AXT INC

(Unaudited)

Note1. Basis of Presentation

The accompanying condensed consolidated financial statements of AXT, Inc., a Delaware corporation (“AXT,” the “Company,” “we,” “us,” and “our” refer to AXT, Inc. and all of its consolidated subsidiaries) are unaudited, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form10-Q and Article10 of Regulation S-X. Accordingly, this interim quarterly financial report doesnot include all disclosures required by U.S. GAAP for complete consolidated financial statements. In the opinion of our management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary to present fairly the financial position, results of operations and cash flows of the Company for all periods presented.

Our management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements in conformity with U.S. GAAP. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. These estimates and assumptions* may*change as new events occur and additional information is obtained. Actual results could differ materially from those estimates.

The results of operations for thethree andnine months ended* September 30, 2025* arenot necessarily indicative of the results to be expected in the future or for the full fiscal year. It is recommended that these condensed consolidated financial statements be read in conjunction with our audited consolidated financial statements and the notes thereto included in our Annual Report on Form10-K for the year ended* December 31, 2024* filed with the Securities and Exchange Commission (the “SEC”) on* March 14,*2025.

The condensed consolidated financial statements include the accounts of AXT and our consolidated subsidiaries, Beijing Tongmei Xtal Technology Co., Ltd. (“Tongmei”), AXT-Tongmei, Inc. (“AXT-Tongmei”), Baoding Tongmei Xtal Technology Co., Ltd. (“Baoding Tongmei”), ChaoYang Tongmei Xtal Technology Co., Ltd. (“ChaoYang Tongmei”), ChaoYang LiMei Semiconductor Technology Co., Ltd. (“ChaoYang LiMei”), ChaoYang XinMei High Purity Semiconductor Materials Co., Ltd. (“ChaoYang XinMei”), Nanjing JinMei Gallium Co., Ltd. (“JinMei”), ChaoYang JinMei Gallium Ltd. (“ChaoYang JinMei”), ChaoYang ShuoMei High Purity Semiconductor Materials Co., Ltd. (“ChaoYang ShuoMei”), MaAnShan JinMei Gallium Ltd., (“MaAnShan JinMei”) and Beijing BoYu Semiconductor Vessel Craftwork Technology Co., Ltd. (“BoYu”). All significant inter‑company accounts and transactions have been eliminated. Investments in business entities in which we donot have controlling interests, but have the ability to exercise significant influence over operating and financial policies (generally20-50% ownership), are accounted for by the equity method. As of* September 30, 2025* and* December 31, 2024*, we have three companies accounted for by the equity method. In* May 2023,we reduced our ownership in Emeishan Jia Mei High Purity Metals Co., Ltd. (“Jia Mei”) from 25% to 10% by selling a portion of our Jia Mei shares to athird* party for approximately $827,000. As a result of our decreased ownership and the fact that we donot have the ability to exercise significant influence over Jia Mei’s operations, as of* May 2023,weno* longer reported Jia Mei as an equity investment in our condensed consolidated balance sheets. Our Jia Mei investment was re-measured to fair value at the time of sale. Any future changes to the fair value are recognized through net income (“fair value method”). In* August 2025,our ownership interest in Jia Mei was further diluted to 7.14% following additional investments by new investors. For the majority-owned subsidiaries that we consolidate, we reflect the portion we donot* own as either noncontrolling interests in stockholder’s equity or as redeemable noncontrolling interests in temporary equity on our condensed consolidated balance sheets and in our condensed consolidated statements of operations.

When warranted by favorable market conditions, we intend to construct facilities at the ChaoYang LiMei location to provide us with additional production capacity. For thethree andnine months ended* September 30, 2025*, expenses associated with ChaoYang LiMei had a de minimis impact on our condensed consolidated financial statements.

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In* February 2021,Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang XinMei. The agreement called for a total investment of approximately $3.0 million, of which Tongmei would fund approximately $1.8 million for a 58.5 percent ownership of ChaoYang XinMei. In February 2021,Tongmei and the investors completed the initial funding of approximately $1.5 million. Tongmei’s portion of the investment was approximately $0.9 million. In May 2021,Tongmei and the investors completed the funding of the remaining balance of approximately $1.5 million. Tongmei’s portion of the final investment was approximately $0.9 million, for a total investment of approximately $1.8 million for a 58.5 percent ownership of ChaoYang XinMei. In September 2021and October 2021,ChaoYang XinMei received funding from a minority investor of $0.9 million and $1.0 million, respectively. In December 2021and January 2022,ChaoYang XinMei received funding from Tongmei of $1.4 million and $1.4 million, respectively. In January 2022,the China local government certified this additional funding in ChaoYang XinMei as an equity investment. In April 2022,Tongmei entered into a capital increase agreement (the “Capital Increase Agreement”) with minority investors to further invest approximately $4.5 million in ChaoYang XinMei. Tongmei’s portion of the investment was approximately $2.6 million, of which $1.1 million was invested in April 2022and $0.8 million was invested in May 2022.The minority investors’ portion of the investment was approximately $1.9 million, of which $0.7 million was invested in April 2022and $0.6 million was invested in May 2022.As a result, noncontrolling interests increased $1.4 million and redeemable noncontrolling interests increased $0.1 million. In July 2022,*Tongmei and the minority investors further invested $0.8 million and $0.6 million in ChaoYang XinMei, respectively. This completed the investment obligations under the Capital Increase Agreement. As a result, noncontrolling interests increased $610,000 and redeemable noncontrolling interests increased $57,000. Tongmei’s ownership remained at 58.5% after these equity investments.

In* April 2022,ChaoYang JinMei signed a joint venture agreement with certain investors to fund a new company, ChaoYang ShuoMei, our consolidated subsidiary (the “ChaoYang ShuoMei Joint Venture Agreement”). The ChaoYang ShuoMei Joint Venture Agreement called for a total investment of approximately $4.4 million, of which ChaoYang JinMei would fund approximately $3.3 million for a 75 percent ownership of ChaoYang ShuoMei. In Julyand August 2022,ChaoYang JinMei completed the initial funding of $1.0 million in ChaoYang ShuoMei. In August 2022,the investor invested $334,000 in ChaoYang ShuoMei. As a result, noncontrolling interests increased $406,000 and redeemable noncontrolling interests increased $73,000. In January 2023,ChaoYang ShuoMei received $0.5 million in funding from ChaoYang JinMei and $0.2 million in funding fromone* of the minority investors. As a result, noncontrolling interests increased $0.2 million and redeemable noncontrolling interests increased $36,000. In* May 2023,ChaoYang ShuoMei received $1.0 million in funding from ChaoYang JinMei and $0.3 million in funding fromone* of the minority investors. As a result, noncontrolling interests increased $0.4 million and redeemable noncontrolling interests increased $75,000. In* August 2023,ChaoYang ShuoMei received $0.6 million in funding from ChaoYang JinMei and $0.2 million in funding fromone* of the minority investors. As a result, noncontrolling interests increased $0.2 million and redeemable noncontrolling interests increased $44,000. ChaoYang JinMei has completed its investment obligations under the ChaoYang ShuoMei Joint Venture Agreement. ChaoYang JinMei’s ownership of ChaoYang ShuoMei remained at 75% after these equity investments.

In* April 2022,Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang KaiMei Quartz Co., Ltd. (“ChaoYang KaiMei”) (the “ChaoYang KaiMei Joint Venture Agreement”), which called for a total investment of approximately $7.6 million, of which Tongmei would fund approximately $3.0 million for a 40 percent ownership of ChaoYang KaiMei. In July 2022,Tongmei and the investors completed the initial funding of approximately $2.2 million. Tongmei’s portion of the investment was approximately $0.9 million. In January 2023,Tongmei made an investment of $0.9 million to ChaoYang KaiMei. In each of July 2023and August 2023,Tongmei made an investment of approximately $0.6 million in ChaoYang KaiMei. In September 2023,Tongmei entered into another joint venture agreement with the same group of investors. This new agreement called for additional investment of approximately $5.6 million, with Tongmei committing to fund approximately $2.3 million. In December 2023,Tongmei made its initial additional investment of approximately $0.6 million in ChaoYang KaiMei, followed by additional investments of approximately $0.3 million each in Juneand July 2024,and in March,** Apriland May 2025*. Tongmei’s ownership of ChaoYang KaiMei remained at 40% after these equity investments.

All activities for MaAnShan JinMei ceased during thefirst half of2022 and the subsidiary was subsequently dissolved in* May 2022.*The dissolution of MaAnShan JinMei had a de minimis impact on the condensed consolidated results.

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During the quarter ended* December 31, 2020,Tongmei entered intotwo* sets of definitive transaction documents, each consisting of a capital increase agreement along with certain supplemental agreements in substantially the same form (collectively, the “Capital Investment Agreements”), with several private equity investors in China.

In preparation for Tongmei’s application for a listing of shares in an initial public offering (the “IPO”) on the Shanghai Stock Exchange’s Sci-Tech innovAtion boaRd (the “STAR Market”), in late* December 2020,we reorganized our entity structures in China. JinMei and BoYu and their subsidiaries were assigned to Tongmei and effectively merged with Tongmei although they retained their own respective legal entity status and are wholly owned subsidiaries of Tongmei. The 33% minority interest stakeholders of BoYu converted their ownership to a 7.59% minority interest in Tongmei. The 8.5% minority interest stakeholders, employees of JinMei, converted their ownership to a 0.38% minority interest in Tongmei. Further, a number of employees, key managers and contributors purchased a 0.4% minority interest in Tongmei. Additionally, Baoding Tongmei and ChaoYang Tongmei, were assigned to Tongmei as wholly owned subsidiaries. In2020,* the private equity funds (the “Investors”) had transferred approximately $48.1 million of new capital to Tongmei. An additional investment of approximately $1.5 million of new capital was funded in* January 2021.Under China regulations these investments must be formally approved by the appropriate government agency and arenot* deemed to be dilutive until such approval is granted. The government approved the approximately $49 million investment in its entirety on* January 25, 2021,at which time the Investors owned a redeemable noncontrolling interest in Tongmei of 7.28%. As of September 30, 2025*, Tongmei’s noncontrolling interests and redeemable noncontrolling interests totaled approximately 14.5%. We remain the controlling stakeholder of Tongmei and hold a majority of the board of director positions of Tongmei. In* June 2021,*we sold AXT-Tongmei to Tongmei for $1. Since Tongmei is 85.5% owned by us, and the transaction was between common interest holders, the transaction was accounted for at net book value and resulted in an increase of $1.2 million to noncontrolling interests and $1.2 million to redeemable noncontrolling interests.

Note2. Investments and Fair Value Measurements

Our investments consist of instruments with original maturities of more thanthree months. As of* September 30, 2025* and* December 31, 2024*, our cash and debt investments are classified as follows (in thousands):

We manage our debt investments as a single portfolio of highly marketable securities that is intended to be available to meet our current cash requirements. Certificates of deposit and corporate bonds are typically held until maturity.

Historically, the gross unrealized losses related to our portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations andnot due to increased credit risk or other valuation concerns. There was an insignificant amount of gross unrealized losses on our available-for-sale debt securities as of* September 30, 2025*, and historically, such gross unrealized losses have been temporary in nature and we believe that it is probable the principal and interest will be collected in accordance with the contractual terms. We 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 credit losses or impairment would be necessary. 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 securities for a period of time sufficient to allow for any anticipated recovery in market value. We heldno available-for-sale debt securities as of* September 30, 2025* and* December 31, 2024*.

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Restricted Cash

We maintain restricted cash in connection with cash balances temporarily restricted for regular business operations. These balances have been excluded from the Company’s cash balance. As of* September 30, 2025* and* December 31, 2024*, $8.1 million and $11.0 million were included in restricted cash in our condensed consolidated balance sheets, respectively. The decrease in restricted cash primarily reflects the release of restrictions upon the settlement of the related bank loans that were collateralized by such cash balances.

Investments in Privately-held Raw Material Companies

We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business (see Note7). The investment balances for the non-consolidated companies are accounted for under the equity method, included in “Other assets” in the condensed consolidated balance sheets, totaled $14.6 million and $14.1 million as of* September 30, 2025* and* December 31, 2024*, respectively. As of* September 30, 2025*, there were three companies accounted for under the equity method. There wereno impairment charges for these investments during thethree andnine months ended* September 30, 2025and2024*.

In* May 2023,we reduced our ownership in Jia Mei from 25% to 10% by selling a portion of our Jia Mei shares to athird* party for approximately $827,000. As a result of our decreased ownership and the fact that we donot have the ability to exercise significant influence over Jia Mei’s operations, we adopted the fair value method of accounting to report on the investment in Jia Mei. Our investments under the fair value method are reviewed for other-than-temporary declines in value on a quarterly basis. We monitor our investments for impairment and record reductions in carrying value when events or changes in circumstances indicate that the carrying value* maynot* be recoverable. As a result of the share sale, we recognized a gain of $575,000. Additionally, in accordance with Accounting Standards Codification (“ASC”)321-10-35-2, we adjusted the investment in Jia Mei to its fair value at the time of the sale, which resulted in a gain of $383,000. The gain resulting from the sale and the subsequent remeasurement was incorporated as a component of “Equity in income of unconsolidated joint ventures” in the condensed consolidated statements of operations in thesecond quarter of2023. In* June 2025,we determined that the fair value had declined, resulting in the recognition of a loss of $145,000. In September2025,* we recognized a gain of $296,000, reflecting an increase in the estimated fair value of the investment based on an offer from an unrelated buyer to purchase our shares. As of* September 30, 2025*, our investments in this unconsolidated company had a carrying value of $702,000 and were included in “Other assets” in the condensed consolidated balance sheets.

Fair Value Measurements

We invest primarily in certificates of deposits, corporate bonds and notes, government securities and money market accounts. We review our debt investment portfolio for credit loss at least quarterly or when there are changes in credit risk or other potential valuation concerns. As of* September 30, 2025* and* December 31, 2024*, the total unrealized loss, net of tax, included in accumulated other comprehensive income was immaterial. We believe it is probable the principal and interest will be collected in accordance with the contractual terms, and the unrealized loss on these securities was due to normal market fluctuations, andnot due to increased credit risk or other valuation concerns. ASC820, Fair Value Measurements and Disclosures, establishesthree levels of inputs that* maybe used to measure fair value. Level1* instrument valuations are obtained from real-time quotes for transactions in active exchange markets of the asset or identical assets. Level2 instrument valuations are obtained from readily- available, observable pricing sources for comparable instruments. Level3 instrument valuations are obtained from unobservable inputs in which there is little orno market data, which require us to develop our own assumptions. On a recurring basis, we measure certain financial assets and liabilities at fair value, primarily consisting of our short-term and long-term debt investments.

The type of instrument valued based on quoted market prices in active markets includes our money market funds, which are generally classified within Level1 of the fair value hierarchy. We classify our available-for-sale debt securities, including certificates of deposit and corporate bonds, as having Level2 inputs. The valuation techniques used to measure the fair value of these financial instruments having Level2 inputs were derived from bank statements, quoted market prices, broker or dealer statements or quotations, or alternative pricing sources with reasonable levels of price transparency.

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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 U.S. GAAP. At quarter end, any foreign currency hedgesnot settled are netted in “Accrued liabilities” on the condensed consolidated balance sheets and classified as Level3 assets and liabilities. As of* September 30, 2025*, 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 on the condensed consolidated results.

There wereno changes in valuation techniques or related inputs in thethree andnine months ended* September 30, 2025*. There have beenno transfers between fair value measurements levels during thethree andnine months ended* September 30, 2025*. Our investment balance as of* September 30, 2025* was $0.

Items Measured at Fair Value on a Nonrecurring Basis

Certain assets that are subject to nonrecurring fair value measurements arenot included in the table above. These assets include investments in privately-held companies accounted for by the equity or fair value method (see Note7). We didnot record any other-than-temporary impairment charges for these investments during thethree andnine months ended* September 30, 2025and2024*, respectively.

Note3. Inventories

The components of inventories are summarized below (in thousands):

As of* September 30, 2025* and* December 31, 2024*, carrying values of inventories were net of inventory reserves of $27.1 million and $24.1 million, respectively, for excess and obsolete inventory and $149,000 and $73,000, respectively, for lower of cost or net realizable value reserves.

Note 4. Property, Plant and Equipment, Net

The components of our property, plant and equipment are summarized below (in thousands):

As of* September 30, 2025*, the balance of construction in progress was $21.8 million, of which$16.8 million was related to our buildings in our new Dingxing and Kazuo locations,$1.2 million was for manufacturing equipment purchasesnot yet placed in service and $3.8 million was for construction in progress for our other consolidated subsidiaries. As of* December 31, 2024*, the balance of construction in progress was $23.5 million, of which $17.9 million was related to our buildings in our Dingxing and Kazuo locations, $1.4 million was for manufacturing equipment purchasesnot yet placed in service and $4.3 million was for our construction in progress for our other consolidated subsidiaries.

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Note5. Accrued Liabilities

The components of accrued liabilities are summarized below (in thousands):

Note6. Related Party Transactions

In* September 2021and October 2021,our consolidated subsidiary, ChaoYang XinMei, received funding from a minority investor of $0.9 million and $1.0 million, respectively. As of December 31, 2021,$1.9 million was included in short-term loan from noncontrolling interest in our condensed consolidated balance sheets. In December 2021and January 2022,the same subsidiary received funding from Tongmei of $1.4 million and $1.4 million, respectively. In January 2022,the China local government certified this additional funding in ChaoYang XinMei as an equity investment. As a result, noncontrolling interests increased $2.2 million and redeemable noncontrolling interests increased $0.2 million. Short-term loan from noncontrolling interest decreased to $0. In April 2022,Tongmei entered into the Capital Increase Agreement with minority investors to further invest approximately $4.5 million in ChaoYang XinMei. In April 2022and May 2022,ChaoYang XinMei received funding from Tongmei of $1.1 million and $0.8 million, respectively, as equity investments. In April 2022and May 2022,the minority investors invested $0.7 million and $0.6 million, respectively. As a result, noncontrolling interests increased $1.4 million and redeemable noncontrolling interests increased $0.1 million. In July 2022,*Tongmei and the minority investors further invested $0.8 million and $0.6 million in ChaoYang XinMei, respectively. This completed the investment obligations under the Capital Increase Agreement. As a result, noncontrolling interests increased $610,000 and redeemable noncontrolling interests increased $57,000. Tongmei’s ownership remained at 58.5% after these equity investments.

In* September 2022,our consolidated subsidiary, ChaoYang LiMei completed the sale of land and its attached buildings to our equity investment entity, ChaoYang KaiMei, for a total consideration of $1.5 million. In January 2023,*ChaoYang KaiMei paid to ChaoYang LiMei $1.5 million.

Our Related Party Transactions Policy seeks to prohibit all conflicts of interest in transactions between related parties and us, unless they have been approved by our Board of Directors. This policy applies to all of our employees, directors, and our consolidated subsidiaries. Our executive officers retain board seats on the board of directors of the companies in which we have invested in our PRC joint ventures. See Note7 for further details.

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Note7. Investments in Privately-Held Raw Material Companies

We have made strategic investments in private companies located in China in order to gain access at a competitive cost to raw materials that are critical to our substrate business. These companies form part of our overall supply chain strategy.

As of* September 30, 2025*, the investments are summarized below (in thousands):

• These percentages reflect the ownership currently in effect upon the completion of the reorganization in China and the ownership in effect upon the completion of the new capital funding by private equity investors in* January 2021.*

** In preparation for Tongmei’s application for a listing of shares in an IPO on the STAR Market, in late* December 2020we reorganized our entity structures in China. JinMei and BoYu and their subsidiaries, previously organized under AXT, Inc., were assigned to Tongmei and effectively merged with Tongmei although they retained their own respective legal entity status and are wholly owned subsidiaries of Tongmei. The 33% minority interest stakeholders of BoYu converted their ownership to a 7.59% minority interest in Tongmei. The 8.5% minority interest stakeholders, employees of JinMei, converted their ownership to a 0.38% minority interest in Tongmei. Further, a number of employees, key managers and contributors, purchased a 0.4% minority interest in Tongmei. In2020,* the Investors transferred approximately $48.1 million of new capital to Tongmei. An additional investment of approximately $1.5 million of new capital was funded in early* January 2021.Under China regulations these investments must be formally approved by the appropriate government agency and arenot* deemed to be dilutive until such approval is granted. The government approved the approximately $49 million investment in its entirety on* January 25, 2021at which time the Investors owned a redeemable noncontrolling interest in Tongmei of 7.28%. As of September 30, 2025*, Tongmei’s noncontrolling interests and redeemable noncontrolling interests totaled approximately 14.5%. AXT remains the controlling stakeholder of Tongmei and holds a majority of the Board of Director positions of Tongmei.

*** In* February 2021,*Tongmei signed a joint venture agreement with certain investors to fund ChaoYang XinMei.

**** In* April 2022,*ChaoYang JinMei signed a joint venture agreement with certain investor to fund a new company, ChaoYang ShuoMei.

***** In* April 2022,*Tongmei signed a joint venture agreement with certain investors to fund a new company, ChaoYang KaiMei.

****** In* May 2023,we sold 15% of our equity investments in Jia Mei to athird* party, after which we began accounting for the investment under the fair value method. In* August 2025,*our ownership interest in Jia Mei was further diluted to 7.14% following additional investments by new investors.

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In* May 2023,we reduced our ownership in Jia Mei from 25% to 10% by selling a portion of our Jia Mei shares to athird* party for approximately $827,000. Considering our decreased ownership and that weno longer have significant influence over its operations and financial policies, we adopted the fair value method of accounting to report on the investment in Jia Mei. As Jia Mei's equity interest is without a readily determinable fair value, we elected to use the measurement alternative to measure at cost, less any impairment, plus or minus fair value changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

The Jia Mei investment is reviewed for other-than-temporary declines in value on a quarterly basis. In* May 2025,two unrelated investors entered into an agreement to invest approximately $360,000 each in Jia Mei, in exchange for an 8.9% ownership per investor. The signed agreement provided a market-based indication of Jia Mei's fair value. Based on the signed agreement, we recorded an impairment charge of $145,000 for Jia Mei investment during thenine* months ended* September 30, 2025*. In* August 2025,the May 2025transaction was registered and as a result, our ownership interest in Jia Mei was reduced to 7.1% as of September 30, 2025.At the end of September**2025,* we recognized a gain of $296,000, reflecting an increase in the estimated fair value of the investment based on an offer from another unrelated buyer to purchase our shares in Jia Mei.

Although we have representation on the board of directors of each of the privately held raw material companies, the daily operations of each of these companies are managed by local management andnot by us. Decisions concerning their respective short-term strategy and operations, ordinary course of business capital expenditures and sales of finished product, are made by local management with regular guidance and input from us.

For AXT’s minority investment entities that arenot consolidated, the investment balances are included in “Other assets” in our condensed consolidated balance sheets and totaled $15.3 million and $14.6 million as of* September 30, 2025* and* December 31, 2024*, respectively. As of* September 30, 2025*, our ownership interests in ChaoYang KaiMei, JiYa, Xiaoyi XingAn Gallium Co., Ltd (“Xiaoyi XingAn”) and Jia Mei were 40%,39%,25%, and 7%, respectively. These minority investment entities arenot considered variable interest entities because:

In* June 2022,** July 2022and August 2022,we received a dividend of $1.3 million from BoYu, $1.5 million from Xiaoyi XingAn and$0.1* million from JiYa, respectively. In* April 2023,Xiaoyi XingAn distributed a dividend of $1.8 million to us. Additionally, in both April 2023and November 2023,JiYa distributed dividends to us, totaling $2.0 million and $0.5 million, respectively. In May 2024and November 2024,we received a dividend of $2.1 million from Xiaoyi XingAn and $0.3 million from JiYa, respectively. In April 2025,we received a $0.9 million dividend from JiYa. We haveno* current intentions to distribute to our investors earnings under our corporate structure. All of these distributions were paid to the PRC companies and the minority shareholders.

AXT’s minority investment entities arenot consolidated and are accounted for under the equity method. The equity investment entities had the following summarized statements of operations information (in thousands) for thethree andnine months ended* September 30, 2025and2024*:

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Our portion of the income and losses, including impairment charges, from these minority investment entities that arenot consolidated and are accounted for under the equity method was income of $0.2 million and $1.0 million, respectively, for thethree months ended* September 30, 2025and2024*. Our portion of the income and losses, including impairment charges, from these minority investment entities that arenot consolidated and are accounted for under the equity method was income of $0.4 million and $2.5 million, respectively, for thenine months ended* September 30, 2025and2024*.

Note8. Stockholders’** Equity**

Condensed Consolidated Statements of Stockholders’** Equity**

(in thousands)

The changes in stockholders’ equity by component for thethree andnine months ended* September 30, 2025* are as follows:

Net income (loss) and other comprehensive loss attributable to redeemable noncontrolling interests were$10,000 and $65,000, respectively, for thethree months ended* September 30, 2025*, and ($1.0) millionand $246,000, respectively, for thenine months ended* September 30, 2025* and arenot shown in the table above.

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The changes in stockholders’ equity by component for thethree andnine months ended* September 30, 2024* are as follows:

Net income (loss) and other comprehensive income (loss) attributable to redeemable noncontrolling interests were ($140,000) and $376,000, respectively, for thethree months ended* September 30, 2024* and ($210,000) and $118,000, respectively, for thenine months ended* September 30, 2024* and arenot shown in the table above.

There wereno reclassification adjustments from accumulated other comprehensive income (loss) for thethree andnine months ended* September 30, 2025and2024*.

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Stock Repurchase Program

On* October 27, 2014,our Board of Directors approved a stock repurchase program pursuant to which we mayrepurchase 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. During2015,* 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 from2016 through2024. During thethree andnine months ended* September 30, 2025*, we didnot repurchase any shares under the approved stock repurchase program. As of* September 30, 2025*, approxima tely $2.7 million remained available for future repurchases under this program. Currently, we donot plan to repurchase additional shares.

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. During2013 and2015, 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. In the quarter ended September 30, 2025and2024*, we didnot repurchase any of our outstanding common stock. 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.

Note9. Stock-Based Compensation

We account for stock-based compensation in accordance with the provisions of ASC Topic718, Compensation-Stock Compensation(“ASC718”), which established accounting for stock-based awards exchanged for employee services. Stock-based compensation cost is measured at each grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period of the award. All of our stock compensation is accounted for as an equity instrument.

In* May 2015,our stockholders approved our2015* Equity Incentive Plan (the*“2015* Plan”). The2015 Plan is a replacement of the2007 Plan. The 399,562 share reserve of the2007 Plan became the reserve of the2015 Plan, together with 3,000,000 additional shares approved for issuance under the2015 Plan. In* May 2019,our stockholders approved 1,600,000 of additional shares for issuance under the2015* Plan. In* May 2021,our stockholders approved 3,600,000 of additional shares for issuance under the2015* Plan. In* May 2024,our stockholders approved an amendment to the2015* Plan to increase the number of shares reserved for issuance by an additional 3,600,000 shares. In* May 2025,our stockholders approved our2025* Equity Incentive Plan (the*“2025* Plan”). The2025 Plan is a replacement of the2015 Plan, which expired on* April 1, 2025.The2015* Plan will continue to govern the awards granted under that Plan. The 4,313,156 share reserve of the2015 Plan became the reserve of the2025 Plan. Awards that* maybe made under the2025* Plan are stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, deferred compensation awards and other stock-based awards. Stock options and stock appreciation rights awarded under the2025 Plan* maynot* be repriced without stockholder approval. Stock options and stock appreciation rights* maynot* be granted below fair market value. Stock options or stock appreciation rights generally shallnot be fully vested over a period of less than four years from the date of grant and cannot be exercised more than 10 years from the date of grant. Restricted stock, restricted stock units, and performance awards generally shallnot vest faster than over athree-year period (or atwelve-month period if vesting is based on a performance measure). However, options granted to consultants and restricted stock awards granted to independent board members typically vest inone year and the2025 Plan does allow for similar vesting to employees.

The following table summarizes compensation costs related to our stock-based awards (in thousands, except per share data):

We didnot capitalize any stock-based compensation to inventory as of* September 30, 2025* and* December 31, 2024* due to the immateriality of the amount.

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We estimate the fair value of stock options using the Black-Scholes option pricing model, consistent with the provisions of ASC718. There wereno options granted in thethree andnine months ended* September 30, 2025and2024*.

The following table summarizes the stock option transactions during thenine months ended* September 30, 2025* (in thousands, except per share data):

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing price of $4.49 on* September 30, 2025*, which would have been received by the option holder had all option holders exercised their options on that date.

Restricted stock awards

A summary of activity related to restricted stock awards for thenine months ended* September 30, 2025* is presented below (in thousands, except per share data):

As of* September 30, 2025*, the unamortized compensation costs related to unvested restricted stock awards was approximately $3.2 million, which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.2 years.

At-Risk, Performance Shares

In* February 2024,the Company issued at-risk, performance shares classified as equity awards. Expense is recognized quarterly on a straight-line method over the requisite service period, based on the probability of achieving the specified financial performance metric, with changes in expectations recognized as an adjustment to earnings in the period of change. Compensation cost isnot* recognized for at-risk, performance shares that donot vest because service or performance conditions arenot satisfied and any previously recognized compensation cost is reversed. At-risk, performance shares are eligible to receive dividend equivalents under the Company’s2015 Equity Incentive Plan (the “Plan”), as determined by the Board of Directors. The Company will recognize forfeitures as they occur.

The Company’s at-risk, performance shares are classified as equity and contain performance and service conditions that must be satisfied for an employee to receive the shares. The financial performance metric for the at-risk, performance shares issued in* February 2024is based upon the Company’s year-end actual results in2024.* All performance shares, if earned, are still subject to annual vesting over afour-year period, except thatno shares are vested on thefirst anniversary because the performance measurement is based on year-end results for the year2023 and2024, respectively.

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The fair value of the at-risk, performance shares is determined based on the closing price of the Company’s common stock on thefirst day after the public issuance of the Company’s earnings release for the most recent fiscal quarter, following the Compensation Committee and Board of Directors approval, which is considered the grant date. The fair value per share of the at-risk, performance shares classified as equity awards granted in* February 2024and March 2023*was $2.28 and $3.71, respectively.

On* March 15, 2023,the Compensation Committee recommended, and the Board approved, the grant to Dr. Morris Young of 223,590 at-risk, performance shares under the Plan. On March 15, 2023,the Compensation Committee approved the grant to Gary Fischer of 77,600 at-risk, performance shares under the Plan. If the minimum financial metric for fiscal year2023* is achieved, then based upon a performance formula, a corresponding portion of the 223,590 shares issued to Dr. Young would be eligible to vest and a corresponding portion of the 77,600 shares issued to Mr. Fischer would be eligible to vest. If the target financial metric was exceeded and an additional financial metric for fiscal year2023 is achieved, then additional shares above the target number of shares are earned based on such performance formula and the maximum number of additional shares earned is capped at 100% of the target. If the minimum financial metric for fiscal year2023 isnot achieved, then these awards are forfeited. On* February 20, 2024,the Compensation Committee met and certified that the minimum revenue metric for fiscal year2023* wasnot achieved. Therefore, none of the at-risk performance shares became eligible to vest.

On* February 20, 2024,the Compensation Committee recommended, and the Board approved, the grant to Dr. Morris Young of 223,590 at-risk, performance shares under the Plan. On February 20, 2024,the Compensation Committee approved the grant to Gary Fischer of 77,600 at-risk, performance shares under the Plan. If the minimum financial metric for fiscal year2024* is achieved, then based upon a performance formula, a corresponding portion of the 223,590 shares issued to Dr. Young would be eligible to vest and a corresponding portion of the 77,600 shares issued to Mr. Fischer would be eligible to vest. If the target financial metric is exceeded, then additional shares above the target number of shares are earned based on such performance formula and the maximum number of additional shares earned is capped at 100% of the target. If the minimum financial metric for fiscal year2024 isnot achieved, then these awards are forfeited. On* February 18, 2025,the Compensation Committee met and certified that the year-over-year annual revenue growth rate achieved for fiscal year2024,* expressed as a percentage, was 200%. Therefore, the maximum number of at-risk performance shares became eligible to vest.

A summary of the status of our unvested at-risk, performance shares as of* September 30, 2025* is presented below (in thousands, except per share data):

As of* September 30, 2025*, there was $0.5 million of unrecognized compensation expense related to unvested at-risk, performance shares that is expected to be recognized over a weighted-average period of 1.3 years.

Note10. Net Loss Per Share

Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the periods less shares of common stock subject to repurchase and non-vested stock awards. Diluted net income (loss) per share is computed using the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the periods. The dilutive effect of outstanding stock options and restricted stock awards is reflected in diluted earnings per share by application of the treasury stock method. Potentially dilutive common shares consist of common shares issuable upon the exercise of stock options and vesting of restricted stock awards. Potentially dilutive common shares are excluded from the computation of weighted-average number of common shares outstanding in net loss years, as their effect would be anti-dilutive to the computation.

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A reconciliation of the numerators and denominators of the basic and diluted net loss per share calculations is as follows (in thousands, except per share data):

The 883,000 shares of $0.001 par value Series A preferred stock issued and outstanding as of* September 30, 2025* and* December 31, 2024*, valued at $3,532,000, are non-voting and non-convertible preferred stock with a 5.0% cumulative annual dividend rate payable when declared by the Board of Directors and a $4 per share liquidation preference over common stock, which must be paid before any distribution is made to common stockholders. These preferred shares were issued to Lyte Optronics, Inc. stockholders in connection with the completion of our acquisition of Lyte Optronics, Inc. on* May**28,* 1999.

Note11. Segment Information and Foreign Operations

Segment Information

We operate inone segment for the design, development, manufacture and distribution of high-performance compound and single element semiconductor substrates and sale of raw materials integral to these substrates. In accordance with ASC Topic280, Segment Reporting, our chief operating decision‑maker (“CODM”) has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the Company. Since we operate inone segment, all financial segment and product line information can be found in the consolidated financial statements. The CODM regularly evaluates consolidated net income (loss) and functional expenses, including cost of revenue, selling, general and administrative and research and development, to manage Company operations.No additional disaggregated expense categories are presented beyond those already disclosed in the primary financial statements.

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Product Information

The following table represents revenue amounts (in thousands) by product type:

Geographical Information

The following table represents revenue amounts (in thousands) reported for products shipped to customers in the corresponding geographic region:

Long-lived assets consist primarily of property, plant and equipment and operating lease right-of-use assets, and are attributed to the geographic location in which they are located. Long-lived assets, net of depreciation, by geographic region were as follows (in thousands):

Significant Customers

Two customers represented 19% and 13%, respectively of our revenue for thethree months ended* September 30, 2025* andno customer represented10% of our revenue for thethree months ended* September 30, 2024*. Our topfive customers, althoughnot the samefive customers for each period, represented 45% and 29% of our revenue for thethree months ended* September 30, 2025and2024*, respectively.

No customer represented10% of our revenue for thenine months ended* September 30, 2025* and2024. Our topfive customers, althoughnot the samefive customers for each period, represented 32% and 30% of our revenue for thenine months ended* September 30, 2025and2024*, respectively.

We perform ongoing credit evaluations of our customers’ financial condition, and limit the amount of credit extended when deemed necessary, but generally donot require collateral. Three customers accounted for more than10% of our accounts receivable balance as of* September 30, 2025* andone customer accounted for more than10% of our accounts receivable balance as of* December 31, 2024*.

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Note12. Commitments and Contingencies

Indemnification Agreements

We have entered into indemnification agreements with our directors and officers that require us to indemnify our directors and officers against liabilities that* may*arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of a culpable nature; to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified; and to obtain directors’ and officers’ insurance if available on reasonable terms, which we currently have in place.

Product Warranty

We provide warranties for our products for a specific period of time, generally twelve months, against material defects. We provide for the estimated future costs of warranty obligations in cost of sales when the related revenue is recognized. The accrued warranty costs represent the best estimate at the time of sale of the total costs that we expect to incur to repair or replace product parts that fail while still under warranty. The amount of accrued estimated warranty costs is primarily based on historical experience as to product failures as well as current information on repair costs. On a quarterly basis, we review the accrued balances and update the historical warranty cost trends.

The following table reflects the change in our warranty accrual which is included in “Accrued liabilities” in the condensed consolidated balance sheets, during thethree andnine months ended* September 30, 2025and2024* (in thousands):

Contractual Obligations

In2020, we and a competitor entered into a cross license and covenant agreement (the “Cross License Agreement”), which has a term that began on* January 1, 2020and expires on December 31, 2029.The Cross License Agreement is a fixed-cost cross license andnot* 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.

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Land Purchase and Investment Agreement** **

We have established a wafer process 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 credits or rebates 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 of3-D sensing VCSELs (vertical cavity surface emitting lasers), 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 isno 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 isno 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. In addition, BoYu has a similar agreement with the city of Kazuo. The total investment targeted by BoYu in Kazuo is approximately $8 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* mayincur a penalty if we cancel the purchase order. As of September 30, 2025*, we donot have any outstanding purchase orders that will incur a penalty if cancelled by the Company.

Legal Proceedings

From time to time we* maybe involved in judicial or administrative proceedings concerning matters arising in the ordinary course of business. We donot* expect that any of these matters, individually or in the aggregate, will have a material adverse effect on our business, financial condition, cash flows or results of operations.

On* May 6, 2024,a putative shareholder class action complaint was filed in the U.S. District Court for the Eastern District of New York on behalf of persons or entities who purchased or acquired our publicly traded securities against us, Morris S. Young, our Chief Executive Officer, and Gary L. Fischer, our Chief Financial Officer. The court transferred the case to the Northern District of California, where our headquarters are located. A lead plaintiff was appointed and an amended complaint was filed, asserting a putative class period from March 24, 2021and April 3, 2024,inclusive (the “Class Period”). The amended complaint alleged violations of Sections10*(b) and20(a) of the Securities Exchange Act of1934, as amended (the “Exchange Act”), and Rule10b-5 promulgated thereunder by the defendants, and sought unspecified monetary relief, interest, and attorneys’ fees. On* November 8, 2024,Defendants moved to dismiss. The Court granted the motion to dismiss with leave to amend on May 28, 2025,holding that the plaintiffs failed to state a claim. Plaintiffs filed asecond* amended complaint on* June 27, 2025,asserting the same claims as in the prior complaint. On July 11, 2025,*Defendants again moved to dismiss. Defendants’ motion to dismiss is fully briefed and pending before the Court.

On* August 22, 2024,a derivative lawsuit was filed in the Northern District of California by an alleged shareholder against Morris S. Young, our Chief Executive Officer, Gary L. Fischer, our Chief Financial Officer, then-serving directors David C. Chang, Jesse Chen, and Christine Russell, and former director Leonard J. LeBlanc, with the Company named as a nominal defendant (together, “Defendants”). Defendants moved to dismiss on November 6, 2024,following which the plaintiff filed an amended complaint on November 20, 2024.The amended complaint asserted that the Defendants breached their fiduciary duties to the Company based on the allegations asserted in the original complaint in the putative shareholder class action. On November 27, 2024,Defendants again moved to dismiss. On March 17, 2025,the Court granted our motion to dismiss, holding that the plaintiff didnot* make a pre-suit demand on our Board of Directors and failed to plead with particularity facts sufficient to excuse the lack of a demand and also for failure to state a claim. On* April 11, 2025,the plaintiff filed a notice that he didnot* intend to further amend his complaint. The Court entered judgment on* April 14, 2025.On May 13, 2025,*Plaintiffs filed a notice of appeal.

It isnot possible at this time to reasonably assess the final outcome of the putative shareholder class action or to reasonably estimate the possible loss or range of loss with respect to that litigation. We believe these claims to be meritless and intend to vigorously defend against them.

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Note13. Other Income (expense), Net

Other income (expense), net for thethree months ended* September 30, 2025and2024*, includes a grant of $0.1 million and $0.5 million, respectively, from government agencies as awards for technological innovation and job creation. Other income (expense), net for thenine months ended* September 30, 2025and2024*, includes a grant of $0.6 million and $1.9 million, respectively, from government agencies as awards for technological innovation and job creation.

In addition, we incurred a foreign currency transaction exchange loss of $40,000 and a gain of $800 for thethree months ended* September 30, 2025and2024*, respectively. We incurred a foreign currency transaction exchange gain of $47,000 and $101,000 for thenine months ended* September 30, 2025and2024*, respectively.

Note14. Income Taxes

We account for income taxes in accordance with ASC Topic740, Income Taxes (“ASC740”), 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. ASC740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely thannot that a portion of the deferred tax asset willnot be realized.

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.

We recognize interest and penalties related to uncertain tax positions in income tax expense. Income tax expense for thethree andnine months ended* September 30, 2025* includesno interest and penalties. As of* September 30, 2025*, we haveno accrued interest and penalties related to uncertain tax positions. We file income tax returns in the U.S. federal, various states and foreign jurisdictions. Currently, there isno tax audit in any of the jurisdictions and we donot expect there will be any significant change to this.

Provision for income taxes for thethree andnine months ended* September 30, 2025* was mostly related to our wholly owned China subsidiaries and our partially owned subsidiaries in China. Income taxes and certain state taxes, have been provided for our U.S. operations as most of the income in the U.S. had been fully offset by utilization of federal and state net operating loss carryforwards.

On* July 4, 2025,the President signed into law the “One Big Beautiful Bill Act” (the “Act”). Among other things, the Act makes permanent many provisions of the2017* Tax Cuts and Jobs Act (the “TCJA”) that otherwise would have expired this year. The Act permanently reinstates elective expensing for qualifying domestic research and experimental expenditures with respect to amounts paid or incurred after* December 31, 2024 (section174A*). Expenditures for research performed outside the U.S. remain amortizable over15 years. We capitalize the R&E expense incurred by our China subsidiaries and amortize it over15 years.

California Senate Bill167 was signed into law by the acting governor on* June 27, 2024.The bill makes several tax changes designed to alleviate the2024*-2025 budget. For tax years beginning on or after* January 1, 2024,and before January 1, 2027,net operating losses (NOLs) are suspended for both corporate and personal income taxes. The suspension willnot* apply to any taxpayer with net business income or modified adjusted income of less than*$1* million. Another provision in Senate Bill167 limits the use of credits for tax years beginning on or after* January 1, 2024,and before January 1, 2027.During this period, a business (including all taxpayers that are members of a combined report) mayclaim a total of only$5* million in credits under both the Corporation and Personal Income Tax laws (including the carryover of any business credit). Since the Company’s profit level is below*$1* million, Bill167 hasno impact on the Company.

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Note15. Revenue

Revenue Recognition

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 (7N Ga), pyrolytic boron nitride (pBN) crucibles and boron oxide (B2O3). After we ship our products, there areno 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 donot 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 thansix 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. Shipping and handling fees billed to customers in a sales transaction are recorded as an offset to shipping and handling expenses. 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 donot provide training, installation or commissioning services. We provide for future returns based on historical data, prior experience, current economic trends and changes in customer demand at the time revenue is recognized. We donot recognize any asset associated with the incremental cost of obtaining revenue generating customer contracts. As such, sales commissions are expensed as incurred, given that the expected period of benefit is less thanone year.

Contract Balances

Contract assets are recorded when we have a conditional right to consideration for our completed performance under the contracts. Accounts receivables are recorded when the right to this consideration becomes unconditional. We believe the fair value of our accounts receivable approximates its carrying value due to its short maturities and nominal credit risk. We donot have any material contract assets as of* September 30, 2025*. In some contracts we require payment in advance of shipment, per a billing schedule reflected in our customer contracts, and the payment is recorded as a contract liability. The following table reflects the contract liabilities balance, which is included in “Accrued liabilities” on the condensed consolidated balance sheets, as of* September 30, 2025* and* December 31, 2024* (in thousands):

During thethree andnine months ended* September 30, 2025*, the Company recognized $12,000 and $1.6 million, respectively, of revenue that was included in the contract balances as of* December 31, 2024.During thethree* andnine months ended* September 30, 2024*, the Company recognized $9,000 and $163,000, respectively, of revenue that was included in the contract balances as of* December 31, 2023.*

Disaggregated Revenue

In general, revenue disaggregated by product types and geography (see Note11) is aligned according to the nature and economic characteristics of our business and provides meaningful disaggregation of our results of operations. Since we operate inone segment, all financial segment and product line information can be found in the condensed consolidated financial statements.

Note16. Loans and Line of Credit

Our bank loans and credit facilities typically have a term of12 months or less and are included in “Short-term loans” in our condensed consolidated balance sheets. The following table represents Short-term bank loans as of* September 30, 2025* and* December 31, 2024* (in thousands, except interest rate data):

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Long-term Loans

On* January 30, 2024,the Company secured a new line of credit amounting to $9.7 million, structured as afive-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 projects. As of September 30, 2025*, $4.7 million is included in “Other long-term liabilities” and $0.7 million is included in “Short-term loans” in our condensed 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 the30-month contractual period, ChaoYang XinMei holds the option to repurchase the production line and related equipment for $14.00. As of September 30, 2025*, the full remaining amount is included in “Short-term loans” in our condensed consolidated balance sheets.

In* February 2025,the Company secured afourteen-month unsecured bank loan totaling $2.7 million at an interest rate of 3.2%. As of September 30, 2025*, the full remaining amount is included in “Short-term loans” in our condensed consolidated balance sheets.

In* September**2025,* the Company entered into afour-year bank loan totaling $0.4 million at an interest rate of 3.1%. The loan is secured by the real estate properties owned by JinMei. As of* September 30, 2025*, $0.3 million is included in “Other long-term liabilities” and $0.1 million is included in “Short-term loans” in our condensed consolidated balance sheets.

As of* September 30, 2025*, the maturities of our long-term loan liabilities infive years (including current portion) are as follows (in thousands):

In summary, short-term loans of $61.5 million included under “Short-term loans” in our condensed consolidated balance sheet at* September 30, 2025*, consisted of $57.0 million of short-term bank loans and $4.5 million of the current portion of long-term debt. Long-term loan of $5.0 million included under “Other long-term liabilities” in our condensed consolidated balance sheet at* September 30, 2025*.

Note17. Leases

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 in2020.* 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 areno variable lease payments, residual value guarantees or any restrictions or covenants imposed by the facility lease. The remaining lease obligations relate to a nitrogen system to be used during the manufacturing process for our facility in Dingxing, China. The equipment lease became effective in August 2019and will expire in July 2029.The facility, located in Tongzhou, China, has a lease effective from December 2024and expiring in November 2029.There areno variable lease payments, residual value guarantees or any restrictions or covenants imposed by the equipment lease. All other operating leases have a term of12* months or less.

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Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if anyone of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it doesnot meet anyone of these criteria. All of our leases are classified as operating leases and substantially all of our operating leases are comprised of equipment and office space leases.None of our leases are classified as finance leases.

For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.

The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, consisting mainly of brokerage commissions, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease.

Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease willnot be terminated early.

Lease expense for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term.

We have electednot to recognize right-of-use assets and lease liabilities for short-term leases that have a term of12 months or less. The effect of short-term leases on our right-of-use asset and lease liability wasnot material.

As of* September 30, 2025*, the maturities of our operating lease liabilities (excluding short-term leases) are as follows (in thousands):

The weighted-average remaining lease term and the weighted-average discount rate for our operating leases as of each date is as follows:

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Supplemental cash flow information related to leases where we are the lessee is as follows (in thousands):

The components of lease expense are as follows (in thousands) within our condensed consolidated statements of operations:

Note18. Redeemable Noncontrolling Interests

As discussed in Note1, during the quarter ended* December 31, 2020,Tongmei entered into the Capital Investment Agreements with Investors that invested approximately $48.1 million in the form of redeemable noncontrolling interests representing 7.06% of the outstanding shares of Tongmei. An additional investment of approximately $1.5 million of new capital was funded in early January 2021.Under China regulations these investments must be formally approved by the appropriate government agency and arenot* deemed to be dilutive until such approval is granted. The government approved the entire approximately $49 million investment on* January 25, 2021,at which time the Investors owned a redeemable noncontrolling interest in Tongmei of 7.28%. The initial carrying amount of the redeemable noncontrolling interest was recorded at fair value on the date of issuance of Tongmei’s common stock, net of issuance costs and presented in temporary equity on the condensed consolidated balance sheets. This classification is due to the existence of certain contingencies that could result in potential redemption at the fixed purchase price as described below. We currently donot* believe that this is probable thusno amortization of the issuance costs has been recorded.

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, isnot approved by the Chinese Securities Regulatory Commission (“CSRC”) or Tongmei cancels the IPO application. The aggregate redemption amount is approximately $49 million, subject to the foreign exchange rate variable at time of redemption.

Tongmei submitted its IPO application to the Shanghai Stock Exchange in* December 2021and 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 willnot* change the status of AXT as a U.S. public company.

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The components of the change in redeemable noncontrolling interests for thenine months ended* September 30, 2025* are presented in the following table (in thousands):

Note19. Recent Accounting Pronouncements

In* December 2023,FASB issued ASU2023*-09— Income Taxes (Topic740): Improvements to Income Tax Disclosures, to help investors better understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities. Furthermore, the update improves to assess income tax information that affects cash flow forecasts and capital allocation decisions. The update is effective for public business entities for annual periods beginning after* December 15, 2024,*on a prospective basis. Adoption of the new standard will have an immaterial effect on our condensed consolidated financial statements.

In* March 2024,FASB released ASU2024*-01— Compensation—Stock Compensation (Topic718). The update adds an illustrative example aimed at clarifying the scope application of a profit interest award in accordance with Topic718. The update is effective for annual periods beginning after* December 15, 2024,*and interim periods within those annual periods. Adoption of the new standard had an immaterial effect on our condensed consolidated financial statements.

In* November 2024,FASB issued ASU2024*-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220-40), which requires public business entities to disclose additional information on specific expense categories in the notes to the financial statements. The Update is effective for annual reporting periods beginning after* December 15, 2026.Additionally, ASU2025*-01 amended the effective date for interim periods within annual reporting periods beginning after* December 15, 2027.*Adoption is expected to have an immaterial effect on our condensed consolidated financial statements.

In* July 2025.FASB issued ASU2025*-05, Financial Instruments - Credit Losses (Topic326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which allows a practical expedient that assumes current conditions as of the balance sheet date donot change for the remaining life of the asset when developing forecasts for estimating expected credit losses. The ASU is effective for fiscal years beginning after* December 15, 2025,*and interim periods within those fiscal years on a prospective basis. Adoption is expected to have an immaterial effect on our condensed consolidated financial statements.

Note20. Subsequent Events

In* Octoberand November 2025,*the Company obtained an aggregate of $9.5 million from its existing lines of credit, with interest rates ranging from 2.3% to 3.1%. All borrowings are unsecured and mature withinone year. During the same period, the Company repaid a total of $9.5 million of existing loans.

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