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AXON ENTERPRISE, INC. (AXON)·Q3 2025 Earnings Summary

Executive Summary

  • Axon delivered its seventh consecutive 30%+ growth quarter: revenue rose 31% YoY to $711M, with Adjusted EBITDA of $177M (24.9% margin). Software & Services grew 41% YoY to $305M; ARR rose 41% to ~$1.3B; Connected Devices grew 24% to $405M .
  • Versus Street: revenue slightly beat ($710.6M actual vs $704.8M consensus*), while non-GAAP EPS of $1.17 came in below the $1.54 consensus* as tariffs and stepped-up R&D spending compressed margins .
  • Guidance raised again: FY25 revenue now ~ $2.74B (from $2.65–$2.73B) with ~25% full-year Adjusted EBITDA margin; Q4 revenue guided to $750–$755M and Adjusted EBITDA to $178–$182M .
  • Strategic catalysts: Axon launched “Axon 911” by acquiring Prepared and signing a definitive agreement to acquire Carbyne, positioning a cloud-native, AI-enabled 911 stack linking calls to field response; also unveiled Axon Body Workforce Mini for enterprise, expanding TAM and cross-ecosystem pull-through .

What Went Well and What Went Wrong

  • What Went Well

    • Robust top-line and recurring momentum: Revenue +31% YoY to $711M; ARR +41% to ~$1.3B; net revenue retention steady at 124% .
    • Strategic platform build-out: “Axon 911” brings Prepared and Carbyne to modernize call handling and integrate voice/AI from call to closure; management frames this as “a once-in-a-generation game changer” to cut response times dramatically .
    • Demand broad-based: TASER +17% YoY to $238M; Body cameras +20% to $107M; Platform Solutions +71% to $61M; international includes a nine-figure cloud deal in Europe and growing TASER 10 adoption .
    • Quote: “We see Carbyne repeating in voice communications the success we had with Evidence.com in moving agency data centers to the cloud” — CEO Rick Smith .

  • What Went Wrong

    • Margin headwinds: First full-quarter tariff impact and higher Platform Solutions mix drove adjusted gross margin down 50 bps YoY to 62.7%; Connected Devices adjusted GM -240 bps YoY to 52.1% .
    • Non-GAAP EPS below consensus: $1.17 non-GAAP diluted EPS vs Street* $1.54; management cited tariffs and elevated R&D as factors behind 24.9% Adjusted EBITDA margin .
    • Cash generation moderation: Operating cash flow fell to $60M (from $91M prior year), reflecting working capital/inventory; free cash flow $33M .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($M)$544.3 $603.6 $668.5 $710.6
Non-GAAP Diluted EPS ($)$1.45 $1.41 $2.12 $1.17
GAAP Diluted EPS ($)$0.86 $1.08 $0.44 $(0.03)
Gross Margin %60.8% 60.6% 60.4% 60.1%
Adjusted Gross Margin %63.2% 63.6% 63.3% 62.7%
Adjusted EBITDA ($M)$145.1 $155.2 $171.6 $177.0
Adjusted EBITDA Margin %26.7% 25.7% 25.7% 24.9%
Revenue Consensus Mean ($M)*$525.4$586.3$641.0$704.8
Primary EPS Consensus Mean ($)*$1.20$1.28$1.46$1.54
  • Values with asterisk (*) retrieved from S&P Global.

Segment revenue mix

Segment ($M)Q3 2024Q2 2025Q3 2025
Connected Devices$327.9 $376.4 $405.4
• TASER$203.6 $216.2 $238.0
• Personal Sensors$88.7 $92.8 $106.7
• Platform Solutions$35.6 $67.3 $60.8
Software & Services$216.4 $292.2 $305.2

KPIs and operating metrics

KPI30 Sep 202431 Dec 202431 Mar 202530 Jun 202530 Sep 2025
Annual Recurring Revenue ($B)$0.885 $1.001 $1.104 $1.183 $1.252
Net Revenue Retention (%)123% 123% 123% 124% 124%
Future Contracted Bookings ($B)$8.2 $10.1 $9.9 $10.7 $11.4

Geography mix (revenue)

GeographyQ3 2024Q2 2025Q3 2025
United States (% of revenue)89% 80% 84%
Other Countries (% of revenue)11% 20% 16%

Balance sheet highlights (Q3 2025)

  • Cash, cash equivalents and short-term investments: $2.4B .
  • Net cash position (cash and investments net of notes payable): $356.4M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2025$2.65–$2.73B (Aug 4, 2025) ~ $2.74B (implied by Q4 guide) Raised
Adjusted EBITDA MarginFY 2025~25% ~25% Maintained
Stock-based Compensation ($M)FY 2025$580–$630 $580–$630 Maintained
CapEx ($M)FY 2025$170–$185 $170–$180 Narrowed (lower top-end)
Revenue ($M)Q4 2025N/A$750–$755 New
Adjusted EBITDA ($M)Q4 2025N/A$178–$182 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q1)Current Period (Q3 2025)Trend
AI/technology initiativesQ1 launched Axon Assistant (voice AI) and Vehicle Intelligence (Outpost/Lightpost); AI Era Plan reinforced in Q2 “Axon 911” introduced; Prepared acquired and Carbyne to be acquired to modernize 911 and unify voice AI and field ops Accelerating platform integration
Supply chain/tariffs/macroTariff impacts contemplated in Q2 guidance First full-quarter tariff impact pressured margins; now “baked in” going forward Headwind normalizing
Product performancePersistent TASER 10, Body 4 and Platform Solutions strength in Q1/Q2 TASER +17% YoY; Body cameras +20%; Platform Solutions +71% YoY Sustained broad-based demand
Regional trendsInternational mix rose to 20% in Q2; growing cloud acceptance Nine-figure cloud deal in Europe; TASER 10 leading 7 of top 10 int’l deals International inflection
Regulatory/legal (DFR/Counter-drone)Building portfolio (Fusus, DFR partners) Strong demand; US state/local mitigation authority remains pending; federal/international traction strong Building momentum; regulatory gating in US
R&D execution/investmentsVehicle Intelligence, AI tools scaled from Q1 Continued R&D into Vehicle Intelligence, ABW Mini, AI features; acquisitions to accelerate roadmap Elevated, long-term ROI focus

Management Commentary

  • “Prepared is a low friction AI capability… It can autonomously handle up to half of noncritical calls… Carbyne replaces on-prem call center infrastructure with highly resilient cloud infrastructure” — CEO Rick Smith .
  • “Adjusted gross margin of 62.7% decreased 50 basis points year over year, primarily due to tariffs… offset by continued strong growth in our higher margin software business” — CFO Brittany Bagley .
  • “International also delivered two of our top 10 deals… with an additional 9-figure cloud deal in Europe that closed in October” — President Josh Isner .
  • “We’re again raising revenue guidance… Q4 revenue between $750 and $755 million… implying full year revenue of about $2.74 billion… 25% margin” — CFO Brittany Bagley .

Q&A Highlights

  • AI bookings and portfolio mix: AI bookings on track to exceed 10% of US state/local bookings; expansion across Air/DFR/Fusus up >3x YTD; acquisitions outperforming initial bookings expectations .
  • International and enterprise: Nine-figure EU cloud deal and broad TASER 10 adoption; enterprise demand for ABW Mini expected to unlock larger camera deployments and integrations with Fusus .
  • Tariffs and margins: First full-quarter impact recorded in Q3; seen as a one-time level reset; future gross margin to reflect mix (software tailwind vs. Platform Solutions scale-up) .
  • Domestic timing/visibility: Management emphasized US state/local is accelerating into Q4; revenue timing can be lumpy but bookings strength remains robust .
  • DFR/counter-drone: Strong federal/international demand; US state/local constrained by mitigation authority but pent-up demand exists; DFR adoption expected to scale as robotic docks proliferate .

Estimates Context

  • Q3 results vs Street: Revenue beat (actual $710.6M vs $704.8M consensus*); non-GAAP EPS missed ($1.17 vs $1.54 consensus*). Miss drivers: tariff headwinds and stepped-up R&D spending that compressed margins despite strong top-line .
  • Q4 guide vs Street: Revenue guidance midpoint ~$752.5M vs $755.3M consensus*—roughly in line/slightly below; no EPS guidance provided .
  • FY25: Raised to ~ $2.74B, modestly above/inline with $2.739B consensus* .
  • Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Durable growth plus platform expansion: 31% revenue growth with 41% ARR growth and 124% NRR underscore expanding wallet share and stickiness; Axon 911, ABW Mini and DFR deepen the moat and TAM .
  • Near-term margin dynamics: Expect margins to reflect mix and tariff reset; software growth is a structural tailwind while Platform Solutions scales and normalizes over time .
  • Bookings strength supports Q4 and 2026 setup: Management signals accelerating bookings into Q4, including federal (World Cup, counter-drone) and international cloud deals .
  • M&A as roadmap accelerant: Prepared (closed) and Carbyne (pending) unify 911 voice AI and cloud call handling; synergy across Fusus, DFR, Evidence and Axon OS should drive cross-sell and data network effects .
  • Enterprise catalyst: ABW Mini positions Axon to scale beyond public safety; early demand and integration into Axon OS/Fusus can unlock new verticals and long-term growth .
  • Stock-reaction catalysts: Raised FY revenue outlook; revenue beat; Axon 911 narrative; international nine-figure cloud deal; watch margin commentary and Q4 conversion of bookings to revenue .
  • Risk monitor: Tariff regime, regulatory timing for drone mitigation in US, and continued R&D spend cadence versus near-term margin delivery .

Additional Details and Cross-References

  • Q3 2025 summary: Revenue $710.6M; GAAP net loss $(2.2)M; non-GAAP net income $97.6M; Adjusted EBITDA $177.0M; operating cash flow $60.0M; net cash $356.4M .
  • Segment margins: Connected Devices GM 49.9% (adj 52.1%); Software & Services GM 73.8% (adj 76.8%) .
  • Product line growth: TASER $238.0M (+17% YoY), Personal Sensors $106.7M (+20%), Platform Solutions $60.8M (+71%) .
  • International mix: 16% of revenue in Q3 (vs 20% in Q2) as deal timing varies .

Press releases and 8-K/shareholder letter (primary sources)

  • Q3 2025 Shareholder Letter/8-K (Item 2.02): Results, guidance, KPIs, reconciliations .
  • Q3 2025 Earnings Press Release: Narrative, segment detail, guidance .
  • Carbyne acquisition release: Axon 911 strategy and transaction terms .
  • ABW Mini release: enterprise expansion .

Earnings call transcript (qualitative insights)

  • Strategy, AI/911 platform, bookings, tariffs, international, DFR/federal pipeline .