Electric Vehicle And Renewable Adoption Will Boost Compound Semiconductor Demand

Key Takeaways

• Superior technology and flexible platforms position AIXTRON to outperform consensus expectations through market share gains, margin expansion, and recurring revenue growth.
  
• Structural industry shifts, expanding end markets, and strong customer relationships enable sustained multi-year order momentum and improved earnings resilience.
  
• Persistent demand weakness, overreliance on Asian markets, slower tech adoption, reduced R&D, and currency volatility could undermine revenue growth, competitiveness, and profitability.

Catalysts

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

• While analyst consensus recognizes AIXTRON's market leadership in SiC and GaN and the recovery potential tied to industry upturns, they may be underestimating the magnitude of the demand surge once digestion of legacy 6-inch capacity ends and 8-inch adoption goes mainstream; thanks to superior technology and the capability of the G10-SiC platform to seamlessly transition between wafer sizes, AIXTRON is set to capture outsized share of the replacement and expansion cycle, which could result in an extended period of above-consensus revenue acceleration and gross margin expansion, not just a cyclical rebound.
  
• Analyst consensus expects strong multi-year growth from the G10-AsP platform and the ramp in photonics; however, the momentum in datacom/telecom is broad-based, global, and tied to exponential AI-driven bandwidth needs, implying that AIXTRON's order book growth could rapidly compound across customers and geographies as co-packaged optics, PICs, and LiDAR in autos ramp simultaneously-this could drive not only revenue outperformance but operating leverage that pushes net margins to new highs.
  
• The ongoing build-out of onshore semiconductor fabrication in the US and EU, spurred by state-led initiatives to secure chip supply chains, is structurally increasing local foundry capex on compound semiconductors-AIXTRON's deep customer relationships and strategic presence position it as a prime beneficiary, potentially supporting consistent order inflow and improving earnings quality even in end-market downturns.
  
• With a large and growing installed fleet of G10-series systems, recurring high-margin aftersales (service, upgrades, spares) is set to become a much larger share of gross profit in the next several years, reducing earnings cyclicality and supporting long-term free cash flow growth above hardware peers.
  
• The rapid drop in SiC wafer costs and the associated increase in viable new applications-from power transmission infrastructure for AI data centers to automotive and grid hardware-suggests that total addressable market for deposition tools could multiply, offering AIXTRON the chance to drive sustained multi-year order and revenue growth well beyond what is currently anticipated by market models.

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 8.7% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 17.2% today to 18.8% in 3 years time.
• The bullish analysts expect earnings to reach €153.1 million (and earnings per share of €1.36) by about August 2028, up from €108.6 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 17.1x on those 2028 earnings, up from 14.1x today. This future PE is lower than the current PE for the GB Semiconductor industry at 19.1x.
• Analysts expect the number of shares outstanding to decline by 5.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.79%, as per the Simply Wall St company report.

AIXTRON Future Earnings Per Share Growth

Risks

• Prolonged cyclical overcapacity and demand softness in key end markets such as silicon carbide, gallium nitride, and LEDs may continue, with management acknowledging that many customers have idle capacity and no clear visibility on when a recovery will occur. This could suppress AIXTRON's revenue growth for an extended period.
  
• Heavy reliance on orders and revenues from Asia, especially China, increases AIXTRON's vulnerability to regional demand swings, geopolitical tensions, and government-led localization efforts. Overcapacity in Chinese 6-inch silicon carbide production and growing local competition may threaten long-term revenue stability and market share in the region.
  
• AIXTRON's significant exposure to power semiconductor markets such as SiC and GaN involves the risk of industry transitions to alternative technologies or slower-than-expected adoption curves, as newer technologies or competitive innovations could reduce demand for the company's current equipment portfolio, directly impacting future revenues.
  
• The company noted a 24% reduction in R&D expenses in the first half of 2025, warning that this will partly revert, but underspending on research amid rapid technological change could erode product competitiveness if not corrected. This trend may threaten long-term margins and earnings if AIXTRON fails to keep pace with emerging technologies.
  
• Management highlighted heightened FX volatility and the potential for adverse currency shifts, which, combined with a weaker natural hedge from lower USD sourcing this year, could reduce gross and EBIT margins by around 1 percentage point in unfavorable scenarios and strain overall profitability if currency effects persist or worsen.

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 €812.4 million, earnings will come to €153.1 million, and it would be trading on a PE ratio of 17.1x, assuming you use a discount rate of 7.8%.
• Given the current share price of €13.56, the bullish analyst price target of €22.0 is 38.4% 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.