Good morning, ladies and gentlemen, and welcome to the 2023 annual meeting of stockholders of Microvast Holdings, Inc. I am Yang Wu, Founder, Chief Executive Officer, and Chairman of the Board of Directors of Microvast. I will act as the Chairman and preside over this meeting. I would also like to welcome the other members, our executive leadership team, who are with me on the call today. Before we begin, I would like to extend a special welcome and give my sincere thanks to all of our investors who have been supportive during our second year as a public company. We appreciate the time that everyone took to vote their shares at this annual meeting. Every vote counts, and we value our shareholders' feedback. Today's meeting will be divided into two parts. First, I will ask Craig Webster, Microvast's Chief Financial Officer, to provide a brief business update.
After the business update, we will go through the formal meeting agenda, including the two proposals that stockholders have been asked to vote on, and announce the preliminary voting results.
Thank you, Mr. Wu. I am Craig Webster, Microvast's Chief Financial Officer, and I would like to begin by providing a brief update on our business. If you have logged into today's meeting using your unique control number, you may submit questions through the chat feature of the virtual meeting portal at any time. If any questions are received, we will respond as appropriate at the end of the meeting. During the course of this meeting, we may discuss our business outlook and make other forward-looking statements. Such statements are predictions based on our current expectations. Actual events or results could differ materially due to a number of risks and uncertainties, including those disclosed in our most recent 10-Q filing with the SEC. Such forward-looking statements represent our views as of today and should not be relied on thereafter, and we disclaim any obligation to update them after today.
We may also refer in this meeting to Non-GAAP financial measures as defined in the rules of the SEC. These are intended as supplemental measures of our financial performance that are not required by or presented in accordance with U.S. generally accepted accounting principles. Non-GAAP financial measures have limitations as an analytical tool, and you should not consider them in isolation or as a substitute for financial information prepared in accordance with GAAP. As most of you know, we provided a comprehensive update on our business during our earnings call on August the seventh. I would like to take this opportunity to highlight a few key takeaways from those results. First, we published very encouraging second quarter results, with revenue increasing 16.4% over the second quarter in 2022.
This is an exciting trend, and we are anticipating even more tailwinds in the future from our Phase 3.1 and Phase 1A manufacturing capacity expansions. Phase 3.1 is now in SOP, and Phase 1A is targeting trial production in Q4. Second, our gross margin continues to improve, increasing to 15.3% in Q2 2023, compared to 7.5% in Q2 2022. After adjusting for non-cash settled share-based compensation expense in cost of sales, adjusted gross margin increased to 17.3% in Q2 2023, compared to 10.4% in Q2 2022, a 6.9 percentage point improvement. The increase in gross margin was due in large part to a combination of improved economies of scale, more favorable product mix, and lower raw material prices.
We continue to target adjusted gross margins in the 20% range next year as we scale our business, which we believe puts us on a path to profitability over the next 2-3 years. We're already starting to see that gross margin expansion this year. We expect to achieve continued margin improvements through our key levers of industrialization, automation, utilization, and relentless innovation. The last point I want to get across, we continue to increase our backlog that underpins our high growth forecast, demonstrating the rapid and accelerating adoption of our 53.5 Ah cell for commercial vehicles and ESS projects. Currently, our industry-leading 53.5 Ah cell accounts for over 80% of our total backlog of $675.9 million and provides great visibility into 2024 and beyond.
I will now turn the meeting over to Ishita, Microvast's General Counsel and Corporate Secretary, to go through the formal agenda items and to announce the preliminary voting results.
Thank you, Craig. The official business of today's meeting will now come to order, and I declare that the polls are now open. Many of our stockholders have submitted proxies in advance of this meeting, which means that most of the eligible votes have already been counted. If you have already voted via the internet, you do not need to take any further action. However, if you do not have yet had the opportunity to vote and you wish to vote your shares now, or if you wish to change your vote, you may do so through the virtual meeting site until the polls have been closed. However, please note that this feature is only available if you have already logged in using your unique control number. It is not available if you've logged in as a guest.
Microvast Board of Directors have appointed a representative from Continental Stock Transfer and Trust Company, our transfer agent, to serve as the Inspector of Election for this meeting. The Inspector of Election has had the opportunity to, among other things, receive and determine the validity of all proxies and ballots submitted, and to certify the number of shares represented at this meeting and the results of the vote of the company's stockholders on any motion. The inspector has taken and signed an oath to faithfully execute the duties of Inspector of Election with strict impartiality and according to the best of his or her ability. The inspector has also presented the Affidavit of Mailing that starting on August 18th, 2023, the notice of Internet availability of the proxy materials was mailed to all Microvast stockholders as of the record date of August 10th, 2023.
We have a majority of the outstanding shares as of the record date represented at this meeting, so I declare that there is a quorum present, and that we may proceed with the meeting. The two items on the agenda are as follows: 1, the election of two Class II Director nominees, Arthur Wong and Stanley Whittingham, to Microvast Board of Directors, each to serve for a term of three years or until their respective successors are duly elected or appointed and qualified. Number two, to ratify the appointment of Deloitte Touche Tohmatsu Certified Public Accountants, LLP, as Microvast independent registered public accounting firm for the year ending December 31st, 2023. Microvast Board of Directors has recommended that the stockholders vote for each of the director nominees and for the auditor ratification proposal.
Since no director nominations or other stockholder proposals were properly filed in advance of this meeting, in accordance with the requirements of the company's bylaws, the business of this meeting is limited to the two matters noted above. Please note that now is the final opportunity to submit any proxies in order for them to be counted. I will pause for a brief moment before closing the polls. I declare that the polls are now closed. Based on the proxies that we have previously received, I would like to announce on a preliminary basis that the requisite number of votes in favor of the election of the board of directors of each of the director nominees has been received. In addition, the auditor ratification proposal received sufficient votes at this meeting and is therefore approved.
After the final tabulation is completed, we will formally announce the voting results by filing a Form 8-K within four business days of today's meeting. That concludes the official business of today's stockholder meeting, which is now adjourned. We will now turn to any stockholder questions which have been submitted through the chat feature of the virtual meeting portal. With that, I turn the meeting back over to Craig.
Thank you, Ishita. No questions were submitted. With that, we will conclude today's meeting. Thank you very much for attending and for your continued support of Microvast. Have a good day.