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AXON ENTERPRISE, INC. (AXON)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record revenue of $604.0M (+31% y/y), Non-GAAP EPS of $1.41 and Adjusted EBITDA margin of 25.7%; both revenue and EPS exceeded Wall Street consensus and the company raised full-year revenue and EBITDA guidance .
  • Software & Services revenue grew 39% y/y to $263.0M with ARR up 34% y/y to $1.104B and net revenue retention at 123%, underscoring durable subscription momentum .
  • Management launched Axon Vehicle Intelligence (Outpost/Lightpost fixed ALPR), unveiled Axon Assistant, and announced partnerships with Ring and Citizen to deepen public-private safety networks, positioning new product cycles as catalysts .
  • Guidance raised: FY25 revenue to $2.60–$2.70B (from $2.55–$2.65B) and Adjusted EBITDA to $650–$675M (from $640–$670M); margin target ~25% includes ~50 bps tariff impact, with no price increases planned this year .
  • Governance/watch item: Company disclosed additional ICFR material weakness and restatement related to classification of 2027 convertible notes; no P&L/cash flow impact, but presentation change adds near-term control remediation focus .

What Went Well and What Went Wrong

What Went Well

  • Software & Services strength: Revenue grew 39% y/y to $262.7M; ARR reached $1.104B (+34% y/y) with NRR at 123%, driven by premium plan adoption and new users .
  • Product cycle momentum: Connected Devices revenue rose 26% y/y to $340.9M; TASER revenue of $195.5M (+19% y/y) on strong TASER 10 adoption; Personal Sensors $88.4M (+30% y/y) on Axon Body 4; Platform Solutions $57.0M (+51% y/y) including counter-drone and VR .
  • Strategic expansion: Launch of Axon Vehicle Intelligence (Outpost/Lightpost) and Axon Assistant; partnerships with Ring and Citizen to expand real-time visibility and community collaboration underscore ecosystem moat. “These aren’t just product and capability launches—it’s a blueprint for the future of public safety.” — Rick Smith .

What Went Wrong

  • ICFR/material weakness: Audit Committee determined previously issued FY24/quarters should not be relied upon due to an error in classifying 2027 convertible notes as long-term instead of current; to be restated (presentation only) and an additional ICFR weakness identified .
  • GAAP dilution and SBC headwind: Operating loss of $8.8M driven by $140.2M stock-based compensation expense; GAAP diluted EPS $1.08 vs Non-GAAP $1.41, reflecting sizable non-GAAP adjustments including SBC and marketable security gains/losses .
  • Free cash flow muted: Operating cash flow $25.8M supported free cash flow of $0.9M amid working capital headwinds; management continues investing in capacity and R&D with FY25 CapEx guided to $160–$180M .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$544.3 $575.1 $603.6
GAAP Diluted EPS ($)$0.86 $1.67 $1.08
Non-GAAP Diluted EPS ($)$1.45 $2.08 $1.41
Gross Margin (%)60.8% 60.1% 60.6%
Adjusted EBITDA Margin (%)26.7% 24.6% 25.7%

Segment/Product Breakdown (Revenue):

Category ($USD Millions)Q4 2024Q1 2025
TASER$200.4 $195.5
Personal Sensors$85.2 $88.4
Platform Solutions$44.7 $57.0
Software & Services$244.9 $262.7

Key KPIs:

KPIQ3 2024Q4 2024Q1 2025
ARR ($USD Millions)$885 $1,001 $1,104
Net Revenue Retention (%)123% 123% 123%
Future Contracted Bookings ($USD Billions)$8.2 $10.1 $9.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$2.55–$2.65B $2.60–$2.70B Raised
Adjusted EBITDA DollarsFY 2025$640–$670M $650–$675M Raised
Adjusted EBITDA MarginFY 2025~25% ~25% (includes tariffs) Maintained; tariff impact included
Stock-Based CompensationFY 2025$580–$630M $580–$630M Maintained
CapExFY 2025$140–$180M $160–$180M Raised lower bound
Tariff impact to Adj. EBITDA marginFY 2025n/a~50 bps headwind embedded New headwind acknowledged

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4)Current Period (Q1 2025)Trend
AI/Technology initiativesLaunched AI Era Plan; Draft One fastest-adopted software; AI features pipeline; pricing context (AI bundle $199) Axon Assistant announced; early access skills (translation, policy chat, Q&A); continued Draft One traction Accelerating
Supply chain/tariffsFlexibility, diversified sourcing; tariffs manageable ~50 bps Adj. EBITDA margin impact; no price increases planned in 2025 Mild headwind
Product performance (TASER 10, AB4)TASER 10 adoption pacing 2x TASER 7; capacity ramping; AB4 demand strong TASER revenue +19% y/y; Connected Devices gross margin up y/y; continued AB4 contribution Strong, sustained
Fixed ALPR/Vehicle IntelligenceTransitioning beyond prior partnerships; desire for fair data flow; early commentary on fixed ALPR Outpost/Lightpost launched; partner Ubicquia accelerates installs; dedicated sales effort; trials in 2025 New cycle catalyst
Drones/DFR & Counter-droneDedrone acquisition; FAA BVLOS waiver examples; Skydio autonomy & docks Expect DFR to go mainstream; Skydio scaling production; regulatory progress; TAM ~$20B cited Expanding
Regional trends (International)International bookings +40% seq.; improving execution; CRO hire Record Q1 bookings internationally across multiple regions; growing pipeline confidence Improving
Regulatory/legalFedRAMP authorization; FAA waivers Fusus “FedRAMP-ready” pending certification; broader federal opportunities Advancing
Enterprise growthLargest deal booked in Q4 with logistics company; multiple entry points (Fusus, body cameras) Pipeline building; long-term TAM; pricing broadly similar to public safety Scaling

Management Commentary

  • “These aren’t just product and capability launches—it’s a blueprint for the future of public safety.” — Rick Smith, Founder & CEO .
  • “We emerged from Q1 with a far stronger outcome and an even more exciting pipeline… We expect another record for annual bookings.” — Joshua Isner, President .
  • “We delivered a 25.7% adjusted EBITDA margin… adjusted operating expenses up 3% sequentially… we do expect to continue to ramp investment through the year, especially in our R&D organization.” — Brittany Bagley, COO & CFO .
  • “We built Axon Vehicle Intelligence not just to help solve crimes faster, but to do it the right way. With privacy built in.” — Rick Smith .

Q&A Highlights

  • ARR and premium adoption: ARR strength in Q1 tied to strong Q4 bookings; growth driven by new users and premium add-ons .
  • International momentum and product mix: Execution improved under new CRO; adoption across TASER, body cams, and cloud openness driving bookings .
  • Fixed ALPR strategy: Dedicated sales motion; Ubicquia partnership simplifies permitting and accelerates deployments; 2025 focused on trials, revenue impact more in 2026 .
  • DFR regulatory tailwinds: FAA waiver process improving; Skydio autonomy and docks scaling; strong DFR outlook in back half .
  • AI Era Plan economics: Software margin profile >80%; robust customer ROI (time savings, capacity) supports adoption even at higher OSP pricing .
  • Tariffs: Net impact ~50 bps to FY25 Adj. EBITDA margin; offsets via cost measures; no price hikes planned in 2025 .

Estimates Context

Results vs S&P Global consensus:

MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD)$525.37M*$566.04M*$586.34M*
Revenue Actual ($USD)$544.27M $575.15M $603.63M
EPS Consensus Mean ($)$1.198*$1.403*$1.279*
EPS Actual (Non-GAAP) ($)$1.45 $2.08 $1.41
  • Q1 2025 revenue and Non-GAAP EPS both beat consensus; similar beats occurred in Q3 and Q4 2024, indicating consistent estimate outperformance. Estimates marked with * retrieved from S&P Global.

Where estimates may need to adjust:

  • FY25 revenue and EBITDA estimates likely revise upward post-guide raise to $2.60–$2.70B and $650–$675M, with margin ~25% incorporating tariff headwinds .

Key Takeaways for Investors

  • Momentum intact: 13th consecutive quarter of >25% growth; Q1 revenue and EPS beats plus raised FY25 guidance strengthen near-term setup .
  • Subscription flywheel: ARR $1.104B (+34% y/y) and NRR 123% reflect durable expansion with premium plan upgrades driving high-margin mix .
  • New product cycle catalysts: Vehicle Intelligence (Outpost/Lightpost) and Axon Assistant broaden TAM and deepen ecosystem engagement; watch trials accelerating into year-end .
  • DFR and counter-drone: Regulatory tailwinds and partnerships (Skydio, Dedrone) position Axon to scale in a large, early-stage market .
  • Tariff risk manageable: ~50 bps FY25 margin impact embedded; pricing discipline maintained, signaling confidence in cost offsets and demand resilience .
  • Governance watch: ICFR weaknesses/restatement (note classification) require monitoring; though non-P&L, remediation progress is a near-term investor focus .
  • Capital and liquidity: Net cash position $171.4M; new $1.75B notes issuance and induced conversions reshape maturity profile while funding growth investments .
Estimates marked with * retrieved from S&P Global.

Appendix: Additional Data Points

  • Q1 Operating cash flow $25.8M; Free cash flow $0.9M; Adjusted free cash flow $2.7M .
  • Q1 Gross margin 60.6%; Adjusted gross margin 63.6% (software mix) .
  • Balance sheet: Cash, equivalents, short-term investments $2.192B; long-term notes $1.728B; total current notes $282.5M .