AXONAxon Enterprise

Our revenues for the year ended December 31, 2024 2025 were $2.1 $2.8 billion, an increase of $521.8 $697.0 million, or 33.4%, 33.5%, from the comparable period in the prior year. year ended December 31, 2024. We had loss from operations of $62.1 million for the year ended December 31, 2025, compared to income from operations of $58.5 million, compared to $156.9 million for the same period in the prior year. Gross margin dollars increased $285.9 $416.7 million but decreased and increased as a percentage of revenue to 59.7% from 59.6% from 61.2% compared to the same period in the prior year. The decrease was primarily driven by higher stock-based compensation expense and amortization of acquired intangibles. Excluding the impacts of stock-based compensation expense and intangibles amortization in costs of goods sold, adjusted year ended December 31, 2024. Adjusted gross margin increased decreased to 62.6% for the year ended December 31, 2025 compared to 63.2% for the year ended December 31, 2024, compared to 61.8% for the same period in the prior year, 2024. The decrease was primarily due to an increased driven by global tariffs and a higher mix of high-margin Axon Cloud & Services revenue and investments in TASER automation and cost-reduction initiatives. Platform Solutions revenue. Operating expenses increased $384.2 by $537.4 million, reflecting an increase in salaries, benefits, increased headcount to support business growth and stock-based compensation expenses, as well as an increase in professional and consulting expenses related to transaction costs. For the year ended December 31, 2024, we recorded net expense. Net income of $377.0 $124.7 million which included net realized and unrealized gains on fair value adjustments of $186.4 million related to our strategic investments and a $105.7 million tax benefit, partially offset by a net realized and unrealized loss of $46.4 million related to our marketable securities, inducement expense of $38.9 million associated with the early repurchase of a portion of our 2027 Notes, and interest loss, net of $18.8 million. Net income of $377.0 million for the year ended December 31, 2024 included net realized and unrealized gains of $162.9 million, million related to our strategic investments, a net unrealized gain on marketable securities of $120.3 million, million related to our marketable securities, and interest income, net of $36.6 million. Net income of $175.8 million for the comparable period in the prior year reflected net unrealized losses of $80.5 million related to impairment and observable price changes for our existing investments and related warrants, interest income, net of $42.1 million, and a net unrealized gain of $38.7 million on marketable securities.

As significant tariffs or other restrictions continue to be placed on foreign imports by the United States, our sales and results of operations may be harmed. Recently, the U.S. government has indicated its intent to modify U.S. trade policy and, in some cases, to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. It has also imposed or has indicated its intent to impose increased tariffs on foreign imports into the United States, particularly from the People’s Republic of China (“PRC”), Mexico, and Canada. Such tariffs could have a significant impact on our business, particularly the importation of products used in our business that are manufactured outside the United States, which have resulted and could result in retaliatory tariffs imposed on products we export. We also source certain raw materials from foreign countries, as do some of our suppliers. The implementation of tariffs and trade restrictions as well as changes in trade policies between the United States and such foreign countries have resulted and could continue to lead to increases in our supply costs and make it more difficult to obtain suppliers and may have an adverse effect on our supply chain from a cost and sourcing perspective. If we attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective. We might also consider increasing prices Finally, tariffs and international trade arrangements may continue to the end consumer; however, this could reduce the competitiveness of change, potentially without warning and to an extent that is difficult to predict. Changing tariff rates and shifting trade regulations may create significant uncertainty for vendors, consumers, and us; may increase our merchandise costs; negatively impact consumer demand for our products and adversely affect net sales. services; or otherwise negatively impact our operating results. We may not be able to forecast such impacts accurately. If we fail to manage these dynamics successfully, gross margins and profitability could be adversely affected. Increased tariffs or trade restrictions implemented by the United States could have a material adverse effect on our business prospects, operating results and financial condition.

We derive revenue from two primary sources: (1) SaaS offerings which include digital evidence management, productivity solutions, and real-time operations capabilities, and (2) the sale of physical products, including CEDs, Axon cameras, Axon Signal-enabled devices, corresponding hardware extended warranties, accessories, and related accessories such as Axon docks, cartridges and batteries, among others, and (2) subscriptions to extended warranties across our Axon Evidence digital evidence management SaaS offering (including data storage fees and other ancillary services), product portfolio, which includes varying levels of support. TASER, personal sensors, and platform solutions. To a lesser extent, we also recognize revenue from training, professional services and other software services ancillary to our core offerings.We offer to sell our products and SaaS services. services on a standalone basis, but our customers often prefer to bundle our integrated hardware products and services together in a single transaction that allows them to make payments over a multi-year period. We apply the five-step model outlined in ASC 606. For additional discussion, refer to Note 2.

Pending in the Eastern District of Virginia (Case No. 1:24-CV-01625) is a patent infringement suit filed by Airspace Systems, Inc. (“Airspace”) against Dedrone Holdings, Inc. involving certain drone technology. After Axon we acquired Dedrone on October 1, 2024, Airspace amended its complaint and added Axon us as a defendant. Axon Airspace seeks injunctive relief and treble damages in an unspecified amount. We and Dedrone deny infringement and further contend that the three asserted patents are invalid and/or contain patent ineligible subject matter. To that end, we have simultaneously challenged all three patents in the United States Patent and Trademark Office and the court has stayed the litigation. On October 8, 2025, the Patent Trial and Appeal Board granted our petitions and instituted review on all claims of all three asserted patents. By statute, a decision is required within one year or October 8, 2026. It is expected that the district court litigation will remain stayed during this time.