AXON ENTERPRISE (AXON)·Q4 2025 Earnings Summary

Axon Crushes Q4: Revenue Beats by 5%, Stock Surges 15% After Hours

February 24, 2026 · by Fintool AI Agent

Axon Enterprise delivered a strong Q4 2025, beating revenue estimates by 5.5% and Non-GAAP EPS by 34% as the company's AI-powered law enforcement ecosystem continues to gain traction . Revenue grew 39% year-over-year to $797 million, marking the company's fourth consecutive year of 30%+ growth . The stock surged 15% in after-hours trading to $508 after management raised long-term targets to $6 billion in revenue by 2028 .

Did Axon Beat Earnings?

Axon handily beat Wall Street expectations across all key metrics:

The revenue beat was driven by premium software adoption, TASER 10, Axon Body 4, and counter-drone equipment . Non-GAAP EPS of $2.15 significantly exceeded the $1.60 consensus as operating leverage kicked in despite heavy R&D investment .

Beat/Miss History: Axon has beaten revenue estimates for 8 consecutive quarters .

What Did Management Guide?

Management provided robust 2026 guidance and introduced new 2028 long-term targets:

2026 Guidance

New 2028 Targets

This implies a ~28% revenue CAGR from FY2025's $2.8 billion to reach the $6 billion 2028 target . Management exceeded their prior 3-year targets (set for 2025) of $2B revenue and 25% EBITDA margin, delivering $2.8B at 25.5% .

What Changed From Last Quarter?

Several notable developments compared to Q3 2025:

Improved profitability: Adjusted EBITDA margin expanded to 25.9% from 24.9% in Q3, driven by revenue scale .

Accelerating ARR growth: Annual recurring revenue reached $1.35 billion, up from $1.25 billion in Q3 (+7.6% sequential, +35% YoY) .

Acquisition of Carbyne: The company closed the acquisition of Carbyne (911 call handling technology) in Q1 2026, extending Axon's ecosystem to the "first moment a call for help is made" .

Improved net retention: Net revenue retention accelerated to 125% from 124% in Q3, reflecting strong upsell of premium software .

Future contracted bookings surge: Total backlog reached $14.4 billion, up from $11.4 billion in Q3 (+26% sequential, +43% YoY) .

Segment Performance

Connected Devices: $454M (+38% YoY)

Platform Solutions (fleet cameras, drones, counter-drone equipment) was the standout, nearly doubling YoY as agencies deploy Axon's expanding hardware suite .

Connected Devices gross margin of 46.6% decreased from 49.4% YoY due to product mix and global tariffs .

Software & Services: $343M (+40% YoY)

Software & Services reached 43% of total revenue, up from 42.6% in Q4 2024, continuing the shift toward higher-margin recurring revenue .

• Software-only gross margin exceeded 80%
• Adjusted gross margin of 76.7% (down 130 bps YoY due to professional services mix from Fleet implementations)

How Did the Stock React?

The 15% aftermarket surge reflects relief after a challenging start to 2026. AXON had declined 24% YTD heading into earnings despite seven consecutive quarters of 30%+ revenue growth .

What was priced in: Investors were concerned about slowing margin expansion after Q3's EPS miss (24% below estimates due to R&D and acquisition costs) . Today's beat and upgraded 2028 targets alleviate those concerns.

Key Management Quotes

On AI strategy:

"Here's my conviction: nobody should be more aggressive or more thoughtful on AI than Axon. If we get that balance right, we won't just be a vendor, we'll be the partner our customers can't imagine operating without." — Rick Smith, CEO

On responsible innovation as competitive advantage:

"Key accounts are moving to Axon from competitors — and they're telling us it's because of our unwavering commitment to privacy, transparency, and integrity. That's not just good ethics — it's a competitive superpower."

On Axon Assistant adoption:

"Everyone talks about AI is coming — AI's here. My vision is, you're always using technology to supplement your personnel. And it's really just a force multiplier." — Sheriff John Allen, Bernalillo County

Key Product Updates

Axon Assistant (AI)

• ~500 customers now live on the voice-activated AI platform
• Real-time translation across 50+ languages
• Voice-enabled policy chat with citations
• Extensible foundation for additional AI skills (more announcements expected at Axon Week in April)

Axon Vehicle Intelligence (ALPR)

• Entered fixed automatic license plate recognition market
• Beyond traditional ALPR: vehicle descriptors (make, color, visible damage)
• New form factors: Axon Outpost and Axon Lightpost
• Key feature enhancements shipping H1 2026, deployments scaling H2 2026+

Axon 911

• Acquired Prepared (closed late 2025) and Carbyne (Q1 2026)
• Modernizing 911 call handling with AI-enabled communications
• First integration shipped connecting Axon 911 and Axon Fusus
• Precise location, real-time transcription/translation, automated summaries

Axon Body Mini

• Compact body camera for enterprise (retail, healthcare, logistics)
• Expected to begin shipping mid-2026
• Includes full Axon ecosystem: two-way voice, live streaming, Axon Assistant

Geographic Mix

International revenue grew 54% YoY, outpacing the 35% U.S. growth, indicating expanding global traction .

Capital Allocation & Balance Sheet

The balance sheet shifted to a modest net debt position following acquisitions (Prepared, Carbyne) and debt issuance of $1.75B in 2025 .

Forward Catalysts

1. Axon Week (April 2026): Expected announcements on new Axon Assistant capabilities and AI roadmap
2. Axon Body Mini launch (mid-2026): Enterprise market entry with compact body camera
3. Axon Vehicle Intelligence scaling (H2 2026): Fixed ALPR deployments ramp after H1 feature enhancements
4. Axon 911 integration: Carbyne integration expanding 911 capabilities throughout 2026

Risks to Monitor

• Tariff headwinds: Global tariffs impacted Connected Devices gross margins by ~200 bps
• Stock-based compensation: $610M in 2025, guided $590-620M in 2026 (high relative to peers)
• Integration risk: Multiple acquisitions (Prepared, Carbyne) require successful integration
• Valuation: At ~$508 aftermarket, AXON trades at ~47x forward EBITDA (2026E $879M)

Full-Year 2025 Summary

*Prior year bookings estimated from growth rate disclosed

The GAAP net income decline was driven by higher stock-based compensation ($634M vs $383M) and one-time debt inducement expenses ($39M) .

Bottom Line

Axon delivered a beat across all key metrics with upgraded long-term guidance, addressing investor concerns after Q3's earnings miss. The 15% aftermarket surge reflects:

1. Revenue beat: 39% growth despite tough comps, driven by software adoption and hardware expansion
2. Margin delivery: 25.9% Adjusted EBITDA margin demonstrates operating leverage
3. $6B 2028 target: Management's confidence in sustaining ~28% CAGR underscores product-market fit
4. AI leadership: Axon Assistant reaching scale with 500+ customers validates AI strategy

The key question for 2026: Can Axon maintain its premium valuation (~47x forward EBITDA) as growth moderates from 33% to ~28%? With a $14.4 billion backlog providing visibility and multiple new products (Body Mini, Vehicle Intelligence, 911) ramping, the growth runway remains intact.

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This analysis is based on Axon's Q4 2025 8-K filing and shareholder letter released February 24, 2026.