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AXON ENTERPRISE, INC. (AXON)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record revenue of $0.669B (+33% y/y, +11% q/q) with broad-based strength and raised FY25 revenue and Adjusted EBITDA guidance; Non-GAAP EPS was $2.12 and Adjusted EBITDA was $0.172B with a 25.7% margin .
  • Results beat Street: revenue by ~$27.6M (~4.3%) and Non-GAAP EPS by ~$0.66; Adjusted EBITDA beat consensus by ~$10.4M* (S&P Global) .
  • Software & Services grew 39% to $292M with net revenue retention rising to 124%; Connected Devices grew 29% to $376M; TASER +19%, Personal Sensors +24%, Platform Solutions +86% .
  • Guidance raised: FY25 revenue to $2.65–$2.73B (from $2.60–$2.70B) and Adjusted EBITDA to $665–$685M (from $650–$675M), maintaining ~25% margin; tariffs shift to impact more in 2H .

What Went Well and What Went Wrong

  • What Went Well

    • Strong top-line and quality of growth: revenue +33% y/y; Software & Services +39% y/y; ARR +39% to $1.183B; net revenue retention increased to 124% .
    • New product momentum and bookings: $150M AI Era Plan bookings in Q2; fastest adoption across Draft One, TASER 10, Axon Body 4; largest company deal booked, with strong corrections/international contributions .
    • Management confidence and raised outlook: FY25 revenue and Adjusted EBITDA guidance increased; margin discipline maintained at ~25%; tariffs timing now skewed to 2H .
    • Quote: “Draft One remains our fastest adopted software solution. TASER 10, our fastest adopted TASER weapon. Axon Body 4, our fastest adopted camera.” — Rick Smith .

  • What Went Wrong

    • GAAP profitability constrained by non-cash items: operating loss of $1M and heavy stock-based compensation ($139M) drove GAAP net income margin down to 5.4% (vs 14.6% in Q1) .
    • Cash flow pressure: operating cash outflow of $92M; free cash outflow of $115M; adjusted free cash outflow of $111M, with net cash position down $44M q/q to ~$66M .
    • Device margins compressed: Connected Devices gross margin declined to 48.6% (−270 bps y/y) and adjusted gross margin to 51.1% (−230 bps y/y) on mix (platform solutions) .
    • Analyst concern: platform solutions growth may be “lumpy”; management flagged tariff cost timing to hit 2H .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$0.503 $0.604 $0.669
GAAP Diluted EPS ($)$0.53 $1.08 $0.44
Non-GAAP Diluted EPS ($)$1.22 $1.41 $2.12
Gross Margin %60.8% 60.6% 60.4%
Adjusted Gross Margin %63.1% 63.6% 63.3%
Adjusted EBITDA ($USD Billions)$0.126 $0.155 $0.172
Adjusted EBITDA Margin %25.0% 25.7% 25.7%

Segment breakdown

Segment MetricQ2 2024Q1 2025Q2 2025
Software & Services Revenue ($USD Millions)$210.5 $262.7 $292.2
Software & Services Gross Margin %74.1% 74.2% 75.6%
Software & Services Adjusted GM %76.6% 77.7% 78.9%
Connected Devices Revenue ($USD Millions)$292.8 $340.9 $376.4
Connected Devices Gross Margin %51.3% 50.1% 48.6%
Connected Devices Adjusted GM %53.4% 52.8% 51.1%

Product categories

Category Revenue ($USD Millions)Q2 2024Q1 2025Q2 2025
TASER$181.5 $195.5 $216.2
Personal Sensors$75.1 $88.4 $92.8
Platform Solutions$36.1 $57.0 $67.3

KPIs

KPIQ2 2024Q4 2024Q1 2025Q2 2025
ARR ($USD Billions)$0.850 $1.001 $1.104 $1.183
Net Revenue Retention %122% 123% 123% 124%
Future Contracted Bookings ($USD Billions)$7.5 $10.1 $9.9 $10.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$2.60B–$2.70B $2.65B–$2.73B Raised
Adjusted EBITDAFY 2025$650M–$675M (~25%) $665M–$685M (~25%) Raised
Stock-based CompensationFY 2025$580M–$630M $580M–$630M Maintained
CapExFY 2025$160M–$180M $170M–$185M Raised
Tariffs assumptionFY 2025Included (reciprocal tariffs) Included (U.S./intl tariffs; timing skew to 2H) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesFastest-growing adoption; AI Era Plan closed first 10 deals; 100k incident reports using AI tools; plan launched ≈8–9 weeks prior; expanding TAM via AI, RTCC, drones/robotics $150M AI Era Plan bookings in Q2; accelerating demand for Draft One, AI Assistant, real-time translation, FormOne/BriefOne; users report 6–12 hours weekly time savings Accelerating
Product performance (TASER 10, Body 4, Platform Solutions)TASER 10 demand outpacing supply; CapEx to expand capacity; Body 4 momentum; Platform Solutions adding VR, counter-drone TASER +19%, Body 4 +24%, Platform Solutions +86%; Connected Devices margins compress on mix Strong topline; margin mix headwind
Supply chain/tariffs/macroFlexible supply strategy; tariffs expected to be manageable; guidance includes tariffs Tariffs timing shifted to affect 2H; included in updated guidance Manageable; near-term cost timing
Regional trends (International)International bookings +40–50% seq in 2H’24; enterprise and federal opportunities expanding; broader TAM Big international deals in Q2; management expects strong 2H pipeline; Europe demand across border security, translation, TASER 10 Strengthening
Regulatory/legal (FedRAMP, ICFR)ICFR material weaknesses disclosed/restatement on notes classification; remediation planned FUSUS FedRAMP compliance achieved; awaiting final FedRAMP approval check Progressing/compliance
R&D execution & investmentReached 25% Adj. EBITDA margin target a year early; reinvesting in R&D (drones/robotics/FUSUS) Hiring in R&D prioritized behind roadmap; pipeline “broadest yet” Elevated investment
Enterprise expansionLargest enterprise deal booked in Q4 2024; gaming vertical entry Enterprise deployments “hard by nature” but progressing; FUSUS/body cams core; gaming video use-cases Early-stage scaling

Management Commentary

  • Strategic posture: “Demand for new technology…is accelerating…Artificial intelligence, drones and robotics, real-time operations…there’s no one breakout product…It’s everything.” — Rick Smith .
  • Bookings momentum: “We closed almost $150,000,000 of bookings for our AI Era Plan in Q2 alone, and over 30% of bookings this quarter came from new product categories.” — Josh Isner .
  • Margin/Outlook: “Adjusted EBITDA margin of 25.7% came in ahead of expectations…benefiting from the timing of tariffs, which will now impact us more in the second half of the year.” — Brittany Bagley .
  • Counter-drone positioning: “We are…a market leader…we’re seeing just a ton of demand across the spectrum for people realizing that they need solutions here.” — Rick Smith .
  • FedRAMP: “We are FedRAMP compliant at the moment…waiting…the committee…officially giving that last check mark.” — Jeff Kunins .

Q&A Highlights

  • AI Era Plan acceleration: $150M Q2 bookings; customer ROI measured in staffing/time savings; bundle increasingly includes AI Assistant, real-time translation; pipeline loaded for 2H .
  • Platform Solutions and counter-drone: Strong demand; management cautions for lumpiness; counter-drone is one of multiple growth drivers within the segment .
  • DFR and Skydio: Partnership momentum; monetization primarily software (Dedrone) and services; Skydio hardware via referral/partner agreements; autonomy reduces labor cost versus manual deployments .
  • International: Multiple large deals; Europe interest in border security, TASER 10 and translation; management expects strong 2H quarters .
  • Pricing and upsell: Per-officer value can reach ~$600 at the high end as agencies adopt premium bundles and AI; ~70% of customers still on basic plans—ample upsell runway .
  • Tariffs: Guidance fully bakes current view; impacts shift to 2H; supply chain flexibility cited .
  • TASER 10 capacity: Capacity ramp continuing into next year; demand still outpacing supply .

Estimates Context

  • Q2 2025: Revenue $668.5M vs consensus $641.0M; Non-GAAP EPS $2.12 vs consensus $1.46; Adjusted EBITDA $171.6M vs consensus $161.3M* (Values retrieved from S&P Global).
  • Q1 2025: Revenue $603.6M vs consensus $586.3M; Non-GAAP EPS $1.41 vs consensus $1.28* (Values retrieved from S&P Global).
  • FY 2025 Street revenue stands near the high-end of raised guidance ($2.738B consensus vs $2.65–$2.73B guide); Expect estimate revisions higher on software momentum and bookings conversion, tempered by 2H tariff cost timing (Values retrieved from S&P Global).
MetricQ2 2024Q1 2025Q2 2025FY 2024FY 2025
Revenue Consensus Mean ($USD)$478.4M*$586.3M*$641.0M*$2,074.6M*$2,737.9M*
Non-GAAP/Primary EPS Consensus Mean ($)$0.98*$1.28*$1.46*$5.25*$6.32*
EBITDA Consensus Mean ($USD)$101.4M*$137.6M*$161.3M*$515.2M*$684.9M*
# of EPS Estimates14*13*15*16*18*
# of Revenue Estimates12*12*14*15*16*

Disclaimer: Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue, EPS, and Adjusted EBITDA beats with raised FY25 guidance create positive estimate-revision momentum; watch for continued software mix expansion to sustain margins despite device mix headwinds .
  • AI adoption is a real driver: $150M Q2 AI Plan bookings and tangible time savings for officers signal durable demand, a key narrative supporting multiple expansion and bookings-to-revenue conversion in 2H/2026 .
  • Platform Solutions and counter-drone are growing rapidly but can be lumpy; margin impact from mix should normalize as software ramps and capacity expands (e.g., TASER 10) .
  • International and enterprise pipelines are strengthening; near-term catalysts include large European deals and gaming/enterprise video deployments (FUSUS + body cams) .
  • Tariff costs shift to 2H; guidance incorporates known impacts—near-term headwind to margins but not to growth outlook; monitoring cost mitigation execution is prudent .
  • Upsell runway remains significant: ~70% of customers on basic plans; premium bundle and AI adoption should support ARR growth and retention at elevated levels .
  • Liquidity remains solid despite opex-heavy investment and near-term cash outflow; net cash ~$66M and ample investments support capacity and R&D roadmap .