AXON's Software & Services Growth Picks Up: More Upside to Come?

Axon Enterprise, Inc. AXON is witnessing strong momentum in its Software & Services segment. Solid growth in the aggregate number of users to the Axon network is driving the Software & Services segment’s performance. After witnessing a year-over-year increase of 33.4% in 2024, revenues from the segment also increased 39% in the first quarter of 2025.

Increased demand for digital evidence management and premium add-on features has been supporting the segment’s growth. Adoption of premium subscription plans also continues to rise as more customers recognize the value of enhanced capabilities. Strong customer satisfaction and engagement have led to a growing base of annual recurring revenues (ARR), which increased 34% year over year to $1.1 billion in the first quarter.

With almost 70% of AXON’s domestic user base still on basic plans, the Software & Services segment holds significant growth potential. New product introductions and add-on features are likely to continue playing an important role in its overall growth as customers are increasingly adopting products like Draft One and the OSP 10 premium bundle.

With growing instances of terrorism and criminal activities globally, the demand for advanced public safety technologies is expected to remain strong. This is likely to support the ongoing demand for Axon Enterprise’s Software & Services portfolio, positioning the segment well for sustained momentum in the quarters ahead.

Segment Performance of AXON's Peers

Among its major peers, Woodward, Inc.’s WWD Industrial business segment reported net sales of $321.9 million in the second quarter of fiscal 2025, down 4.7% year over year. Woodward generated 36.4% of its total sales from this segment in the quarter. The decline in revenues for Woodward’s segment is primarily due to lower on-highway volume in China.

Kratos Defense & Security Solutions, Inc.’s KTOS Government Solutions segment’s first-quarter 2025 revenues increased 10% year over year to $239.5 million. This was driven by higher sales of Kratos Defense’s businesses, with the most notable growth in its C5ISR, Defense Rocket Support and Microwave Products units. Kratos Defense derived 79.1% of its total revenues from this segment during the quarter.

AXON’s Price Performance, Valuation and Estimates

Shares of Axon Enterprise have surged 25.8% in the past six months compared with the industry’s growth of 21.8%.

From a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 101.23X, above the industry’s average of 47.88X. Axon Enterprise carries a Value Score of F.

While the Zacks Consensus Estimate for AXON’s second-quarter 2025 earnings increased over the past 60 days, the same for 2025 declined.

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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