AI, 5G And Electrification Will Drive SiC And GaN Adoption

Key Takeaways

• AIXTRON's technical leadership enables it to dominate rapidly expanding silicon carbide, GaN, and optoelectronics markets, driving revenue and margin growth above forecasts.
  
• Scalability in aftersales and specialty materials uniquely positions the company for resilient, high-margin recurring income, fueling operational leverage and long-term expansion.
  
• Heavy reliance on China and weak Western demand, coupled with innovation risks and high inventory, threatens AIXTRON's future growth, margins, and competitive position.

Catalysts

Provides deposition equipment to the semiconductor industry in Asia, Europe, and the Americas.

• Analyst consensus sees AIXTRON's silicon carbide tools gaining share from technical leadership, but this likely understates the pace of adoption-China's accelerating investments and plummeting SiC wafer costs will rapidly expand global SiC power device penetration, driving tool demand and AIXTRON revenue far above current forecasts as new applications and automakers pivot to SiC in the next 2-4 years.
  
• Analysts broadly agree 300-millimeter GaN wafer readiness will unlock a new growth cycle, but this significantly undervalues AIXTRON's unique, fully operational Innovation Center and early shipment of 300-millimeter tools, which positions the company as the dominant enabler for GaN adoption in AI, 5G, and electrification, supporting substantial earnings and gross margin upside as next-gen chip architectures transition.
  
• The explosive growth and manufacturing shift in photonic integrated circuits and data communications-driven by surging demand for optical interconnects in AI and cloud data centers-places AIXTRON's G10-AsP tool as the de facto standard, signaling sustained double-digit growth in optoelectronics equipment sales and long-term margin expansion through technology leadership.
  
• AIXTRON's highly scalable aftersales and services business, already contributing over 20 percent of revenues and growing, will generate high-margin recurring income, providing defensive resilience and incremental profitability even during cyclic downturns.
  
• As miniaturization and heterointegration reshape consumer electronics, AIXTRON is uniquely positioned as a sole supplier for enabling specialty materials (such as MicroLED substrates and advanced epitaxy), capturing new markets and driving superior operational leverage, supporting both topline and EBIT growth through the decade.

AIXTRON Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on AIXTRON compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming AIXTRON's revenue will grow by 8.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 16.0% today to 19.1% in 3 years time.
• The bullish analysts expect earnings to reach €154.8 million (and earnings per share of €1.37) by about July 2028, up from €100.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 19.6x on those 2028 earnings, up from 17.7x today. This future PE is greater than the current PE for the GB Semiconductor industry at 17.4x.
• Analysts expect the number of shares outstanding to decline by 0.58% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.82%, as per the Simply Wall St company report.

AIXTRON Future Earnings Per Share Growth

Risks

• The company's current strong revenue and order intake are heavily dependent on Chinese customers, especially for silicon carbide and gallium nitride equipment, making AIXTRON vulnerable to geopolitical instability, protectionist trade policies, export controls, and potential decoupling, which could significantly reduce its future revenues and profit margins if access to China becomes restricted or Chinese demand weakens.
  
• Demand in key markets outside of Asia, particularly for power electronics and gallium nitride in Europe and the United States, remains subdued with low visibility, raising long-term concerns about market concentration, overreliance on a single region, and the risk that future revenue growth will stall if Western markets do not recover.
  
• The company is experiencing flat demand year-over-year for its core power electronics segment (SiC and GaN), with much of the current growth driven by one-off orders and inventory drawdowns; this trend could lead to stagnant revenues and lower operating leverage if broader end-markets fail to accelerate or if the anticipated adoption in areas like electric vehicles and AI does not materialize at scale.
  
• The reduction in R&D spending may indicate pressure on margins or a need to manage costs in a weak market, but it also raises the risk that AIXTRON could fall behind competitors in technological innovation, especially as rivals or customers pursue in-house equipment development or alternative manufacturing technologies, threatening market share and long-term net profitability.
  
• The company's inventory remains at historically high levels, which may be used to smooth short-term revenues, but this exposes AIXTRON to industry cyclicality, potential equipment overcapacity, pricing pressure, and the possibility of inventory write-downs, all of which could negatively impact earnings and gross margins in the event of a market downturn or delayed customer orders.

Valuation

• The assumed bullish price target for AIXTRON is €22.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of AIXTRON's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €22.0, and the most bearish reporting a price target of just €10.9.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €809.0 million, earnings will come to €154.8 million, and it would be trading on a PE ratio of 19.6x, assuming you use a discount rate of 7.8%.
  
• Given the current share price of €15.77, the bullish analyst price target of €22.0 is 28.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.