AXT Inc shares surged 5.23% in pre-market trading on Monday, continuing a recovery from recent profit-taking declines as investors reacted to the company's blowout second-quarter results and a strengthening demand outlook for indium phosphide substrates.

The rally was fueled by AXT's Q2 earnings report, which massively exceeded expectations. Revenue reached $47.6 million, a 165% year-over-year increase and well above the $34.1 million consensus estimate. Adjusted EPS of $0.19 beat the $0.07 forecast by 171%, driven by record indium phosphide substrate revenue of $30.7 million. Management characterized the quarter as a business inflection point, with adjusted gross margin expanding to 45.0% from just 8.2% a year earlier.

Additionally, the company secured long-term supply agreements with Coherent and Lumentum, pushing InP backlog orders above $100 million. Wedbush maintained its outperform rating, noting that AI-driven data center demand remains in the early innings. These structural catalysts have underpinned an oversold recovery in the stock, which had faced consecutive sessions of sharp declines prior to the upswing.