Strength in Software & Services Unit Drives Axon: Can It Sustain?

Axon Enterprise, Inc.’s AXON Software & Services segment is playing an important role in driving its overall growth. An increase in the aggregate number of users to the Axon network is aiding the segment’s performance. Revenues from the segment surged 39.6% year over year in the first nine months of 2025, driven by strong momentum in digital evidence management and rising demand for premium add-on features. Adoption of higher-tier subscription plans remains robust as customers increasingly recognize the value of enhanced capabilities.

Repeat purchases of additional services by existing customers underscore strong retention and satisfaction, supporting steady growth in annual recurring revenues (ARR). Healthy demand for TASER devices, virtual reality training solutions and counter-drone equipment continues to support the segment’s growth. New product innovations also continue to play a key role in its upliftment, as the customers are rapidly adopting products like Draft One and the OSP 10 premium bundle.

Rising incidents of terrorism, crime and fraudulent activities are expected to further boost demand for Axon’s solutions in the coming quarters. Driven by this solid business momentum, Axon raised its full-year 2025 revenue guidance to approximately $2.74 billion, up from its earlier outlook of $2.65-$2.73 billion, implying about 31% year-over-year growth.

Segment Performance of AXON's Peers

Among its major peers, Woodward, Inc.’s WWD Industrial business segment reported net sales of $334 million in the fourth quarter of fiscal 2025, up 10.6% year over year. Woodward generated 33.6% of its total sales from this segment in the quarter. The increase in revenues for Woodward’s segment is primarily attributable to strength across power generation and oil & gas markets.

Its another peer, Teledyne Technologies Incorporated’s TDY Digital Imaging segment’s third-quarter 2025 revenues increased 2.2% year over year to $785.4 million. The jump was due to higher sales of commercial infrared imaging components and subsystems, unmanned air systems and industrial automation imaging systems. Teledyne generated 51% of its total revenues from this segment in the quarter.

AXON’s Price Performance, Valuation and Estimates

Shares of Axon have declined 13.2% in the past year against the industry’s growth of 19.9%.

From a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 448.09X, above the industry’s average of 44.77X. Axon carries a Value Score of F.

The Zacks Consensus Estimate for AXON’s second-quarter 2025 earnings has been on the rise 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.

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

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