Axon Enterprise's Software Revenues Accelerate: More Upside to Come?

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. After recording 33.4% year-over-year revenue growth in 2024, the segment continued its strong performance with a 39% increase in the first quarter of 2025. 

Solid momentum in digital evidence management and rising demand for premium add-on features are fueling the segment’s performance. Also, the adoption of premium subscription plans continues to grow as more customers recognize the value of enhanced capabilities. Existing customers are consistently returning to purchase additional services, reflecting strong customer satisfaction and engagement. This recurring activity is helping Axon Enterprise grow its base of annual recurring revenues (ARR), supporting long-term growth.

With nearly 70% of AXON’s domestic user base still on basic plans, the Software & Services segment holds substantial growth potential. 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.

As AXON continues to expand its ecosystem with AI-driven tools, digital workflows and subscription-based models, the Software & Services segment is well-positioned to deliver sustained growth. With significant room for user upgrades and products that meet customer needs well, this segment is expected to keep playing an important role in AXON’s success in the near term.

Segment Snapshot 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.

Teledyne Technologies Incorporated’s TDY Digital Imaging segment’s first-quarter 2025 revenues increased 2.2% year over year to $757 million. This was driven by higher sales of Teledyne’s commercial infrared imaging components and surveillance systems. Teledyne derived 52.2% of its total revenues from this segment during the quarter.

AXON’s Price Performance, Valuation and Estimates

Shares of Axon Enterprise have surged 163% in the past year compared with the industry’s growth of 42.1%.

From a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 1,119.00X, above the industry’s average of 46.29X. Axon Enterprise 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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