Can Axon Maintain EBITDA Margin Momentum Amid Cost Pressures?

Axon Enterprise, Inc. AXON achieved a solid adjusted EBITDA of $503.8 million in the first nine months of 2025, which surged 32.6% year over year. The company's adjusted EBITDA margin reached 25.4%, reflecting an increase of 20 basis points (bps). This improved margin not only reflects its strong operational efficiency but also benefits from the continued adoption of its premier products and solutions.

Despite rising operating expenses, AXON’s gross margin grew 100 basis points to 60.4%. The improvement in margins was driven by higher revenues generated from robust sales of TASER 10, Axon Body 4, personal sensors and platform solutions products. It’s worth noting that the company reported revenues of $710.6 million in third-quarter 2025, which increased 31% year over year.

Axon’s focus on effective cost management and revenue growth is expected to expand its margin performance. For 2025, AXON currently expects adjusted EBITDA in the range of $682-$686 million, higher than its previous outlook of $665-$685 million. The updated guided range implies an adjusted EBITDA margin of approximately 25%.

It's worth noting that, effective first-quarter 2025, Axon realigned its business segments. This realignment has been enhancing the company’s visibility into segment-specific performance and enabling it to effectively manage its costs. This strategic move is expected to continue supporting Axon’s margin performance and operational efficiency.

Peer’s Margin performance

While AXON is putting its best foot forward to improve margins, the road ahead for its peers, like Kratos Defense & Security Solutions, Inc. KTOS and Teledyne Technologies Incorporated TDY, looks bumpy as they struggle to maintain healthy margins.

Among its major peers, Kratos Defense is facing cost pressure. In the first nine months of 2025, its cost of sales increased 22% year over year, while its SG&A expenses rose 9%. Kratos Defense’s gross margin declined 310 bps to 22.4% in the quarter.

Teledyne Technologies’ cost of sales rose 6.8% year over year in the third quarter of the year. The company’s SG&A expenses also increased 5.4% year over year. Teledyne Technologies’ adjusted operating margin declined 40 bps to 22.1% in the same quarter.

AXON’s Price Performance, Valuation and Estimates

Shares of Axon have declined 10.2% in the year-to-date period against the industry’s growth of 23.1%.

From a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 69.96X, above the industry’s average of 43.80X. Axon carries a Value Score of F.

The Zacks Consensus Estimate for AXON’s 2025 earnings has declined 8.1% over the past 60 days.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research