Axon's Q3 Earnings Miss Estimates & Revenues Beat, 2025 View Up

Axon Enterprise, Inc. AXON reported third-quarter 2025 adjusted earnings of $1.17 per share, which missed the Zacks Consensus Estimate of $1.63. The bottom line decreased 19.3% year over year amid the rise in operating costs and expenses.

Total revenues of $710.6 million surpassed the consensus estimate of $700 million and increased 31% year over year. The top line benefited from strong demand for TASER 10, Axon Body 4 and counter-drone equipment. Growing adoption of premium software solutions also augmented the top-line results.

AXON’s Q3 Business Segment Performance

Effective first-quarter 2025, AXON realigned its business segments. The company now reports results under two business segments, namely Connected Devices and Software & Services.

Connected Devices: The segment’s revenues jumped 23.6% year over year to $405.4 million, driven by an increase in demand for TASER 10 devices, Axon Body 4, counter-drone products and growth in platform solutions. The adjusted gross margin decreased year over year to 52.1% from 54.5%. The Zacks Consensus Estimate for Connected Devices’ revenues was pegged at $396 million.

Software & Services: The segment’s revenues rose 41.1% year over year to $305.2 million. The uptick was driven by an increase in the aggregate number of users and growing adoption of premium software offerings. The adjusted gross margin increased to 76.8% from 76.3% in the year-ago period owing to a higher software mix. The Zacks Consensus Estimate for Software & Services’ revenues was pegged at $302 million.

Axon Enterprise, Inc Price, Consensus and EPS Surprise

Axon Enterprise, Inc price-consensus-eps-surprise-chart | Axon Enterprise, Inc Quote

AXON’s Margin Profile

Axon’s cost of sales increased 32.7% year over year to $283.3 million. Selling, general and administrative expenses increased 31.5% year over year to $252.8 million.

Total operating expenses climbed 40% year over year to $429.5 million. The adjusted gross margin decreased to 62.7% from 63.2% in the year-ago period, owing to global tariff-related impacts and a higher Platform Solutions product mix in Connected Devices.

AXON’s Balance Sheet & Cash Flow

At the end of third-quarter 2025, Axon had cash and cash equivalents of $1.42 billion compared with $454.8 million at December 2024-end. Long-term lease liabilities totaled $90.2 million compared with $41.4 million at 2024-end.

In the first nine months of 2025, the company used net cash of $5.9 million from operating activities against $158.1 million in cash generated in the previous year period.

Adjusted free cash flow was a negative $71.4 million in the first nine months of 2025 compared with $117.5 million in the prior-year period.

AXON’s Outlook for Q4

For fourth-quarter 2025, Axon anticipates revenues in the band of $750-$755 million, indicating an increase of 31% at the midpoint. Adjusted EBITDA is projected to be $178-$182 million, implying an adjusted EBITDA margin of about 24%.

Outlook for 2025

For 2025, Axon expects revenues to be about $2.74 billion compared with $2.65-$2.73 billion anticipated earlier. The metric indicates approximately 31% year-over-year growth. Adjusted EBITDA margin is expected to be about 25%.

The company expects capital expenditures to be between $170 million and $180 million. This includes investments in long-term research & development projects, continued capacity expansion, global facility build-outs and new product development. It anticipates stock-based compensation expenses to be in the range of $580-$630 million.

Major Developments

Axon signed a definitive deal to acquire Carbyne, a well-known provider of cloud contact center technology solutions to public safety agencies. Management expects the transaction (valued at $625 million) to be completed in first-quarter 2026, conditioned on the fulfillment of certain customary closing conditions.

AXON’s Zacks Rank & Key Picks

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.

Some better-ranked companies are discussed below:

Astronics Corporation ATRO currently sports a Zacks Rank of 1. ATRO outperformed the consensus estimate in each of the preceding four quarters, with an average surprise of 78.5%.  In the past 60 days, the Zacks Consensus Estimate for Astronics’s 2025 earnings has increased 3.1%.

ATI Inc. ATI presently carries a Zacks Rank #2 (Buy). ATI’s earnings surpassed the consensus estimate in each of the trailing four quarters. The average earnings surprise was 18%. In the past 60 days, the Zacks Consensus Estimate for ATI’s 2025 earnings has increased 2.6%.

Kratos Defense & Security Solutions, Inc. KTOS currently carries a Zacks Rank of 2. KTOS has an impressive earnings surprise history, having outperformed the consensus estimate in each of the preceding four quarters, the average surprise being 34.4%.  In the past 60 days, the Zacks Consensus Estimate for Kratos Defense’s 2025 earnings has remained stable.

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

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