AXT, Inc. AXTI appears increasingly well positioned to benefit from the accelerating optical networking upgrade cycle, driven by the global artificial intelligence infrastructure boom. In the first quarter of 2026, the company reported 39.1% year-over-year revenue growth to $26.9 million, with Indium Phosphide (InP) substrate revenues reaching $13.6 million, largely supported by rising demand from data center applications.
Management highlighted that the ongoing surge in AI-driven optical transceivers and silicon photonics deployment is becoming a major catalyst for growth. Massive capital spending by hyperscalers and AI platform providers is driving demand for high-speed optical interconnect solutions required for both scale-up and scale-out AI infrastructure. AXT’s InP substrates play a critical role in lasers and photodetectors powering next-generation networking equipment.
AXT also has an emerging opportunity in co-packaged optics (CPO), an advanced architecture designed to improve bandwidth efficiency and reduce power consumption in AI clusters. Management indicated ongoing active customer discussions around CPO requirements and expects this market to become a meaningful growth driver beginning in late 2027 and beyond.
Management cited industry forecasts suggesting the optical component market could drive a 4x-6x expansion in the substrate market over the next three to five years. To capture this demand, AXT is aggressively expanding capacity, targeting to double Indium Phosphide output in both 2026 and 2027. With record backlog exceeding $100 million and growing Tier-1 customer engagement, AXTI appears strategically positioned to capitalize on this long-term optical infrastructure upgrade cycle.
Peer Updates
Diodes Incorporated DIOD is increasingly benefiting from the accelerating AI-driven data center upgrade cycle, which management identified as a major contributor to its 22% year-over-year revenue growth in the first quarter of 2026. The company is gaining traction across critical infrastructure components powering next-generation AI servers, including power supply units, battery backup systems, thermal management fans, networking switches and optical modules.
DIOD is also positioning itself for emerging 800-volt power architecture upgrades, where its silicon carbide MOSFETs, isolation products and power protection devices create incremental content opportunities. With hyperscale AI infrastructure spending rising, Diodes appears well positioned to sustain multi-quarter growth momentum.
Lattice Semiconductor LSCC is emerging as a direct beneficiary of the AI data center expansion cycle, with its Compute and Communications segment delivering record revenues, growing 86% year over year in the first quarter of 2026.
Management highlighted accelerating demand for its low-power FPGAs used in server management, secure boot, power sequencing, I/O aggregation, sensor bridging and platform control across hyperscale infrastructure.
The recently announced AMI acquisition further strengthens its positioning by combining hardware with firmware, manageability and security solutions for AI servers. With management projecting AI to represent 25% of 2026 revenues, LSCC is building a stronger moat around next-generation data center architectures.
AXTI’s Price Performance, Valuation and Estimates
Shares of AXTI have skyrocketed 577.3% so far this year compared with the industry’s 52.5% growth.
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From a valuation standpoint, AXT trades at a forward price-to-sales ratio of 42.28, significantly above the industry average. It is also higher than its five-year median of 1.48. AXTI carries a Value Score of F.
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The Zacks Consensus Estimate for AXT’s fiscal 2026 earnings implies a 168.3% improvement from the year-ago period’s level.
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The stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).