we have experienced such intervention or influence by the PRC central government and a change in the rules and regulations in China when we were instructed by the Beijing municipal government to relocate our gallium arsenide manufacturing facility in Beijing and expect that such intervention or influence or change in the rules and regulations in China could occur in the future.

In the past, we have experienced such intervention or influence by a change in the rules and regulations when we were instructed by the Beijing municipal government to relocate our gallium arsenide manufacturing facility from Beijing.

A more recent example is the imposition of export controls.

We expect that such intervention or change in the rules and regulations in China could occur in the future.

In the ordinary course of business, our PRC subsidiaries and PRC joint ventures require permits and licenses to operate in the PRC.

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Such disruptions have had an adverse impact on our financial performance and could continue in the future.

We face risks related to health epidemics and other outbreaks, which could significantly disrupt our business operations.

In December 2022, the PRC government ended its zero-COVID policy.

If there is a future outbreak in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.

Epidemic diseases, other contagious diseases or the perception of their effects, may affect our business operations and financial performance.

Outbreaks of epidemic, pandemic, or contagious diseases, such as the COVID-19 pandemic could result in business disruptions and impact our operations and financial performance.

The outbreak of COVID triggered references to the SARS outbreak, which occurred in 2003 and affected our business operations.

Any severe occurrence of an outbreak of a contagious disease such as COVID-19, SARS, Avian Flu or Ebola may cause us or the government to temporarily close our manufacturing operations in China.

In January 2020, virtually all companies in China were ordered to remain closed after the traditional Lunar New Year holiday ended, including our subsidiaries in China.

If there is a renewed surge of the COVID-19 pandemic or of other contagious diseases in cities in which our PRC subsidiaries and PRC joint ventures are located, the Chinese government may require these companies to close again.

If one or more of our key suppliers is required to close for an extended period, we might not have enough raw material inventories to continue manufacturing operations.

In addition, travel restrictions between China and the U.S.

In addition, during COVID-19, travel restrictions between China and the U.S.

were disrupted and this impacted our efficiency.

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If one of our key customers is required to close for an extended period, this may delay the placement of new orders.

Any significant outbreak of epidemic, pandemic, or contagious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, which could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

As a result, our revenue would decline.

Financial market volatility and adverse changes in the domestic, global, political and economic environment could have a significant adverse impact on our business, financial condition and operating results.

We are subject to the risks arising from adverse changes and uncertainty in domestic and global economies.

We are subject to the risks arising from adverse changes and uncertainty in domestic and global economies and policies.

Uncertain global economic and political conditions or low or negative growth in China, Europe or the United States, along with volatility in the financial markets and U.S.

financial system, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures to counteract the impact of the COVID-19 pandemic, pose challenges to our industry.

financial system, increasing national debt and fiscal concerns in various regions and the adoption and availability of fiscal and monetary stimulus measures, pose challenges to our industry.

Currently China’s economy is slowing and this could impact our financial performance.

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delays in, or curtailment of, purchasing decisions by our customers or potential customers;

increased credit risk associated with our customers or potential customers, particularly those that may operate in industries most affected by the economic downturn;

increased credit risk associated with our customers or potential customers, particularly those that may operate in industries most affected by an economic downturn;

impairment of our tangible or intangible assets.

A recent example of economic volatility took shape in the second half of 2022 and has continued into 2024.

A recent example of economic volatility took shape in the second half of 2022 and continued into 2024.

Early in its history, COVID-19 began to impact supply chains resulting in shortages.

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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.

The Company is required to obtain approval from the State Administration of Foreign Exchange (“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.

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Except for routine personal information necessary to process payroll and other benefits and emergency contact information, our PRC subsidiaries and PRC joint ventures do not collect or maintain personal information.

All of our products are manufactured in the PRC by our PRC subsidiaries and PRC joint ventures.

Although we are neither a PRC operating company nor do we conduct our operations in China through the use of VIEs, cybersecurity is increasingly a focus of the central government and the CAC could require AXT to comply with PRC cybersecurity regulations, which could cause us to make changes to our operations that could materially harm our business, financial condition and results of operations.

We believe our PRC subsidiaries and PRC joint ventures are in material compliance with the regulations or policies that have been issued by the CAC.

We do not believe AXT, Inc.

is subject to oversight by the CAC regarding data security.

is neither a PRC operating company nor do we conduct our operations in China through the use of VIEs.

However, cybersecurity is increasingly a focus of the central government and we may be required to change our existing practices in data privacy and cybersecurity matters at substantial costs, which could cause us to make changes to our operations that could materially harm our business, financial condition and results of operations.

We derive a significant portion of our revenue from international sales, and our ability to sustain and increase our international sales involves significant risks.

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All of our manufacturing facilities and most of our suppliers are also located outside the United States.

Managing our overseas operations presents challenges, including periodic regional economic downturns, trade balance issues, threats of trade wars, varying business conditions and demands, political instability, variations in enforcement of intellectual property and contract rights in different jurisdictions, differences in the ability to develop relationships with suppliers and other local businesses, changes in U.S.

and international laws and regulations, including import and export restrictions, fluctuations in interest and currency exchange rates, the ability to provide sufficient levels of technical support in different locations, cultural differences and perceptions of U.S.

Managing our overseas operations presents challenges, including export permit requirements, periodic regional economic downturns, trade balance issues, threats of trade wars, varying business conditions and demands, political instability, variations in enforcement of intellectual property and contract rights in different jurisdictions, differences in the ability to develop relationships with suppliers and other local businesses, changes in U.S.

and international laws and regulations, including import tariffs, fluctuations in interest and currency exchange rates, the ability to provide sufficient levels of technical support in different locations, cultural differences and perceptions of U.S.

companies, shipping delays and terrorist acts or acts of war, natural disasters and epidemics or pandemics, such as COVID-19, among other risks.

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We are subject to foreign exchange gains and losses that may materially impact our condensed consolidated statements of operations.

For example, in 2024, 2023 and 2022, we incurred foreign exchange gains of $91,000, $169,000 and $1.6 million, respectively.

For example, in 2025, 2024 and 2023, we incurred foreign exchange losses of $74,000 and foreign exchange gains of $91,000 and $169,000, respectively.

The functional currency of our companies in China is the Chinese renminbi, the local currency.

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In addition, if power is shut off at any of our facilities at any time, either voluntarily or as a result of unplanned brownouts, during certain phases of our manufacturing process including our crystal growth phase, the work in process may be ruined and rendered unusable, causing us to incur costs that will not be covered by revenue, and negatively impacting our cost of revenue and gross margins.

Although the audit report is prepared by an independent registered public accounting firm who is currently inspected fully by the PCAOB, there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB.

Although our audit report is prepared by an independent registered public accounting firm who is currently inspected fully by the PCAOB, there is no guarantee that future audit reports will be prepared by an independent registered public accounting firm that is completely inspected by the PCAOB.

Our independent registered public accounting firm, BPM, is registered with the PCAOB and is subject to regular inspections by the PCAOB to assess its compliance with the applicable professional standards.

Although we have operations in China, a jurisdiction where the PCAOB was, until recently, unable to conduct inspections without the approval of the Chinese government authorities, our independent registered public accounting firm is currently inspected fully by the PCAOB.

Although we have operations in China, a jurisdiction where the PCAOB was, until 2022, unable to conduct inspections without the approval of the Chinese government authorities, our independent registered public accounting firm is currently inspected fully by the PCAOB.

Inspections of other independent registered public accounting firms conducted by the PCAOB outside China have at times identified deficiencies in those independent registered public accounting firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.

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capital markets.

As part of a continued regulatory focus in the United States on access to audit and other information currently protected by national law, in particular PRC laws, in June 2019, a bipartisan group of lawmakers introduced bills in both houses of the U.S.

Congress which, if passed, would require the SEC to maintain a list of issuers for which PCAOB is not able to inspect or investigate the audit work performed by a non-U.S.

independent registered public accounting firm completely.

The proposed Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges Act prescribes increased disclosure requirements for these issuers and, beginning in 2025, the delisting from U.S.

national securities exchanges such as the Nasdaq Global Select Market of issuers included on the SEC’s list for three consecutive years.

It is unclear if this proposed legislation will be enacted.

Furthermore, there have been recent deliberations within the U.S.

government regarding potentially limiting or restricting companies based in China from accessing U.S.

capital markets.

On May 20, 2020, the U.S.

Senate passed the HFCA Act, which includes requirements for the SEC to identify issuers whose audit work is performed by independent registered public accounting firms that the PCAOB is unable to inspect or investigate completely because of a restriction imposed by a non-U.S.

authority in the independent registered public accounting firms’ local jurisdiction.

House of Representatives passed the HFCA Act on December 2, 2020, and the HFCA Act was signed into law on December 18, 2020.

Additionally, in July 2020, the U.S.

President’s Working Group on Financial Markets issued recommendations for actions that can be taken by the executive branch, the SEC, the PCAOB or other federal agencies and department with respect to Chinese companies listed on U.S.

stock exchanges and their independent registered public accounting firms, in an effort to protect investors in the United States.

In response, on November 23, 2020, the SEC issued guidance highlighting certain risks (and their implications to U.S.

investors) associated with investments in issuers based in China and summarizing enhanced disclosures the SEC recommends issuers based in China make regarding such risks.

On March 18, 2021, the SEC adopted interim final rules to implement the HFCA Act, which requires the SEC to identify certain issuers that filed annual reports with audit reports issued by registered public accounting firms located in foreign jurisdictions and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in those jurisdictions (the “Commission-Identified Issuers”).

Specifically, the SEC implemented the submission and disclosure requirements of the HFCA Act.

On December 2, 2021, the SEC issued amendments to finalize the interim final rules.

Further, the SEC established procedures to identify Commission-Identified Issuers and prohibit the trading of the securities of Commission-Identified Issuers as required by the HFCA Act.

We will be required to comply with these rules if the SEC identifies us as a Commission-Identified Issuer.

Under the HFCA Act, our securities may be prohibited from trading on the Nasdaq Global Select Market or other U.S.

stock exchanges if we are determined to be a Commission-Identified Issuer for three consecutive years, and this ultimately could result in our common stock being delisted.

Furthermore, on June 22, 2021, the U.S.

Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if enacted, would amend the HFCA Act and require the SEC to prohibit an issuer’s securities from trading on any U.S.

stock exchanges if the issuer is determined to be a Commission-Identified Issuer for two consecutive years instead of three.

On December 15, 2021, the Accelerating Holding Foreign Companies Accountable Act was introduced to the U.S.

House of Representatives.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCA Act, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCA Act, whether the PCAOB is unable to inspect or investigate completely independent registered public accounting firms located in a non-U.S.

jurisdiction because of a position taken by one or more authorities in that jurisdiction and was approved by the SEC on November 5, 2021.

On December 16, 2021, the PCAOB issued a report on its determinations that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in the PRC and Hong Kong because of positions taken by PRC authorities in those jurisdictions.

Beginning in March 2022, the SEC listed companies on either its conclusive list of issuers identified under the HFCA Act or its provisional list of issuers identified under the HFCA Act.

Companies listed on the SEC’s conclusive list of issuers identified under the HFCA Act are determined to be Commission-Identified Issuers.

The SEC did not list AXT, Inc.

on either its conclusive list of issuers identified under the HFCA Act or its provisional list of issuers identified under the HFCA Act.

On December 15, 2022, the PCAOB vacated its 2021 determinations that the positions taken by authorities in the PRC and Hong Kong prevented it from inspecting and investigating completely registered public accounting firms headquartered in those jurisdictions.

As a result, the SEC will not provisionally or conclusively identify an issuer as a Commission-Identified Issuer if it files an annual report with an audit report issued by a registered public accounting firm headquartered in either jurisdiction on or after December 15, 2022, until such time as the PCAOB issues a new determination.

The SEC will continue to include any Commission-Identified Issuer on the provisional or conclusive list if they filed an annual report with an audit report issued by a registered public accounting firm headquartered in mainland China and Hong Kong prior to the PCAOB’s decision to vacate its 2021 determinations.

While an agreement has been reached among the CSRC, the SEC and the PCAOB regarding the inspection of PCAOB-independent registered public accounting firms in China, there can be no assurance that we will be able to comply with requirements imposed by U.S.

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Risks Related to Our Financial Results and Capital Structure

We may utilize our cash balances for relocating manufacturing lines, adding capacity, acquiring state-of-the-art equipment or offsetting a business downturn resulting in the decline of our existing cash and if we need additional capital, funds may not be available on acceptable terms, or at all.

Our liquidity is affected by many factors, including among others, the relocation of our gallium arsenide manufacturing lines, the expansion of our capacity to meet market demand, the acquisition of state-of-the-art equipment, other capital expenditures, operating activities, the effect of exchange rate changes and other factors related to the uncertainties of the industry and global economies.

Such matters could draw down our cash reserves, which could adversely affect our financial condition, require us to incur debt, reduce our value and possibly impinge our ability to raise debt and equity funding in the future, at a time when we might need to raise additional cash or elect to raise additional cash.

Management has broad discretion as to the use of our cash balances, including any proceeds from capital raises such as the offering completed in December 2025 for gross proceeds of approximately $100 million and in April 2026 for gross proceeds of approximately $632.5 million, before deducting underwriting discounts and commissions and other offering expenses, and may not use such funds effectively.

If we need additional capital, funds may not be available on acceptable terms, or at all.

Our management has broad discretion in the application of our cash balances and if we are not able to use this cash effectively, it could adversely affect our business and operations.

Our liquidity is affected by many factors, including among others, the expansion of our capacity to meet market demand, in particular to add InP capacity, the acquisition of state-of-the-art equipment, relocating manufacturing lines, other capital expenditures, operating activities, offsetting a business downturn, the effect of exchange rate changes and other factors related to the uncertainties of the industry and global economies.

Such matters could draw down our cash reserves, which could adversely affect our financial condition, reduce the value of our common stock and possibly impinge our ability to raise debt and equity funding in the future, at a time when we might need to raise additional cash or elect to raise additional cash.

Accordingly, there can be no assurance that events will not require us to seek additional capital or, if required, that such capital would be available on terms acceptable to us, if at all.

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Any redemptions could have a material adverse effect on our business, financial condition and results of operations.

The price of shares of our Common Stock has fluctuated substantially.

The price of shares of our common stock has fluctuated substantially.

Therefore, some investors who have purchased our common stock at high prices face the risk of losing a significant portion of their original investment if they have to sell at a time when the price of shares of our common stock has declined.

For example, during the fourth quarter of 2025, and during the first and second quarter of 2026, the price of our common stock and trading volume have significantly increased compared to prior periods.

During this period, we did not make any significant announcements other than our financial condition and results of operations for the three and nine months ended September 30, 2025.

Accordingly, the market price of our common stock may fluctuate dramatically and may decline rapidly, irrespective of any developments in our business.

In addition, the volatility of our stock price could cause other consequences including causing a short squeeze due to the difference in investment decisions by short sellers of shares of our common stock and buy-and-hold decisions of longer investors.

Unpredictable fluctuations in our operating results could disappoint analysts or our investors, which could cause our stock price to decline.

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If our operating or financial results do not meet our guidance or the expectations of investment analysts, our stock price may decline.

We have adopted certain anti-takeover measures that may make it more difficult for a third party to acquire us.

Our Board of Directors has the authority to issue up to 1,117,000 shares of preferred stock in addition to the outstanding shares of Series A preferred stock and to determine the price, rights, preferences and privileges of those shares without any further vote or action by the stockholders.

The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.

The issuance of shares of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

We have no present intention to issue additional shares of preferred stock.

Because we do not intend to pay dividends on our common stock, stockholders will benefit from an investment in our stock only if it appreciates in value.

We have never declared or paid any cash dividends on our shares of common stock.

We currently intend to retain all future earnings, if any, for use in the operations and expansion of the business.

As a result, we do not anticipate paying cash dividends in the foreseeable future.

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.

We have adopted certain anti-takeover measures that may make it more difficult for a third party to acquire us and the rights of the holders of common stock may be impaired by the potential issuance of preferred stock.

Our Board of Directors has the authority, without stockholder approval, to issue preferred stock with voting, dividend, conversion, liquidation or other rights and this could adversely affect the voting power and equity interest of the holders of common stock.

Preferred shares could be issued with the right to more than one vote per common share and could be utilized as a method of discouraging, delaying or preventing a change of control.

These steps could be taken without any further vote or action by the common stockholders.

The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued.

The possible negative impact on takeover attempts could adversely affect the price of our common stock.

Although we have no present intention to issue any shares of preferred stock or to create any new series of preferred stock, we may issue such shares in the future.

Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or change of control, or changes in our management, which could adversely affect the market price of our common stock.

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the Board of Directors approves the merger or combination or the transaction which resulted in the stockholder becoming an interested stockholder.

We are not currently in compliance with the continued listing requirements for the Nasdaq Stock Market.

If we do not regain compliance with the continued listing standards, our common stock may be delisted from The Nasdaq Global Select Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

Our common stock may be delisted from The Nasdaq Global Select Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

Our common stock is listed on The Nasdaq Global Select Market.

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If the bid price of our common stock remains below $1.00 per share for thirty consecutive business days, we could be subject to delisting from the Nasdaq Global Select Market.

On July 14, 2025, we notified The Nasdaq Stock Market LLC (“Nasdaq”) that Ms.

Christine Russell, our independent director and Chair of the Audit Committee, passed away, and that the Audit Committee has been reduced to two independent directors, and we are not compliant with Nasdaq Lising Rule 5605(c)(2)(A), which requires the Audit Committee to be comprised of a minimum of three independent directors.

On July 18, 2025, Nasdaq confirmed the foregoing non-compliance and further notified us that we will be provided a cure period in order to regain compliance (i) until the earlier of our next annual meeting of shareholders or July 11, 2026;

or, (ii) if the next annual meeting of shareholders is held before January 7, 2026, then we must provide evidence of compliance no later than January 7, 2026.

On July 29, 2025, we appointed Leonard J.

Leblanc to the Board, to fill Ms.

Russell’s vacancy and also appointed Mr.

Leblanc to the Audit Committee.

However, the Board has determined that Mr.

Leblanc is not independent under the Nasdaq Listing Rules, and is relying on the exception provided under applicable Nasdaq Listing Rules for membership on the audit committee under exceptional and limited circumstances.

Leblanc’s previous experience, the Board has determined that the appointment of Mr.

Leblanc to our Audit Committee as a non-independent director will be in the best interests of the Company and our stockholders.

LeBlanc’s independence under the Nasdaq Listing Rules will be re-evaluated by the Board on or after January 1, 2026, at which time Mr.

Leblanc would be considered independent under the Nasdaq Listing Rules on January 1, 2026.

We cannot assure that we will be able to continue to comply with the continued listing standards that we are required to meet in order to maintain a listing of our common stock on Nasdaq.

Our failure to continue to meet these requirements may result in our common stock being delisted.

In addition, the continued listing of our common stock is contingent upon our compliance with The Nasdaq Global Select Market’s conditions for continued listing.

If we fail to meet any Nasdaq listing requirements, including the minimum bid price, satisfaction of minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity and certain corporate governance requirements, and do not regain compliance, we may be subject to delisting by Nasdaq.

Any delisting from The Nasdaq Global Select Market could have an adverse effect on our business and on the trading of our common stock.

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federal net operating loss carryforwards of approximately $50.5 million.

We have net operating loss carryforwards of approximately $108,000, primarily in the state of California, as of December 31, 2024.

We have state net operating loss carryforwards of approximately $138,000, primarily in the state of California, as of December 31, 2025.

We do not expect to utilize the loss carryforwards in the next several years unless Tongmei pays a dividend.

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Risks Related to Compliance, Environmental Regulations and Other Legal Matters

For as long as we are a “ smaller reporting company, ” we may take advantage of certain scaled disclosures available to Us and will be eligible to rely on reduced disclosure and reporting requirements applicable to smaller reporting companies.

We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

We may continue to qualify as a “smaller reporting company,” which would allow us to continue to take advantage of many of the same exemptions from disclosure requirements, including presenting only the two most recent fiscal years of audited financial statements and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million.

To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

As of the date of the filing of this report, we are a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act because our non-affiliated common stock public float was above $700 million as of the relevant determination date.

If we continue to qualify as a well-known seasoned issuer, we will no longer qualify as a smaller reporting company under the current rules of the SEC.

Once we cease to be a smaller reporting company, we will not be eligible to take advantage of the scaled disclosures available to smaller reporting companies and will be subject to increased disclosure and compliance obligations, including accelerated reporting deadlines and associated attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, in addition to the requirement to furnish a report by management on, among other things, the effectiveness of our internal controls over financial reporting.

The loss of smaller reporting company status and compliance with such larger company disclosure obligations may increase our legal, accounting and financial compliance costs and cause management and other personnel to divert attention from operational and other business matters to devote additional time to public company reporting requirements.

If we, or any of our partially owned supply chain companies, fail to comply with environmental and safety regulations, we may be subject to significant fines or forced to cease our operations.

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Although we have in place engineering, administrative and personnel protective equipment programs to address these issues, our ability to expand or continue to operate our present locations could be restricted or we could be required to acquire costly remediation equipment or incur other significant expenses if we were found liable for failure to comply with environmental and safety regulations.

Existing or future changes in laws or regulations in the United States and China may require us to incur significant expenditures or liabilities, or may restrict our operations.

Existing or future changes in laws or regulations in the United States or China may require us to incur significant expenditures or liabilities, or may restrict our operations.

In addition, our employees could be exposed to chemicals or other hazardous materials at our facilities and we may be subject to lawsuits seeking damages for wrongful death or personal injuries allegedly caused by exposure to chemicals or hazardous materials at our facilities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors