Axon’s third quarter was marked by robust revenue growth and a negative market reaction, with shares falling significantly after results. Management attributed the top-line momentum to strong demand across software, services, and connected devices, driven by adoption of new AI-powered offerings and deeper customer relationships. CEO Patrick Smith emphasized the rapid uptake of Prepared and Carbyne, highlighting their immediate impact on 911 call center efficiency, while CFO Brittany Bagley pointed to broad-based international and corrections sector wins. However, management acknowledged a notable contraction in operating margin, citing tariffs and increased R&D investment as primary headwinds.
Is now the time to buy AXON? Find out in our full research report (it’s free for active Edge members).
Axon (AXON) Q3 CY2025 Highlights:
- Revenue: $710.6 million vs analyst estimates of $705.2 million (30.6% year-on-year growth, 0.8% beat)
- Adjusted EPS: $1.17 vs analyst expectations of $1.54 (24.1% miss)
- Adjusted EBITDA: $177 million vs analyst estimates of $173 million (24.9% margin, 2.3% beat)
- Revenue Guidance for Q4 CY2025 is $752.5 million at the midpoint, above analyst estimates of $743 million
- EBITDA guidance for Q4 CY2025 is $180 million at the midpoint, below analyst estimates of $186.8 million
- Operating Margin: -0.3%, down from 4.4% in the same quarter last year
- Annual Recurring Revenue: $1.25 billion vs analyst estimates of $1.22 billion (41.5% year-on-year growth, 2.3% beat)
- Market Capitalization: $46.14 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Axon’s Q3 Earnings Call
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George Notter (Wolfe Research) asked about softer bookings and the rationale behind the Prepared and Carbyne acquisitions. CEO Patrick Smith explained the focus on integrating AI into 911 call workflows, stating, “We see Carbyne as the play to go deeper into that voice layer infrastructure.”
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Jeremy Hamblin (Craig-Hallum) probed the interplay between software/services and connected devices growth. CFO Brittany Bagley responded that software and services will maintain a higher-than-average growth rate, driven by both new customer adoption and feature expansion.
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Andrew Sherman (TD) sought details on international deals and the trajectory for Body Workforce Mini in retail. COO Joshua Isner highlighted pent-up demand in enterprise, noting, “Enterprise might be the biggest part of our business.”
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James Fish (Piper Sandler) questioned competitive dynamics in body cameras and the strategic intent behind Carbyne. Isner stressed Axon’s focus on customer needs and ongoing innovation as differentiators in a competitive landscape.
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Ioannis Samoilis (Baird) inquired about drone and DFR (Drone as First Responder) progress. Smith emphasized growing customer awareness of drone-based threats and described Dedrone as well positioned for longer-term demand across federal and international markets.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will be monitoring (1) the pace of customer adoption and integration of Prepared and Carbyne within the Axon ecosystem, (2) the impact of tariffs and ongoing product mix shifts on gross and EBITDA margins, and (3) the expansion of enterprise and international bookings, especially around new body camera and drone solutions. Execution on R&D investments and the scaling of AI-powered offerings will also be key determinants of future performance.
Axon currently trades at $585.99, down from $709.34 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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