AXT Inc shares surged 5.37% during intraday trading on Wednesday, building on momentum from a strong earnings report and growing demand for its indium phosphide substrates.

The rally comes as the market continues to digest the company's blockbuster Q2 results, which saw revenue of $47.59 million significantly exceed the consensus estimate of $34.09 million. Adjusted earnings per share of $0.19 beat expectations by 171%, while indium phosphide substrate revenue reached a record $30.7 million, with adjusted gross margins surging to 45.0% from just 8.2% a year ago. Management characterized the quarter as a business inflection point.

Industry tailwinds further support the stock, with the global indium phosphide substrate supply-demand gap exceeding 70% and NVIDIA projecting demand to surge 20x over five years. AXT has also signed long-term supply agreements with Coherent and Lumentum, with backlog exceeding $100 million, reinforcing its position in the AI data center supply chain.