Axon reports record Q3 2026 revenue of $909 million, up 28% year over year
• Announces increased stake in Skydio to 37%, cementing leadership in Drone as First Responder
• Software & Services revenue growth accelerates to 43% year over year, reaches $437 million
Today, we announce the largest single investment in Axon’s history: a $1.2 billion investment in Skydio. Skydio is one of America’s leading drone technology companies, and this investment increases our ownership stake to 37%. Axon has also entered into an exclusive public safety distribution partnership with Skydio in the U.S. and Canada, further solidifying our position in one of the most transformative technologies of the coming decade. Drones are already helping agencies cut response times dramatically. We expect millions of flying robots to reshape American life in the years ahead and we intend to be at the center of it.
Axon remains on pace to deliver another record year, expecting full-year revenue growth of approximately 30% on top of four consecutive years of growth above 30%. Demand is broad, Software & Services is accelerating and newer businesses are becoming meaningful contributors to our results. The reduction from our prior expectations is concentrated in three large Federal Dedrone deployments representing approximately $130 million of revenue we no longer expect in 2026. Had those deployments remained on pace, our full-year growth outlook would be nearly 500 basis points higher than our current guidance and approximately 200 basis points above our prior guidance — underscoring the robust demand we see across our business.
Software & Services revenue accelerated to 43% year over year growth and reached $437 million. Growth is increasingly driven by our newer software offerings: real-time operations, Axon Records, Axon AI, Axon 911 and Dedrone software collectively reached an annual revenue run rate of nearly $500 million, more than doubling from last year. AI annual recurring revenue surpassed $100 million.
Connected Devices revenue increased 16% year over year to $472 million. Platform Solutions led Connected Devices growth, increasing 106% to $125 million, and underlying performance would have been even stronger absent the delayed timing of an approximately $30 million Federal Dedrone deployment we had expected to recognize during the quarter.
Demand keeps building, and customers are putting more Axon to work in more markets. New five-year bookings are up 25% year to date. Select third-quarter wins show the size and breadth of what customers are deploying:
• $115 million OSP 10 Premium, AI Era Plan and Axon Fusus agreement with a state
We are meeting that demand with an accelerating pace of innovation. In October we introduced Axon Body 5, our latest-generation body camera, and TASER Ion, a new, more flexible TASER device built for a broader range of users and use cases. We launched Axon Guardian, the latest addition to our suite of superintelligence products, and took important early steps toward Axon Gravity, our broader vision to further bring superintelligence capabilities across the public safety workflow. Together, these innovations expand the problems we can solve for customers across more verticals and geographies and open new avenues for durable, long-term growth.
We expect fourth-quarter revenue in a range of $990 million to $1.01 billion and Adjusted EBITDA of $245 million to $250 million. Our updated full-year outlook excludes approximately $130 million of revenue from the Federal Dedrone deployments discussed above, including the $30 million deployment previously expected in the third quarter and two additional deployments totaling $100 million previously expected in the fourth quarter.
We will finish 2026 with a broader portfolio, deeper customer relationships and more avenues for growth than at any point in our history.
Below, we detail our latest product and ecosystem updates, third-quarter financial performance and outlook for the remainder of 2026.
Our latest launches bring more intelligence to the edge, extend our less-lethal portfolio and connect more of the response lifecycle through a common ecosystem.
Drones are becoming one of the defining technologies of the decade, and we are taking a major stake in a market leader. Today, we announce an additional $1.2 billion investment in Skydio, which takes our fully diluted ownership to 37%. Axon is also now the exclusive distributor of Skydio for public safety in the U.S. and Canada. Deployed Skydio docks through Axon Air have more than doubled year over year, and we believe Drone as First Responder (DFR) is becoming the new standard of response.
• A major stake in a category-defining company: We believe Skydio is positioned to lead in nearly every sector that flying robots touch. We now own 37% of this category definer.
• Exclusive reach in public safety: Axon becomes Skydio’s exclusive public safety distributor in the U.S. and Canada. This extends our lead in public safety technology.
• Scale that already exists: Skydio expects about $1 billion of bookings this fiscal year. It is already operating at scale.
A faster, more complete response: Combined with Axon 911, Axon Fusus, digital evidence and Dedrone airspace security, Skydio completes an integrated platform that helps agencies detect, understand and respond faster.
• Pure-margin revenue to Axon: Axon acts as a direct channel partner. Revenue is recognized on a net basis in Software & Services.
Two companies, each a leader in its field, are building something bigger than either could alone. Axon extends its network of mission-critical technologies in public safety. Skydio stays free to move fast and build the future of American aerial robotics across many industries.
In October we introduced Axon Body 5, a major leap for the camera at the center of our ecosystem. It is built as an increasingly intelligent endpoint across the Axon platform.
vs. prior-generation Axon cameras, creating a stronger hardware foundation to support current and future superintelligence capabilities directly on the device
to support public safety 5G network utilization and enable future network resilience with the ability to move between providers and adjust bandwidth in weaker connectivity settings for better live-streaming continuity
to provide full shift battery assurance and enhance reliability and performance as camera workloads continue to expand and new superintelligence innovations become available
• 4K video and optional Pro model with a dedicated near-focus camera for scanning driver’s licenses and connecting relevant information into Axon Fusus
• Improved audio and optional Pro model front-facing speakers to support capabilities such as real-time translation through Axon Assistant
This is more than a hardware upgrade. Beyond a better camera, Axon Body 5 puts more intelligence directly in the field as our portfolio of superintelligence products expands.
Alongside the launch of Axon Body 5, we expanded features available in our suite of superintelligence products, the AI Era Plan, by moving Axon Guardian into general availability. Axon Guardian introduces a new category of field intelligence designed to use connected devices to enhance safety as events unfold. Its first capabilities include:
• Escalation Detection: When an Axon Body 4 or Body 5 camera is recording, Guardian can detect signals of potential conflict in real time and create an alert in Axon Fusus. A remote user can then review the livestream and determine whether additional support is needed.
• Approach Alert: On Axon Fleet 3, Guardian can detect when the door of a stopped vehicle opens and alert the officer through both the in-car display and their body-worn camera.
These features mark another step in the evolution of delivering superintelligence capabilities for our customers and showcase where we believe the future is going – connected, intelligent devices at the edge with superintelligence-powered software that supports customers before, during and after the moment.
“When Tampa became the first major agency to adopt Axon’s AI Era Plan, we recognized the potential for AI to do much more than simply automate tasks. It could give officers valuable time back, improve communication, and help them make better use of information, ultimately allowing them to focus more of their time and energy on fighting crime and serving the community.
Now, as I help educate the next generation of public safety leaders, I am even more convinced that we are at the beginning of a fundamental transformation in how technology can support our profession. What makes Axon’s approach special is that its AI technology is being designed around the real-world responsibilities, challenges, and mission of public safety.” — Lee Bercaw, Retired Tampa Police Chief and Associate Professor of Instruction, University of South Florida
Intelligence helps customers understand a situation. When intervention is required, less-lethal technology is still essential. TASER Ion is an entirely new device designed to extend the reach of our TASER products. This pocket-sized form factor expands the application of the technology into environments where our traditional devices can be less practical.
Examples include undercover operations, personal and executive protection and use cases where attire, visibility or limited carry space may otherwise leave personnel with fewer options between physical engagement and a firearm. We believe this highly capable device creates an opportunity to expand our existing TASER user base, and we have already seen demand beginning to build just weeks after its introduction.
• Flexible, discreet carry: A palm-sized, non-pistol design with belt, inside- the-waistband, deep-pocket and MOLLE options, allowing personnel to maintain a lower profile without leaving a less-lethal option behind
• More options when intervention is necessary: Four individually deployed probes, compared to 10 for TASER 10, with a range from close contact to 45 feet (13.7 m), plus a green laser and built-in LED light for greater visibility
• Accountability built in: Activity logging for upload to Axon Evidence, with optional wireless sharing, alerts and weapon behavior data to help organizations align use with policy and authorized assignments
The breadth and impact of our product investments is increasingly visible in our financial results, with newer products and software becoming meaningful contributors alongside our core businesses.
increased 28% year over year to $909 million, led by Software & Services, which accelerated to 43% growth and reached $437 million.
revenue increased 16% to $472 million, with growth moderating sequentially due to normal third-quarter seasonality and the timing of an approximately $30 million Federal Dedrone deployment we had expected to recognize during the quarter. As our counter-drone business scales, particularly with Federal and international customers, the size and hardware-heavy nature of these deployments can create greater quarter-to-quarter variability in revenue timing.
was 59.2%, compared to 62.7% in the prior-year period. The decrease in gross margin and Adjusted gross margin was primarily driven by an increased mix of counter-drone equipment, higher memory costs and scaling of new product categories.
increased to $42 million, compared to a loss from operations of $2 million in the prior-year period, reflecting higher revenue and operating leverage.
of $394 million, or 43% of revenue, including $13 million of stock-based compensation expense
of $280 million, or 31% of revenue, including $78 million of stock-based compensation expense
of $192 million, or 21% of revenue, including $65 million of stock-based compensation expense
was $57 million (6.3% net income margin), or $0.68 per diluted share, compared to a net loss of $2 million (0.3% net loss margin) or ($0.03) per diluted share in the prior-year period.
was $144 million (15.8% non-GAAP net income margin), or $1.72 per diluted share, compared to $103 million (14.5% non-GAAP net income margin) or $1.24 per diluted share in the prior-year period.
increased 33% year over year to $236 million, representing an Adjusted EBITDA margin of 25.9%. Adjusted EBITDA reflects continued operating leverage and a more favorable revenue mix led by accelerating Software & Services growth. This performance demonstrates our ability to deliver strong profitability even as we invest behind newer, hardware-intensive businesses with significant long-term growth potential.
was $20 million, compared to $60 million in the prior-year period. This included approximately $100 million of cash used in the quarter related to our strategic inventory investment to support product availability and supply chain resilience, in addition to ongoing investment as we scale to support growth.
was an outflow of $19 million, compared to an inflow of $33 million in the prior-year period, primarily reflecting the impact of our inventory investment, which totaled approximately $100 million in the quarter.
and $2.9 billion of outstanding convertible and senior notes, resulting in a net debt position of $1.2 billion, up $182 million sequentially.
Detailed definitions of our non-GAAP financial measures and caution regarding their use are included later in this letter .
• Software & Services revenue grew 43% year over year to $437 million, driven by growth in users and increasing adoption of premium solutions by existing customers. Growth is increasingly benefiting from newer software offerings, including AI, real-time operations, Axon Records and Axon 911.
• Software & Services gross margin was 71.4%, compared to 73.8% in the prior- year period. Adjusted gross margin was 75.0%, compared to 76.8%. The year over year decrease in gross margin and Adjusted gross margin was primarily driven by the scaling of new product offerings and a higher mix of professional services revenue. Software-only gross margin continued to exceed 80%.
• Connected Devices revenue grew 16% year over year to $472 million, led by Dedrone and continued adoption of Axon Body 4, partially offset by lower legacy TASER volume. Growth would have been stronger absent the timing of an approximately $30 million Federal Dedrone deployment we had expected to recognize during the quarter.
• Connected Devices gross margin was 43.0%, compared to 49.9% in the prior-year period. Adjusted gross margin was 44.6%, compared to 52.1%. The year over year decrease in gross margin and Adjusted gross margin was primarily driven by the increased mix of counter-drone equipment and higher memory costs. The sequential change is primarily attributable to the absence of global tariff refunds recognized in the prior quarter.
• Annual recurring revenue grew 40% year over year to $1.8 billion, reflecting continued adoption of premium software offerings, including the AI Era Plan, real-time operations, Axon Records and Axon 911.
• Net revenue retention was 126%, reflecting our ability to deliver additional value to customers over time with de minimis attrition. We drive adoption of our c loud software solutions through integrated subscription plans that include a variety of premium software offerings. This SaaS metric excludes the hardware portion of customer subscriptions and is normalized to account for phased customer deployments throughout the year.
• Future contracted bookings grew 39% year over year to $15.8 billion. T his operational metric tracks total unfulfilled contracted bookings for products and services, including remaining performance obligations, as well as contracts with certain ter mination or other clauses that are not otherwise included in remaining performance obligations. We expect to fulfill approximately 20% to 25% of this balance over the next 12 months, with the remainder generally expected to be fulfilled over the following 10 years.
The following forward-looking statements reflect Axon’s expectations as of November 5, 2026 and are subject to risks and uncertainties. Please refer to “ Forward-Looking Statements ” below for additional information.
◦ We provide Adjusted EBITDA margin guidance, rather than net income margin guidance, due to the inherent difficulty of forecasting certain types of expenses and gains such as stock-based compensation, income tax expenses and gains or losses on marketable s ecurities and strategic investments, which affect net income but not Adjusted EBITDA. We are unable to reasonably es timate the impact of such expenses, which could be material, on net income. Accordingly, we do not provide forward-looking reconciliations of these measures.
• Revenue: Our fourth-quarter revenue guidance implies full-year 2026 revenue of approximately $3.61 billion to $3.63 billion, representing approximately 30% annual growth. The reduction from our prior guidance of 32% to 34% annual growth reflects the exclusion of three Federal Dedrone deployments totaling approximately $130 million that were contemplated in our prior expectations. Had the three Federal Dedrone deployments remained on pace for 2026, our full-year growth outlook would be nearly 500 basis points higher than our current guidance and approximately 200 basis points above the midpoint of our prior guidance.
• Adjusted EBITDA: Our fourth-quarter Adjusted EBITDA guidance implies full-year 2026 Adjusted EBITDA of $924 million to $929 million. This represents a full- year Adjusted EBITDA margin of approximately 25.6%, a 10 basis point increase from prior margin guidance of 25.5%.
• Free cash flow: We expect full-year 2026 free cash flow of $350 million to $400 million, modestly below our prior target of $450 million due to our accelerated inventory investment to strengthen product availability and supply chain resilience. In aggregate, our inventory strategy is expected to utilize $225 million in cash for the full year. Excluding this strategic inventory investment, which we expect to moderate after the first quarter of 2027, free cash flow conversion on Adjusted EBITDA would be on track to exceed our long- term target of 60%.
• Stock-based compensation: We expect stock-based compensation expense of approximately $570 million to $600 million, a decrease from $590 million to $620 million previously.
◦ Full-year 2026 stock-based compensation expense includes approximately $240 million related to the broad-based Employee XSP and the CEO Performance Award, primarily within SG&A and R&D. These performance-based incentive programs are tied to stock price, operational and time-based requirements.
• CapEx: We expect 2026 CapEx to be in the range of $130 million to $150 million, a decrease from $160 million to $190 million.
◦ Our 2026 capital expenditure plans include long-term R&D investment projects, continued capacity expansion, global facility build-outs and new product development costs. Expected capital expenditures do not include costs related to investments in a new headquarters.
We will host our Q3 2026 earnings conference call webinar on Thursday, November 5 at 2:00 p.m. PT / 5:00 p.m. ET.
The webcast will be available via a link on Axon's investor relations website at https://investor.axon.com or can be accessed directly via https://axon.zoom.us/j/93430641216.
Annual recurring revenue: Annual recurring revenue is a performance indicator that management believes provides more visibility into the growth of our revenue generated by our highest margin, recurring services. Annual recurring revenue should be viewed independently of revenue and deferred revenue because it is an operating measure and is not intended to be combined with or to replace GAAP revenue or deferred revenue, as they can be impacted by contract start and end dates and renewal rates. Annual recurring revenue is not intended to be a replacement or forecast of revenue or deferred revenue. We calculate annual recurring revenue as monthly recurring license, integration, warranty and storage revenue, annualized.
Net revenue retention: Dollar-based net revenue retention is an important metric to measure our ability to retain and expand our relationships with existing customers. We calculate it as the software, camera and TASER warranty subscription and support revenue from a base set of agency customers from which we generated Axon Cloud subscription and warranty revenue in the last month of a quarter divided by the software and camera warranty subscription and support revenue from the year-ago month of that same customer base. This calculation includes high-margin warranty revenue but purposely excludes the lower-margin hardware subscription component of the customer contracts, as it is meant to be a SaaS metric that we use to monitor the health of the recurring revenue business we are building. This calculation also excludes the implied monthly revenue contribution of customers that were added since the year-ago quarter, and therefore excludes the benefit of new customer acquisition. The metric includes customers, if any, that terminated during the annual period, and therefore, this metric is inclusive of customer churn. This metric is downwardly adjusted to account for the effect of phased deployments — meaning that, for the year-ago period, we consider the total contractually obligated implied monthly revenue amount, rather than monthly revenue amounts that might have been in actuality smaller on a GAAP basis due to the customer not having yet fully deployed their Axon solution. For more information relative to our revenue recognition policies, please reference our filings with the Securities and Exchange Commission (SEC).
Future contracted bookings: This operational metric tracks our total unfulfilled contracted bookings, including remaining performance obligations, in addition to contracts with certain termination or other clauses that exclude them from remaining performance obligations. Total future contracted bookings for products and services represent total orders that the Company has received and not yet performed. Such cumulative gross bookings include amounts associated with third- party agent arrangements, where we may only recognize the net portion expected to be paid on behalf of our customers as revenue. The amounts associated with third-party agent arrangements not recognized will be eliminated from future contracted bookings upon fulfillment. This operational metric is subject to change based on future events, including terminations for convenience, the execution of optional periods or other contract modifications or cancellations. This operational metric may be unique to the Company, as it may be different from similarly titled operational metrics used by other companies. As such, the presentation of this operational metric may not enhance the comparability of the Company’s results to the results of other companies.
Bookings: This operational metric represents total product and service orders the Company received during the period, including customer contracts with certain termination or cancellation clauses, optional periods or other clauses, as well as customer orders associated with third-party agent arrangements. To facilitate comparison across end markets with varying contract durations, the Company also presents five-year bookings, which reduces the value of contracts with durations longer than five years to only include the value of the first five years in the contract. A contract with a duration of five years or shorter is included at its full contract value and not adjusted. The Company provides this metric as growth in newer end markets, including international and enterprise, increases the mix of contracts with shorter durations than those often signed in state and local public safety. Management believes five-year bookings provides a comparable view of underlying demand across end markets and periods.
To supplement the Company's financial results presented in accordance with GAAP, we present the non-GAAP financial measures of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, adjusted gross margin, non-GAAP net income, non-GAAP net income margin, non-GAAP diluted earnings per share, free cash flow and adjusted free cash flow. The Company's management uses these non-GAAP financial measures in evaluating the Company's performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented below.
Beginning in the quarterly period ended March 31, 2026, we updated Adjusted EBITDA to exclude all components of other income (loss), net, including foreign currency exchange gains and losses, net and fees related to our Credit Agreement, as these items are not considered representative of our core operating results. Comparable prior periods were not recast because the impact was de minimis.
Beginning in the quarterly period ended March 31, 2026, we updated non-GAAP Net Income and non-GAAP Diluted Earnings per Share to exclude amortization of acquired intangible assets, as the portion of the purchase price assigned to the intangible assets and the corresponding amortization period can differ from one acquisition to another, and we do not consider this activity to be representative of our core ongoing operations. Comparable prior periods were recast, including the related income tax effects.
Beginning in the quarterly period ended June 30, 2026, we updated Adjusted EBITDA and Adjusted Gross Margin to exclude jurisdiction-specific compensation- related taxes directly associated with Employee XSP vesting events, expanding our historical adjustment for payroll taxes to include such activities. Comparable prior periods were not recast because the impact was de minimis.
• EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense, investment interest income, income taxes, depreciation and amortization.
• Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; all components of other income (loss), net, which is primarily comprised of fair value adjustments and income or losses related to strategic investments and marketable securities, debt inducement expense associated with the early repurchase of a portion of our 2027 Notes, foreign currency exchange gains and losses, net, and fees incurred related to our Credit Agreement; noncash stock-based compensation expense; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements and certain compensation costs directly related to employee integration activities; non-recurring severance costs, including employee cash payments, equity, and related benefits; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; mark-to-market adjustments on our non-qualified deferred compensation liabilities; compensation taxes related to Employee XSP vesting; losses incurred as a result of the disposal, abandonment, and impairment of property, equipment, and intangible assets; and inventory step-up amortization related to acquisitions.
• Adjusted EBITDA margin (most comparable GAAP measure: Net income margin) – Adjusted EBITDA as a percentage of net sales.
• Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross margin before noncash stock-based compensation expense; compensation taxes related to Employee XSP vesting; amortization of acquired intangible assets; non-recurring severance costs, including employee cash payments, equity, and related benefits; and inventory step-up amortization related to acquisitions.
• Non-GAAP net income (most comparable GAAP measure: Net income) – Net income excluding fair value adjustments and income or losses related to strategic investments and marketable securities; the costs of noncash stock-based compensation expense; amortization of acquired intangible assets; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; compensation taxes related to Employee XSP vesting; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; non-recurring severance costs, including employee cash payments, equity, and related benefits; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; and inventory step-up amortization related to acquisitions. The Company tax-effects non-GAAP adjustments using the blended statutory federal and state tax rates for each period presented.
• Non-GAAP net income margin (most comparable GAAP measure: Net income margin) - Non-GAAP net income as a percentage of sales.
• Non-GAAP diluted earnings per share (most comparable GAAP measure: Earnings per share) – Measure of the Company's non-GAAP net income divided by the weighted average number of diluted common shares outstanding during the period presented.
• Free cash flow (most comparable GAAP measure: Cash flow from operating activities) – Cash flows provided by operating activities minus purchases of property and equipment.
• Adjusted free cash flow (most comparable GAAP measure: Cash flow from operating activities) – Free cash flow, excluding the net impact of investments in our new Scottsdale, Arizona campus and bond premium amortization.
◦ We believe that free cash flow and adjusted free cash flow excluding the impact of bond premium amortization and net campus investment are non-GAAP measures that are useful to investors and management to evaluate the Company’s ability to generate cash. These non-GAAP measures can also be used to evaluate the Company’s ability to generate cash flow from operations and the impact that this cash flow has on the Company’s liquidity.
Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing the Company's operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:
• these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to the Company's GAAP financial measures;
• these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, the Company's GAAP financial measures;
• these non-GAAP financial measures should not be considered to be superior to the Company's GAAP financial measures; and
• these non-GAAP financial measures were not prepared in accordance with GAAP or under a comprehensive set of rules or principles proposed by a third party.
Further, these non-GAAP financial measures may be unique to the Company, as they may be different from similarly titled non-GAAP financial measures used by other companies. As such, this presentation of non-GAAP financial measures may not enhance the comparability of the Company's results to the results of other companies.
Forward-looking statements in this letter include, without limitation, statements regarding: Axon's future results and the benefits anticipated to be realized from the strategic investment in Skydio; the expected timing and requirements for closing the strategic investment; the ongoing and future commercial relationship between Axon and Skydio; the timing and financial impacts of the strategic investment and other uncertainties and contingencies in connection with the foregoing; proposed products and services and related development efforts and activities; expectations about the market for our current and future products and services, including statements related to our user base and customer profiles; strategies and trends relating to subscription plan programs and revenues; our expectations about the future implementation of new strategies related to artificial intelligence; the timing and realization of future contracted revenue; the fulfillment of bookings; the timing of product shipment and delivery; strategies and trends, including the amounts and benefits of R&D investments; the sufficiency of our liquidity and financial resources; expectations about customer behavior; statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance, including our outlook for 2026 full-year revenue, stock-based compensation expense, Adjusted EBITDA, Adjusted EBITDA margin, free cash flow, free cash flow conversion on Adjusted EBITDA and capital expenditures; statements of management’s strategies, goals and objectives and other similar expressions; as well as the ultimate resolution of financial statement items requiring critical accounting estimates, including those set forth in our Annual Report on Form 10‑K for the year ended December 31, 2025 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2026. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Words such as “may,” “will,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. However, not all forward-looking statements contain these identifying words.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. The following important factors could cause actual results to differ materially from those in the forward-looking statements: the possibility that the closing of the strategic investment does not occur or is delayed, including resulting negative impacts to the commercial relationship between Axon and Skydio; failure to satisfy the conditions to closing the strategic investment; negative effects of the announcement of the strategic investment; potential litigation associated with the strategic investment; our exposure to cancellations of government contracts due to non-appropriation clauses, exercise of a cancellation clause or non-exercise of contractually optional periods; the ability of law enforcement agencies to obtain funding, including based on tax revenues; our ability to design, introduce and sell new products, services or features; our ability to defend against litigation and protect our intellectual property, and the resulting costs of this activity; our ability to win bids through the open bidding process for governmental agencies; our ability to manage our supply chain and avoid production delays, shortages and impacts to expected gross margins; the impacts of inflation, macroeconomic conditions and global events; the impact of catastrophic events or public health emergencies; the impact of stock-based compensation expense, impairment expense and income tax expense on our financial results; customer purchase behavior, including adoption of our software as a service delivery model; negative media publicity or sentiment regarding our products; the impact of various factors on projected gross margins; defects in, or misuse of, our products; changes in the costs of product components and labor; loss of customer data, a breach of security or an extended outage, including by our third-party cloud-based storage providers; exposure to international operational risks; delayed cash collections and possible credit losses due to our subscription model; changes in government regulations in the United States and in foreign markets, especially related to the classification of our products by the United States Bureau of Alcohol, Tobacco, Firearms and Explosives; our ability to integrate acquired businesses; the impact of declines in the fair values or impairment of our investments, including our strategic investments; our ability to attract and retain key personnel; litigation or inquiries and related time and costs; and counterparty risks relating to cash balances held in excess of federally insured limits. Many events beyond our control may determine whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. These factors are intended as cautionary statements for investors within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Readers can find them under the heading “Risk Factors” in our Annual and Quarterly Reports, and investors should refer to them. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 8-K, 10‑Q and 10‑K reports to the SEC. Our filings with the SEC may be accessed at the SEC’s website at www.sec.gov.
Axon (Nasdaq: AXON) is the global leader in public safety technology supporting state, local, federal and international public safety agencies with technology designed to Protect Life. Complementing its mission, Axon’s growing Enterprise market focuses on protecting critical infrastructure and frontline workers across multiple industries including corporate security, hospitality, retail and healthcare. Founder-led since 1993, Axon builds products with transparency and responsibility. From TASER energy devices to today’s connected network of hardware - including cameras, drones, and robotics - cloud software, sensors, and AI tools, the Axon Ecosystem helps seamlessly protect people and places when it matters most. To ensure these technologies align with community expectations, Axon’s independent Ethics & Equity Advisory Council guides the ethical, inclusive, and accountable design of its products and services. Learn more about the EEAC and Axon’s Responsible Innovation framework at https://www.axon.com/responsibility.
Axon, Axon 911, Axon Air, Axon Assistant, AI Era Plan, Axon Body, Axon Ecosystem, Axon Evidence, Axon Fleet, Axon Fusus, Axon Records, Dedrone, OSP, TASER, TASER 10, the Filled Bolt within Circle Logo and the Delta Logo are trademarks of Axon Enterprise, Inc., some of which are registered in the United States and other countries. For more information, visit www.axon.com/legal. All rights reserved.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes fleet in-car video, interview room, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes fleet in-car video, interview room, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
(1) For the three and nine months ended September 30, 2026, non-recurring compensation costs were $5.5 million and $8.2 million, respectively. These costs consisted of stock-based compensation, cash payments and employee benefits, the majority of which derived from acquisition integration activities.
(2) For the three and nine months ended September 30, 2026, stock-based compensation expense included $5.1 million and $5.7 million in non-recurring costs, respectively. The majority of these non-recurring costs derived from acquisition integration activities, and were recorded in selling, general and administrative expenses.
(1) For the three and nine months ended September 30, 2026, non-recurring compensation costs were $5.5 million and $8.2 million, respectively. These costs consisted of stock-based compensation, cash payments and employee benefits, the majority of which derived from acquisition integration activities.
ASSETS 30 SEP 2026 Current Assets: (Unaudited) 31 DEC 2025 ────────────────────────────────────────────────────────────────────────────── Cash and cash $ 1,458,817 $ 1,201,147 equivalents Short-term investments 181,587 505,417 Marketable securities 14,751 27,213 Accounts and notes receivable, net of 838,294 777,486 allowance Contract assets, net 866,856 582,630 Inventory 579,225 341,811 Prepaid expenses 201,603 149,800 Other current assets 141,084 127,548 Total current assets 4,282,217 3,713,052 Property and equipment, 357,342 330,979 net Deferred tax assets, net 333,585 359,803 Intangible assets, net 268,817 196,972 Goodwill 1,885,348 1,370,189 Long-term notes 1,704 6,066 receivable, net Long-term contract 298,906 178,249 assets, net Strategic investments 924,934 416,833 Other long-term assets 479,924 428,170 Total assets $ 8,832,777 $ 7,000,313 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 249,940 $ 139,086 Accrued liabilities 398,475 510,538 Current portion of 742,247 714,708 deferred revenue Current portion of notes — 80,552 payable, net Customer deposits 17,020 16,156 Other current 19,220 9,107 liabilities Total current 1,426,902 1,470,147 liabilities Deferred revenue, net of 435,326 359,902 current portion Liability for unrecognized tax 26,517 24,376 benefits Long-term deferred 34,573 23,675 compensation Long-term lease 100,861 98,942 liabilities Long-term notes payable, 2,868,037 1,730,170 net Other long-term 177,633 50,443 liabilities Total liabilities 5,069,849 3,757,655 Stockholders’ Equity: Common stock 1 1 Additional paid-in 2,764,868 2,475,035 capital Treasury stock -180,164 -157,242 Retained earnings 1,192,415 936,670 Accumulated other -14,192 -11,806 comprehensive loss Total stockholders’ 3,762,928 3,242,658 equity Total liabilities and stockholders’ $ 8,832,777 $ 7,000,313 equity
Full text with the tables
Exhibit 99.1
CONTACT:
Investor Relations
Axon Enterprise, Inc.
IR@axon.com
Axon reports record Q3 2026 revenue of $909 million, up 28% year over year
• Announces increased stake in Skydio to 37%, cementing leadership in Drone as
First Responder
• Software & Services revenue growth accelerates to 43% year over year, reaches
$437 million
• Platform Solutions revenue grows 106% year over year to $125 million
• AI bookings up over 50% year to date; AI ARR surpasses $100 million
• Net income of $57 million increases from a net loss in the prior-year period;
Adjusted EBITDA of $236 million increases 33% year over year
Fellow shareholders,
Today, we announce the largest single investment in Axon’s history: a $1.2
billion investment in Skydio. Skydio is one of America’s leading drone
technology companies, and this investment increases our ownership stake to 37%.
Axon has also entered into an exclusive public safety distribution partnership
with Skydio in the U.S. and Canada, further solidifying our position in one of
the most transformative technologies of the coming decade. Drones are already
helping agencies cut response times dramatically. We expect millions of flying
robots to reshape American life in the years ahead and we intend to be at the
center of it.
Axon remains on pace to deliver another record year, expecting full-year revenue
growth of approximately 30% on top of four consecutive years of growth above
30%. Demand is broad, Software & Services is accelerating and newer businesses
are becoming meaningful contributors to our results. The reduction from our
prior expectations is concentrated in three large Federal Dedrone deployments
representing approximately $130 million of revenue we no longer expect in 2026.
Had those deployments remained on pace, our full-year growth outlook would be
nearly 500 basis points higher than our current guidance and approximately 200
basis points above our prior guidance — underscoring the robust demand we see
across our business.
Software & Services revenue accelerated to 43% year over year growth and reached
$437 million. Growth is increasingly driven by our newer software offerings:
real-time operations, Axon Records, Axon AI, Axon 911 and Dedrone software
collectively reached an annual revenue run rate of nearly $500 million, more
than doubling from last year. AI annual recurring revenue surpassed $100
million.
Connected Devices revenue increased 16% year over year to $472 million. Platform
Solutions led Connected Devices growth, increasing 106% to $125 million, and
underlying performance would have been even stronger absent the delayed timing
of an approximately $30 million Federal Dedrone deployment we had expected to
recognize during the quarter.
Demand keeps building, and customers are putting more Axon to work in more
markets. New five-year bookings are up 25% year to date. Select third-quarter
wins show the size and breadth of what customers are deploying:
• $258 million AI Era Plan and body camera expansion with a state
Department of Corrections
• $115 million OSP 10 Premium, AI Era Plan and Axon Fusus agreement with a state
Department of Corrections
• $40 million OSP 10 Premium and Axon Fleet 3 Advanced expansion with a
major metro police department
• $21 million TASER 10 agreement with an i
nternational police agency
• $18 million Dedrone deployment with a
U.S. federal agency
• $10 million TASER and body-worn camera agreement with an
enterprise healthcare provider
We are meeting that demand with an accelerating pace of innovation. In October
we introduced Axon Body 5, our latest-generation body camera, and TASER Ion, a
new, more flexible TASER device built for a broader range of users and use
cases. We launched Axon Guardian, the latest addition to our suite of
superintelligence products, and took important early steps toward Axon Gravity,
our broader vision to further bring superintelligence capabilities across the
public safety workflow. Together, these innovations expand the problems we can
solve for customers across more verticals and geographies and open new avenues
for durable, long-term growth.
We enter the fourth quarter with high conviction.
We expect fourth-quarter revenue in a range of $990 million to $1.01 billion and
Adjusted EBITDA of $245 million to $250 million. Our updated full-year outlook
excludes approximately $130 million of revenue from the Federal Dedrone
deployments discussed above, including the $30 million deployment previously
expected in the third quarter and two additional deployments totaling $100
million previously expected in the fourth quarter.
Axon’s long-term position is stronger than ever.
We will finish 2026 with a broader portfolio, deeper customer relationships and
more avenues for growth than at any point in our history.
Below, we detail our latest product and ecosystem updates, third-quarter
financial performance and outlook for the remainder of 2026.
Product & Ecosystem
Axon is building a platform, not a product line.
Our latest launches bring more intelligence to the edge, extend our less-lethal
portfolio and connect more of the response lifecycle through a common ecosystem.
Skydio
Drones are becoming one of the defining technologies of the decade, and we are
taking a major stake in a market leader. Today, we announce an additional $1.2
billion investment in Skydio, which takes our fully diluted ownership to 37%.
Axon is also now the exclusive distributor of Skydio for public safety in the
U.S. and Canada. Deployed Skydio docks through Axon Air have more than doubled
year over year, and we believe Drone as First Responder (DFR) is becoming the
new standard of response.
Key highlights include:
• A major stake in a category-defining company: We believe Skydio is positioned
to lead in nearly every sector that flying robots touch. We now own 37% of this
category definer.
• Exclusive reach in public safety: Axon becomes Skydio’s exclusive public
safety distributor in the U.S. and Canada. This extends our lead in public
safety technology.
• Scale that already exists: Skydio expects about $1 billion of bookings this
fiscal year. It is already operating at scale.
•
A faster, more complete response: Combined with Axon 911, Axon Fusus, digital
evidence and Dedrone airspace security, Skydio completes an integrated platform
that helps agencies detect, understand and respond faster.
• Pure-margin revenue to Axon: Axon acts as a direct channel partner. Revenue is
recognized on a net basis in Software & Services.
Two companies, each a leader in its field, are building something bigger than
either could alone. Axon extends its network of mission-critical technologies in
public safety. Skydio stays free to move fast and build the future of American
aerial robotics across many industries.
Axon Body 5
In October we introduced Axon Body 5, a major leap for the camera at the center
of our ecosystem. It is built as an increasingly intelligent endpoint across the
Axon platform.
Enhancements include:
•
25x more processing power
vs. prior-generation Axon cameras, creating a stronger hardware foundation to
support current and future superintelligence capabilities directly on the device
•
Improved connectivity
to support public safety 5G network utilization and enable future network
resilience with the ability to move between providers and adjust bandwidth in
weaker connectivity settings for better live-streaming continuity
•
20% longer battery life
to provide full shift battery assurance and enhance reliability and performance
as camera workloads continue to expand and new superintelligence innovations
become available
• 4K video and optional Pro model with a dedicated near-focus camera for
scanning driver’s licenses and connecting relevant information into Axon Fusus
• Improved audio and optional Pro model front-facing speakers to support
capabilities such as real-time translation through Axon Assistant
This is more than a hardware upgrade. Beyond a better camera, Axon Body 5 puts
more intelligence directly in the field as our portfolio of superintelligence
products expands.
AI Era Plan
Alongside the launch of Axon Body 5, we expanded features available in our suite
of superintelligence products, the AI Era Plan, by moving Axon Guardian into
general availability. Axon Guardian introduces a new category of field
intelligence designed to use connected devices to enhance safety as events
unfold. Its first capabilities include:
• Escalation Detection: When an Axon Body 4 or Body 5 camera is recording,
Guardian can detect signals of potential conflict in real time and create an
alert in Axon Fusus. A remote user can then review the livestream and determine
whether additional support is needed.
• Approach Alert: On Axon Fleet 3, Guardian can detect when the door of a
stopped vehicle opens and alert the officer through both the in-car display and
their body-worn camera.
These features mark another step in the evolution of delivering
superintelligence capabilities for our customers and showcase where we believe
the future is going – connected, intelligent devices at the edge with
superintelligence-powered software that supports customers before, during and
after the moment.
“When Tampa became the first major agency to adopt Axon’s AI Era Plan, we
recognized the potential for AI to do much more than simply automate tasks. It
could give officers valuable time back, improve communication, and help them
make better use of information, ultimately allowing them to focus more of their
time and energy on fighting crime and serving the community.
Now, as I help educate the next generation of public safety leaders, I am even
more convinced that we are at the beginning of a fundamental transformation in
how technology can support our profession. What makes Axon’s approach special is
that its AI technology is being designed around the real-world responsibilities,
challenges, and mission of public safety.” — Lee Bercaw, Retired Tampa Police
Chief and Associate Professor of Instruction, University of South Florida
TASER Ion
Intelligence helps customers understand a situation. When intervention is
required, less-lethal technology is still essential. TASER Ion is an entirely
new device designed to extend the reach of our TASER products. This pocket-sized
form factor expands the application of the technology into environments where
our traditional devices can be less practical.
Examples include undercover operations, personal and executive protection and
use cases where attire, visibility or limited carry space may otherwise leave
personnel with fewer options between physical engagement and a firearm. We
believe this highly capable device creates an opportunity to expand our existing
TASER user base, and we have already seen demand beginning to build just weeks
after its introduction.
Key capabilities include:
• Flexible, discreet carry: A palm-sized, non-pistol design with belt, inside-
the-waistband, deep-pocket and MOLLE options, allowing personnel to maintain a
lower profile without leaving a less-lethal option behind
• More options when intervention is necessary: Four individually deployed
probes, compared to 10 for TASER 10, with a range from close contact to 45 feet
(13.7 m), plus a green laser and built-in LED light for greater visibility
• Accountability built in: Activity logging for upload to Axon Evidence, with
optional wireless sharing, alerts and weapon behavior data to help organizations
align use with policy and authorized assignments
The breadth and impact of our product investments is increasingly visible in our
financial results, with newer products and software becoming meaningful
contributors alongside our core businesses.
Q3 2026 Summary Results
Total revenue
increased 28% year over year to $909 million, led by Software & Services, which
accelerated to 43% growth and reached $437 million.
Connected Devices
revenue increased 16% to $472 million, with growth moderating sequentially due
to normal third-quarter seasonality and the timing of an approximately $30
million Federal Dedrone deployment we had expected to recognize during the
quarter. As our counter-drone business scales, particularly with Federal and
international customers, the size and hardware-heavy nature of these deployments
can create greater quarter-to-quarter variability in revenue timing.
Total company gross margin
of 56.7% decreased from 60.1% in the prior-year period, and
Adjusted gross margin
was 59.2%, compared to 62.7% in the prior-year period. The decrease in gross
margin and Adjusted gross margin was primarily driven by an increased mix of
counter-drone equipment, higher memory costs and scaling of new product
categories.
Operating income
increased to $42 million, compared to a loss from operations of $2 million in
the prior-year period, reflecting higher revenue and operating leverage.
•
Cost of goods sold
of $394 million, or 43% of revenue, including $13 million of stock-based
compensation expense
•
SG&A expense
of $280 million, or 31% of revenue, including $78 million of stock-based
compensation expense
•
R&D expense
of $192 million, or 21% of revenue, including $65 million of stock-based
compensation expense
Net income
was $57 million (6.3% net income margin), or $0.68 per diluted share, compared
to a net loss of $2 million (0.3% net loss margin) or ($0.03) per diluted share
in the prior-year period.
Non-GAAP net income
was $144 million (15.8% non-GAAP net income margin), or $1.72 per diluted share,
compared to $103 million (14.5% non-GAAP net income margin) or $1.24 per diluted
share in the prior-year period.
Adjusted EBITDA
increased 33% year over year to $236 million, representing an Adjusted EBITDA
margin of 25.9%. Adjusted EBITDA reflects continued operating leverage and a
more favorable revenue mix led by accelerating Software & Services growth. This
performance demonstrates our ability to deliver strong profitability even as we
invest behind newer, hardware-intensive businesses with significant long-term
growth potential.
Operating cash flow
was $20 million, compared to $60 million in the prior-year period. This included
approximately $100 million of cash used in the quarter related to our strategic
inventory investment to support product availability and supply chain
resilience, in addition to ongoing investment as we scale to support growth.
Free cash flow
was an outflow of $19 million, compared to an inflow of $33 million in the
prior-year period, primarily reflecting the impact of our inventory investment,
which totaled approximately $100 million in the quarter.
As of September 30, 2026, Axon had $1.7 billion in
cash, cash equivalents and short-term investments
and $2.9 billion of outstanding convertible and senior notes, resulting in a net
debt position of $1.2 billion, up $182 million sequentially.
Detailed definitions of our non-GAAP financial measures and caution regarding
their use are included later in this letter .
Financial commentary by segment
Software & Services
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… 7… % 7… % 73… % 10 (…
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• Software & Services revenue grew 43% year over year to $437 million, driven by
growth in users and increasing adoption of premium solutions by existing
customers. Growth is increasingly benefiting from newer software offerings,
including AI, real-time operations, Axon Records and Axon 911.
• Software & Services gross margin was 71.4%, compared to 73.8% in the prior-
year period. Adjusted gross margin was 75.0%, compared to 76.8%. The year over
year decrease in gross margin and Adjusted gross margin was primarily driven by
the scaling of new product offerings and a higher mix of professional services
revenue. Software-only gross margin continued to exceed 80%.
Connected Devices
T…
M…
E…
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S…
2… 30 30
(… JUN S… CH…
t… 20… 2… QoQ YoY
──────────────────────────────────────────────────────────────────────────────
… $ 4… $ 50… $ 4… -… % 1… %
… 4… % 5… % 49… % -… bp -… bp
…
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• Connected Devices revenue grew 16% year over year to $472 million, led by
Dedrone and continued adoption of Axon Body 4, partially offset by lower legacy
TASER volume. Growth would have been stronger absent the timing of an
approximately $30 million Federal Dedrone deployment we had expected to
recognize during the quarter.
• Connected Devices gross margin was 43.0%, compared to 49.9% in the prior-year
period. Adjusted gross margin was 44.6%, compared to 52.1%. The year over year
decrease in gross margin and Adjusted gross margin was primarily driven by the
increased mix of counter-drone equipment and higher memory costs. The sequential
change is primarily attributable to the absence of global tariff refunds
recognized in the prior quarter.
Forward-Looking Operating Metrics
30 30 31 31 30
SEP JUN MAR DEC SEP
2026 2026 2026 2025 2025
──────────────────────────────────────────────────────────────────────────────
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rev… $ 1,7… $ 1,639 $ 1,4… $ 1,347 $ 1,2…
($
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ret…
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____________________________________________________________________
(1) Refer to “Statistical Definitions” below.
• Annual recurring revenue grew 40% year over year to $1.8 billion, reflecting
continued adoption of premium software offerings, including the AI Era Plan,
real-time operations, Axon Records and Axon 911.
• Net revenue retention was 126%, reflecting our ability to deliver additional
value to customers over time with de minimis attrition. We drive adoption of our
c loud software solutions through integrated subscription plans that include a
variety of premium software offerings. This SaaS metric excludes the hardware
portion of customer subscriptions and is normalized to account for phased
customer deployments throughout the year.
• Future contracted bookings grew 39% year over year to $15.8 billion. T his
operational metric tracks total unfulfilled contracted bookings for products and
services, including remaining performance obligations, as well as contracts with
certain ter mination or other clauses that are not otherwise included in
remaining performance obligations. We expect to fulfill approximately 20% to 25%
of this balance over the next 12 months, with the remainder generally expected
to be fulfilled over the following 10 years.
Outlook
The following forward-looking statements reflect Axon’s expectations as of
November 5, 2026 and are subject to risks and uncertainties. Please refer to “
Forward-Looking Statements ” below for additional information.
Q4 2026
•
Revenue: We expect revenue of $990 million to $1.01 billion.
• Adjusted EBITDA: We expect Adjusted EBITDA of $245 million to $250 million.
◦ We provide Adjusted EBITDA margin guidance, rather than net income margin
guidance, due to the inherent difficulty of forecasting certain types of
expenses and gains such as stock-based compensation, income tax expenses and
gains or losses on marketable s ecurities and strategic investments, which
affect net income but not Adjusted EBITDA. We are unable to reasonably es timate
the impact of such expenses, which could be material, on net income.
Accordingly, we do not provide forward-looking reconciliations of these
measures.
FULL YEAR 2026
• Revenue: Our fourth-quarter revenue guidance implies full-year 2026 revenue of
approximately $3.61 billion to $3.63 billion, representing approximately 30%
annual growth. The reduction from our prior guidance of 32% to 34% annual growth
reflects the exclusion of three Federal Dedrone deployments totaling
approximately $130 million that were contemplated in our prior expectations. Had
the three Federal Dedrone deployments remained on pace for 2026, our full-year
growth outlook would be nearly 500 basis points higher than our current guidance
and approximately 200 basis points above the midpoint of our prior guidance.
• Adjusted EBITDA: Our fourth-quarter Adjusted EBITDA guidance implies full-year
2026 Adjusted EBITDA of $924 million to $929 million. This represents a full-
year Adjusted EBITDA margin of approximately 25.6%, a 10 basis point increase
from prior margin guidance of 25.5%.
• Free cash flow: We expect full-year 2026 free cash flow of $350 million to
$400 million, modestly below our prior target of $450 million due to our
accelerated inventory investment to strengthen product availability and supply
chain resilience. In aggregate, our inventory strategy is expected to utilize
$225 million in cash for the full year. Excluding this strategic inventory
investment, which we expect to moderate after the first quarter of 2027, free
cash flow conversion on Adjusted EBITDA would be on track to exceed our long-
term target of 60%.
• Stock-based compensation: We expect stock-based compensation expense of
approximately $570 million to $600 million, a decrease from $590 million to $620
million previously.
◦ Full-year 2026 stock-based compensation expense includes approximately $240
million related to the broad-based Employee XSP and the CEO Performance Award,
primarily within SG&A and R&D. These performance-based incentive programs are
tied to stock price, operational and time-based requirements.
• CapEx: We expect 2026 CapEx to be in the range of $130 million to $150
million, a decrease from $160 million to $190 million.
◦ Our 2026 capital expenditure plans include long-term R&D investment projects,
continued capacity expansion, global facility build-outs and new product
development costs. Expected capital expenditures do not include costs related to
investments in a new headquarters.
Quarterly conference call and webcast
We will host our Q3 2026 earnings conference call webinar on Thursday, November
5 at 2:00 p.m. PT / 5:00 p.m. ET.
The webcast will be available via a link on Axon's investor relations website at
https://investor.axon.com or can be accessed directly via
https://axon.zoom.us/j/93430641216.
Statistical Definitions
Annual recurring revenue: Annual recurring revenue is a performance indicator
that management believes provides more visibility into the growth of our revenue
generated by our highest margin, recurring services. Annual recurring revenue
should be viewed independently of revenue and deferred revenue because it is an
operating measure and is not intended to be combined with or to replace GAAP
revenue or deferred revenue, as they can be impacted by contract start and end
dates and renewal rates. Annual recurring revenue is not intended to be a
replacement or forecast of revenue or deferred revenue. We calculate annual
recurring revenue as monthly recurring license, integration, warranty and
storage revenue, annualized.
Net revenue retention: Dollar-based net revenue retention is an important metric
to measure our ability to retain and expand our relationships with existing
customers. We calculate it as the software, camera and TASER warranty
subscription and support revenue from a base set of agency customers from which
we generated Axon Cloud subscription and warranty revenue in the last month of a
quarter divided by the software and camera warranty subscription and support
revenue from the year-ago month of that same customer base. This calculation
includes high-margin warranty revenue but purposely excludes the lower-margin
hardware subscription component of the customer contracts, as it is meant to be
a SaaS metric that we use to monitor the health of the recurring revenue
business we are building. This calculation also excludes the implied monthly
revenue contribution of customers that were added since the year-ago quarter,
and therefore excludes the benefit of new customer acquisition. The metric
includes customers, if any, that terminated during the annual period, and
therefore, this metric is inclusive of customer churn. This metric is downwardly
adjusted to account for the effect of phased deployments — meaning that, for the
year-ago period, we consider the total contractually obligated implied monthly
revenue amount, rather than monthly revenue amounts that might have been in
actuality smaller on a GAAP basis due to the customer not having yet fully
deployed their Axon solution. For more information relative to our revenue
recognition policies, please reference our filings with the Securities and
Exchange Commission (SEC).
Future contracted bookings: This operational metric tracks our total unfulfilled
contracted bookings, including remaining performance obligations, in addition to
contracts with certain termination or other clauses that exclude them from
remaining performance obligations. Total future contracted bookings for products
and services represent total orders that the Company has received and not yet
performed. Such cumulative gross bookings include amounts associated with third-
party agent arrangements, where we may only recognize the net portion expected
to be paid on behalf of our customers as revenue. The amounts associated with
third-party agent arrangements not recognized will be eliminated from future
contracted bookings upon fulfillment. This operational metric is subject to
change based on future events, including terminations for convenience, the
execution of optional periods or other contract modifications or cancellations.
This operational metric may be unique to the Company, as it may be different
from similarly titled operational metrics used by other companies. As such, the
presentation of this operational metric may not enhance the comparability of the
Company’s results to the results of other companies.
Bookings: This operational metric represents total product and service orders
the Company received during the period, including customer contracts with
certain termination or cancellation clauses, optional periods or other clauses,
as well as customer orders associated with third-party agent arrangements. To
facilitate comparison across end markets with varying contract durations, the
Company also presents five-year bookings, which reduces the value of contracts
with durations longer than five years to only include the value of the first
five years in the contract. A contract with a duration of five years or shorter
is included at its full contract value and not adjusted. The Company provides
this metric as growth in newer end markets, including international and
enterprise, increases the mix of contracts with shorter durations than those
often signed in state and local public safety. Management believes five-year
bookings provides a comparable view of underlying demand across end markets and
periods.
Supplementary Non-GAAP Measures
To supplement the Company's financial results presented in accordance with GAAP,
we present the non-GAAP financial measures of EBITDA, Adjusted EBITDA, Adjusted
EBITDA margin, adjusted gross margin, non-GAAP net income, non-GAAP net income
margin, non-GAAP diluted earnings per share, free cash flow and adjusted free
cash flow. The Company's management uses these non-GAAP financial measures in
evaluating the Company's performance in comparison to prior periods. We believe
that both management and investors benefit from referring to these non-GAAP
financial measures in assessing the Company's performance, and when planning and
forecasting our future periods. A reconciliation of GAAP to the non-GAAP
financial measures is presented below.
Beginning in the quarterly period ended March 31, 2026, we updated Adjusted
EBITDA to exclude all components of other income (loss), net, including foreign
currency exchange gains and losses, net and fees related to our Credit
Agreement, as these items are not considered representative of our core
operating results. Comparable prior periods were not recast because the impact
was de minimis.
Beginning in the quarterly period ended March 31, 2026, we updated non-GAAP Net
Income and non-GAAP Diluted Earnings per Share to exclude amortization of
acquired intangible assets, as the portion of the purchase price assigned to the
intangible assets and the corresponding amortization period can differ from one
acquisition to another, and we do not consider this activity to be
representative of our core ongoing operations. Comparable prior periods were
recast, including the related income tax effects.
Beginning in the quarterly period ended June 30, 2026, we updated Adjusted
EBITDA and Adjusted Gross Margin to exclude jurisdiction-specific compensation-
related taxes directly associated with Employee XSP vesting events, expanding
our historical adjustment for payroll taxes to include such activities.
Comparable prior periods were not recast because the impact was de minimis.
• EBITDA (most comparable GAAP measure: Net income) – Earnings before interest
expense, investment interest income, income taxes, depreciation and
amortization.
• Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before
interest expense; investment interest income; income taxes; depreciation;
amortization; all components of other income (loss), net, which is primarily
comprised of fair value adjustments and income or losses related to strategic
investments and marketable securities, debt inducement expense associated with
the early repurchase of a portion of our 2027 Notes, foreign currency exchange
gains and losses, net, and fees incurred related to our Credit Agreement;
noncash stock-based compensation expense; transaction and integration costs
related to strategic investments and acquisitions, including the change in fair
value of contingent consideration arrangements and certain compensation costs
directly related to employee integration activities; non-recurring severance
costs, including employee cash payments, equity, and related benefits; costs (or
subsequent recoveries of prior costs) related to certain legal or regulatory
matters we consider outside of our core operating activities; mark-to-market
adjustments on our non-qualified deferred compensation liabilities; compensation
taxes related to Employee XSP vesting; losses incurred as a result of the
disposal, abandonment, and impairment of property, equipment, and intangible
assets; and inventory step-up amortization related to acquisitions.
• Adjusted EBITDA margin (most comparable GAAP measure: Net income margin) –
Adjusted EBITDA as a percentage of net sales.
• Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross
margin before noncash stock-based compensation expense; compensation taxes
related to Employee XSP vesting; amortization of acquired intangible assets;
non-recurring severance costs, including employee cash payments, equity, and
related benefits; and inventory step-up amortization related to acquisitions.
• Non-GAAP net income (most comparable GAAP measure: Net income) – Net income
excluding fair value adjustments and income or losses related to strategic
investments and marketable securities; the costs of noncash stock-based
compensation expense; amortization of acquired intangible assets; transaction
and integration costs related to strategic investments and acquisitions,
including the change in fair value of contingent consideration arrangements;
compensation taxes related to Employee XSP vesting; costs (or subsequent
recoveries of prior costs) related to certain legal or regulatory matters we
consider outside of our core operating activities; non-recurring severance
costs, including employee cash payments, equity, and related benefits; debt
inducement expense associated with the early repurchase of a portion of our 2027
Notes; and inventory step-up amortization related to acquisitions. The Company
tax-effects non-GAAP adjustments using the blended statutory federal and state
tax rates for each period presented.
• Non-GAAP net income margin (most comparable GAAP measure: Net income margin) -
Non-GAAP net income as a percentage of sales.
• Non-GAAP diluted earnings per share (most comparable GAAP measure: Earnings
per share) – Measure of the Company's non-GAAP net income divided by the
weighted average number of diluted common shares outstanding during the period
presented.
• Free cash flow (most comparable GAAP measure: Cash flow from operating
activities) – Cash flows provided by operating activities minus purchases of
property and equipment.
• Adjusted free cash flow (most comparable GAAP measure: Cash flow from
operating activities) – Free cash flow, excluding the net impact of investments
in our new Scottsdale, Arizona campus and bond premium amortization.
◦ We believe that free cash flow and adjusted free cash flow excluding the
impact of bond premium amortization and net campus investment are non-GAAP
measures that are useful to investors and management to evaluate the Company’s
ability to generate cash. These non-GAAP measures can also be used to evaluate
the Company’s ability to generate cash flow from operations and the impact that
this cash flow has on the Company’s liquidity.
Caution on Use of Non-GAAP Measures
Although these non-GAAP financial measures are not consistent with GAAP,
management believes investors will benefit by referring to these non-GAAP
financial measures when assessing the Company's operating results, as well as
when forecasting and analyzing future periods. However, management recognizes
that:
• these non-GAAP financial measures are limited in their usefulness and should
be considered only as a supplement to the Company's GAAP financial measures;
• these non-GAAP financial measures should not be considered in isolation from,
or as a substitute for, the Company's GAAP financial measures;
• these non-GAAP financial measures should not be considered to be superior to
the Company's GAAP financial measures; and
• these non-GAAP financial measures were not prepared in accordance with GAAP or
under a comprehensive set of rules or principles proposed by a third party.
Further, these non-GAAP financial measures may be unique to the Company, as they
may be different from similarly titled non-GAAP financial measures used by other
companies. As such, this presentation of non-GAAP financial measures may not
enhance the comparability of the Company's results to the results of other
companies.
Forward-looking Statements
Forward-looking statements in this letter include, without limitation,
statements regarding: Axon's future results and the benefits anticipated to be
realized from the strategic investment in Skydio; the expected timing and
requirements for closing the strategic investment; the ongoing and future
commercial relationship between Axon and Skydio; the timing and financial
impacts of the strategic investment and other uncertainties and contingencies in
connection with the foregoing; proposed products and services and related
development efforts and activities; expectations about the market for our
current and future products and services, including statements related to our
user base and customer profiles; strategies and trends relating to subscription
plan programs and revenues; our expectations about the future implementation of
new strategies related to artificial intelligence; the timing and realization of
future contracted revenue; the fulfillment of bookings; the timing of product
shipment and delivery; strategies and trends, including the amounts and benefits
of R&D investments; the sufficiency of our liquidity and financial resources;
expectations about customer behavior; statements concerning projections,
predictions, expectations, estimates or forecasts as to our business, financial
and operational results and future economic performance, including our outlook
for 2026 full-year revenue, stock-based compensation expense, Adjusted EBITDA,
Adjusted EBITDA margin, free cash flow, free cash flow conversion on Adjusted
EBITDA and capital expenditures; statements of management’s strategies, goals
and objectives and other similar expressions; as well as the ultimate resolution
of financial statement items requiring critical accounting estimates, including
those set forth in our Annual Report on Form 10‑K for the year ended December
31, 2025 and our Quarterly Report on Form 10-Q for the quarter ended September
30, 2026. Such statements give our current expectations or forecasts of future
events; they do not relate strictly to historical or current facts. Words such
as “may,” “will,” “should,” “could,” “would,” “predict,” “potential,”
“continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,”
“estimate,” and similar expressions, as well as statements in future tense,
identify forward-looking statements. However, not all forward-looking statements
contain these identifying words.
We cannot guarantee that any forward-looking statement will be realized,
although we believe we have been prudent in our plans and assumptions.
Achievement of future results is subject to risks, uncertainties and potentially
inaccurate assumptions. The following important factors could cause actual
results to differ materially from those in the forward-looking statements: the
possibility that the closing of the strategic investment does not occur or is
delayed, including resulting negative impacts to the commercial relationship
between Axon and Skydio; failure to satisfy the conditions to closing the
strategic investment; negative effects of the announcement of the strategic
investment; potential litigation associated with the strategic investment; our
exposure to cancellations of government contracts due to non-appropriation
clauses, exercise of a cancellation clause or non-exercise of contractually
optional periods; the ability of law enforcement agencies to obtain funding,
including based on tax revenues; our ability to design, introduce and sell new
products, services or features; our ability to defend against litigation and
protect our intellectual property, and the resulting costs of this activity; our
ability to win bids through the open bidding process for governmental agencies;
our ability to manage our supply chain and avoid production delays, shortages
and impacts to expected gross margins; the impacts of inflation, macroeconomic
conditions and global events; the impact of catastrophic events or public health
emergencies; the impact of stock-based compensation expense, impairment expense
and income tax expense on our financial results; customer purchase behavior,
including adoption of our software as a service delivery model; negative media
publicity or sentiment regarding our products; the impact of various factors on
projected gross margins; defects in, or misuse of, our products; changes in the
costs of product components and labor; loss of customer data, a breach of
security or an extended outage, including by our third-party cloud-based storage
providers; exposure to international operational risks; delayed cash collections
and possible credit losses due to our subscription model; changes in government
regulations in the United States and in foreign markets, especially related to
the classification of our products by the United States Bureau of Alcohol,
Tobacco, Firearms and Explosives; our ability to integrate acquired businesses;
the impact of declines in the fair values or impairment of our investments,
including our strategic investments; our ability to attract and retain key
personnel; litigation or inquiries and related time and costs; and counterparty
risks relating to cash balances held in excess of federally insured limits. Many
events beyond our control may determine whether results we anticipate will be
achieved. Should known or unknown risks or uncertainties materialize, or should
underlying assumptions prove inaccurate, actual results could differ materially
from past results and those anticipated, estimated or projected. You should bear
this in mind as you consider forward-looking statements. These factors are
intended as cautionary statements for investors within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. Readers can find them under the heading
“Risk Factors” in our Annual and Quarterly Reports, and investors should refer
to them. You should understand that it is not possible to predict or identify
all such factors. Consequently, you should not consider any such list to be a
complete set of all potential risks or uncertainties.
Except as required by law, we undertake no obligation to publicly update
forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any further
disclosures we make on related subjects in our Form 8-K, 10‑Q and 10‑K reports
to the SEC. Our filings with the SEC may be accessed at the SEC’s website at
www.sec.gov.
About Axon
Axon (Nasdaq: AXON) is the global leader in public safety technology supporting
state, local, federal and international public safety agencies with technology
designed to Protect Life. Complementing its mission, Axon’s growing Enterprise
market focuses on protecting critical infrastructure and frontline workers
across multiple industries including corporate security, hospitality, retail and
healthcare. Founder-led since 1993, Axon builds products with transparency and
responsibility. From TASER energy devices to today’s connected network of
hardware - including cameras, drones, and robotics - cloud software, sensors,
and AI tools, the Axon Ecosystem helps seamlessly protect people and places when
it matters most. To ensure these technologies align with community expectations,
Axon’s independent Ethics & Equity Advisory Council guides the ethical,
inclusive, and accountable design of its products and services. Learn more about
the EEAC and Axon’s Responsible Innovation framework at
https://www.axon.com/responsibility.
Non-Axon trademarks are property of their respective owners.
Axon, Axon 911, Axon Air, Axon Assistant, AI Era Plan, Axon Body, Axon
Ecosystem, Axon Evidence, Axon Fleet, Axon Fusus, Axon Records, Dedrone, OSP,
TASER, TASER 10, the Filled Bolt within Circle Logo and the Delta Logo are
trademarks of Axon Enterprise, Inc., some of which are registered in the United
States and other countries. For more information, visit www.axon.com/legal. All
rights reserved.
AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
TH… NI…
MO… MO…
EN… EN…
30 30 30 30 30
SEP JUN SEP SEP SEP
20… 20… 20… 20… 2025
──────────────────────────────────────────────────────────────────────────────
N…
s… $ 47… $ 50… $ 405… $ 1,… $ 1,1…
f…
p…
N…
s… 43… 39… 305… 1,… 860…
f…
s…
N… 90… 90… 710… 2,… 1,9…
s…
C…
of 26… 24… 203… 74… 566…
p…
s…
C…
of 12… 11… 80,… 33… 219…
s…
s…
C…
of 39… 35… 283… 1,… 785…
s…
G… 51… 54… 427… 1,… 1,1…
m…
O…
e…
S…
g… 28… 29… 252… 83… 718…
a…
a…
R…
a… 19… 20… 176… 59… 490…
d…
T…
o… 47… 49… 429… 1,… 1,2…
e…
I…
(… 42… 46… -2,… 11… -11…
f…
o…
I… 5,… 6,… 23,… 23… 57,…
i…
I… -2… -2… -28… -85… -6…
e…
O…
i… 59… 7,… 22,… 255… 10…
n…
I…
b…
p… 78… 32… 15,… 311… 85…
f…
i…
t…
P…
f…
(… 21… 3,… 17,… 56,… -3…
f…
i…
t…
N…
i… $ 57… $ 29… $ -2,… $ 25… $ 121…
(…
N…
i…
(…
p…
c…
a…
c…
e…
s…
B… $ 0.… $ 0.… $ -0.… $ 3.… $ 1.57
D… $ 0.… $ 0.… $ -0.… $ 3.… $ 1.48
W…
a…
n…
of
c…
a…
c…
e…
s…
o…
B… 81… 80… 78,… 80… 77,…
D… 83… 82… 78,… 82… 82,…
AXON ENTERPRISE, INC.
SALES BY PRODUCT AND SERVICE
(in thousands)
(unaudited)
… … …
… … …
… … …
… … …
… … …
… … … … … …
… & … & … &
… … … … … … … … …
──────────────────────────────────────────────────────────────────────────────
$ … $ — $ … $ … $ — $ … $ … $ $
… — … … — … … —
… — … … — … … —
— … … — … … — …
$ … $ … $ … $ … $ … $ … $ … $ … $
________________________________________________________________________________
____
(1) 'TASER' includes TASER devices, cartridges and related extended warranties.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal
sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes fleet in-car video, interview room,
fixed cameras, drones and counter-drone equipment, virtual reality training
hardware, and related extended warranties.
NI… NI…
MO… MO…
EN… EN…
30 30
SEP SEP
20… So… 20… So…
Co… & Co… &
De… Se… To… De… Se… To…
──────────────────────────────────────────────────────────────────────────────
T… $ 72… $ — $ 72… $ 64… $ — $ 649…
P… 31… — 31… 28… — 287…
S…
P… 38… — 38… 18… — 185…
S…
S…
& — 1,… 1,… — 860… 860…
S…
T… $ 1,… $ 1,… $ 2,… $ 1,… $ 860… $ 1,9…
________________________________________________________________________________
____
(1) 'TASER' includes TASER devices, cartridges and related extended warranties.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal
sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes fleet in-car video, interview room,
fixed cameras, drones and counter-drone equipment, virtual reality training
hardware, and related extended warranties.
AXON ENTERPRISE, INC.
SALES BY GEOGRAPHY
(in thousands)
(unaudited)
THR… 30 THR… 30 THREE 30
MON… SEP MON… JUN MONT… SEP
END… 2026 END… 2026 ENDED 2025
──────────────────────────────────────────────────────────────────────────────
Un… $ 772… 85 % $ 742… 82 % $ 593… 84 %
St…
Ot… 136… 15 162… 18 116… 16
co…
To… $ 908… 100 % $ 904… 100 % $ 710… 100 %
NINE NINE
MONTHS 30 SEP MONTHS 30 SEP
ENDED 2026 ENDED 2025
──────────────────────────────────────────────────────────────────────────────
United $ 2,160,860 82 % $ 1,660,695 84 %
States
Other 459,428 18 322,117 16
countri…
Total $ 2,620,288 100 % $ 1,982,812 100 %
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(in thousands)
T… N…
M… M…
… E… E…
… 30 30 30 30 30
… S… J… SEP S… SEP
… 2… 2… 20… 2… 20…
──────────────────────────────────────────────────────────────────────────────
…
… $ 5… $ 2… $ -2… $ 2… $ 12…
…
…
… 3… 3… 21… 9… 59…
…
… 2… 2… 28… 8… 65…
…
…
… -… -… -2… -… -5…
…
…
…
… 2… 3… 17… 5… -3…
…
…
…
… $ 1… $ 8… $ 41… $ 4… $ 15…
…
…
…
… $ -… $ -… $ -2… $ -… $ -1…
…
…
… 1… 1… 14… 4… 42…
…
…
…
…
…
… 7… 4… 4,… 1… 9,…
…
…
…
…
…
…
…
…
… 1… 9… — 9… 9,…
…
…
…
…
… 2… 1… 5,… 5… 8,…
…
…
… — 6… — 2… —
…
…
…
… — 2… 1,… 2… 2,…
…
…
…
…
…
…
…
…
… 1… — 430 1… 430
…
…
…
…
…
…
…
… — — — — 607
…
… $ 2… $ 2… $ 17… $ 6… $ 50…
…
…
…
…
…
a 6… % 3… % -… % 9.8 % 6… %
…
…
…
…
…
…
…
a 2… % 2… % 2… % 25… % 2… %
…
…
…
…
…
…
…
…
…
… $ 1… $ 1… $ 12… $ 3… $ 38…
…
…
…
…
…
… 7… 7… 75… 2… 21…
…
…
…
… 6… 6… 58… 1… 16…
…
…
…
… $ 1… $ 1… $ 14… $ 4… $ 42…
…
…
…
… 5… -… — 5… —
…
…
…
…
… $ 1… $ 1… $ 14… $ 4… $ 42…
…
…
…
________________________________________________________________________________
____
(1) For the three and nine months ended September 30, 2026, non-recurring
compensation costs were $5.5 million and $8.2 million, respectively. These costs
consisted of stock-based compensation, cash payments and employee benefits, the
majority of which derived from acquisition integration activities.
(2) For the three and nine months ended September 30, 2026, stock-based
compensation expense included $5.1 million and $5.7 million in non-recurring
costs, respectively. The majority of these non-recurring costs derived from
acquisition integration activities, and were recorded in selling, general and
administrative expenses.
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - continued
(in thousands)
T… N…
M… M…
E… E…
… 30 30 30 30 30
… S… J… SEP S… SEP
… 2… 2… 20… 2… 20…
──────────────────────────────────────────────────────────────────────────────
…
… $ 5… $ 2… $ -2… $ 2… $ 12…
…
…
…
…
…
…
…
… -… -… -2… -… -1…
…
…
…
…
… 1… 1… 14… 4… 42…
…
…
…
… 1… 1… 6,… 3… 20…
…
…
…
…
…
…
… 7… 4… 4,… 1… 9,…
…
…
…
…
…
…
…
…
… 1… 9… — 9… 9,…
…
…
…
…
… 2… 1… 5,… 5… 8,…
…
…
… — 6… — 2… —
…
…
… — — — — 28…
…
…
… — — — — 607
…
…
… -… -… -3… -… -8…
…
…
… $ 1… $ 1… $ 10… $ 4… $ 40…
…
…
…
…
…
a 1… % 1… % 1… % 16… % 2… %
…
…
…
…
…
…
…
…
…
…
… $ 0… $ 0… $ -0… $ 3… $ 1.…
… $ 1… $ 1… $ 1.… $ 5… $ 4.…
…
…
…
…
…
… 8… 8… 83… 8… 82…
…
…
…
…
…
________________________________________________________________________________
____
(1) For the three and nine months ended September 30, 2026, non-recurring
compensation costs were $5.5 million and $8.2 million, respectively. These costs
consisted of stock-based compensation, cash payments and employee benefits, the
majority of which derived from acquisition integration activities.
AXON ENTERPRISE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - continued
(in thousands)
THR… 30 30 30 NINE 30 30
MON… SEP JUN SEP MON… SEP SEP
END… 20… 2026 20… END… 20… 2025
──────────────────────────────────────────────────────────────────────────────
Net $ 90… $ 904… $ 71… $ 2,… $ 1,9…
sa…
Co…
of -3… -35… -2… -1… -78…
sa…
Gr… 51… 546… 42… 1,… 1,1…
ma…
St…
co… 12… 11,… 12… 34… 38,…
ex…
Am…
of
ac… 10… 10,… 5,… 29… 15,…
in…
as…
Co…
ta…
re…
to — 1,0… — 1,… 1,4…
Em…
XSP
ve…
Se… — -25 — 141 —
co…
In…
st… — — — — 607
am…
Ad…
gr… $ 53… $ 569… $ 44… $ 1,… $ 1,2…
ma…
Gr… 56… % 60.4 % 60… % 58… % 60.4 %
ma…
Ad…
gr… 59… % 62.9 % 62… % 61… % 63.2 %
ma…
Software & Services
THR… 30 30 30 NINE 30 30
MON… SEP JUN SEP MON… SEP SEP
END… 20… 2026 20… END… 20… 2025
──────────────────────────────────────────────────────────────────────────────
Net $ 43… $ 397… $ 30… $ 1,… $ 860…
sa…
Co…
of -1… -11… -8… -3… -21…
sa…
Gr… 31… 283… 22… 85… 641…
ma…
Am…
of
ac… 8,… 8,5… 4,… 24… 11,…
in…
as…
St…
co… 7,… 5,8… 5,… 17… 15,…
ex…
Co…
ta…
re…
to — 633 — 633 854
Em…
XSP
ve…
Se… — — — 20 —
co…
Ad…
gr… $ 32… $ 298… $ 23… $ 89… $ 668…
ma…
Gr… 71… % 71.3 % 73… % 71… % 74.5 %
ma…
Ad…
gr… 75… % 75.1 % 76… % 75… % 77.8 %
ma…
Connected Devices
THR… 30 30 30 NINE 30 30
MON… SEP JUN SEP MON… SEP SEP
END… 20… 2026 20… END… 20… 2025
──────────────────────────────────────────────────────────────────────────────
Net $ 47… $ 506… $ 40… $ 1,… $ 1,1…
sa…
Co…
of -2… -24… -2… -7… -56…
sa…
Gr… 20… 262… 20… 68… 555…
ma…
St…
co… 5,… 5,5… 7,… 17… 22,…
ex…
Am…
of
ac… 1,… 1,7… 1,… 5,… 3,9…
in…
as…
Co…
ta…
re…
to — 426 — 426 634
Em…
XSP
ve…
Se… — -25 — 121 —
co…
In…
st… — — — — 607
am…
Ad…
gr… $ 21… $ 270… $ 21… $ 70… $ 583…
ma…
Gr… 43… % 51.9 % 49… % 48… % 49.5 %
ma…
Ad…
gr… 44… % 53.4 % 52… % 49… % 52.0 %
ma…
AXON ENTERPRISE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS 30 SEP 2026
Current Assets: (Unaudited) 31 DEC 2025
──────────────────────────────────────────────────────────────────────────────
Cash and cash $ 1,458,817 $ 1,201,147
equivalents
Short-term investments 181,587 505,417
Marketable securities 14,751 27,213
Accounts and notes
receivable, net of 838,294 777,486
allowance
Contract assets, net 866,856 582,630
Inventory 579,225 341,811
Prepaid expenses 201,603 149,800
Other current assets 141,084 127,548
Total current assets 4,282,217 3,713,052
Property and equipment, 357,342 330,979
net
Deferred tax assets, net 333,585 359,803
Intangible assets, net 268,817 196,972
Goodwill 1,885,348 1,370,189
Long-term notes 1,704 6,066
receivable, net
Long-term contract 298,906 178,249
assets, net
Strategic investments 924,934 416,833
Other long-term assets 479,924 428,170
Total assets $ 8,832,777 $ 7,000,313
LIABILITIES AND
STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 249,940 $ 139,086
Accrued liabilities 398,475 510,538
Current portion of 742,247 714,708
deferred revenue
Current portion of notes — 80,552
payable, net
Customer deposits 17,020 16,156
Other current 19,220 9,107
liabilities
Total current 1,426,902 1,470,147
liabilities
Deferred revenue, net of 435,326 359,902
current portion
Liability for
unrecognized tax 26,517 24,376
benefits
Long-term deferred 34,573 23,675
compensation
Long-term lease 100,861 98,942
liabilities
Long-term notes payable, 2,868,037 1,730,170
net
Other long-term 177,633 50,443
liabilities
Total liabilities 5,069,849 3,757,655
Stockholders’ Equity:
Common stock 1 1
Additional paid-in 2,764,868 2,475,035
capital
Treasury stock -180,164 -157,242
Retained earnings 1,192,415 936,670
Accumulated other -14,192 -11,806
comprehensive loss
Total stockholders’ 3,762,928 3,242,658
equity
Total liabilities and
stockholders’ $ 8,832,777 $ 7,000,313
equity
AXON ENTERPRISE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
THR… NINE
MON… MON…
Ca… END… END…
fl… 30 30 30 30 30
fr… SEP JUN SEP SEP SEP
op… 2026 2026 2025 2026 2025
ac… (Un… (Un… (Un… (Un… (Un…
──────────────────────────────────────────────────────────────────────────────
Net $ 57,… $ 29,… $ -2,1… $ 255,… $ 121,…
in…
Ad…
to
re…
net
in…
to
net
ca…
pr…
by
(u…
in)
op…
ac…
St… 156… 143… 146,… 435,… 425,…
co…
Ga…
on
st…
in… -59… -6,… -22,… -257… -134…
and
ma…
se…
net
De…
in… — — -82 — 28,5…
ex…
De…
and 33,… 32,… 19,6… 96,0… 56,2…
am…
Pr…
for
bad 4,5… 662 2,574 7,208 8,828
de…
and
in…
De…
in… 24,… -6,… 16,3… 36,0… -53,…
ta…
No…
le… 3,6… 3,7… 2,880 10,9… 7,026
ex…
Ot…
no… 16,… 3,0… -6,2… 27,9… 8,904
it…
Ch…
in
as…
and
li…
Re…
and -19… -30… -153… -448… -366…
co…
as…
In… -93… -80… -10,… -238… -58,…
De… 120… 4,9… 72,6… 85,2… 21,5…
re…
Ac…
pa…
ac… 3,2… 256… 23,5… 108,… 44,7…
and
ot…
li…
Pr…
ex…
and -55… -55… -29,… -110… -116…
ot…
as…
Net
ca…
pr…
by 19,… 20,… 60,0… 8,247 -5,8…
(u…
in)
op…
ac…
Ca…
fl…
fr…
in…
ac…
Pu…
of -18… -10… -251… -490… -2,0…
in…
Bu…
co…
net -425 -1,… -19,… -552… -22,…
of
ca…
ac…
Pr…
fr…
ca…
ma… 75,… 185… 887,… 509,… 1,64…
and
sa…
of
in…
Pu…
of
pr… -38… -21… -26,… -82,… -74,…
and
eq…
Ot… -705 28 -132 -2,2… -49
net
Net
ca…
(u…
in) -15… 151… 590,… -618… -498…
pr…
by
in…
ac…
Ca…
fl…
fr…
fi…
ac…
Net
pr…
fr… -218 100… 178,… 100,… 362,…
eq…
of…
Pr…
fr…
is… 1,1… — — 1,15… 1,75…
of
no…
Pu…
of
ca…
ca…
re…
to -11… — — -114… —
the
20…
co…
se…
no…
Pr…
pa…
for
co…
and — — -19 -81,… -407…
re…
of
co…
de…
In…
and
pa…
tax
pa… -26… -12… -16,… -167… -209…
for
ne…
st…
aw…
Pa…
to
th…
pa…
for
de…
is… -16… — -2,1… -17,… -26,…
am…
co…
re…
and
ca…
ca…
ac…
Ot… 1,5… -825 -150 671 -226
net
Net
ca…
pr…
by 993… -30… 159,… 870,… 1,46…
(u…
in)
fi…
ac…
Ef…
of
ex…
ra…
ch… 2,1… -2,… -756 -1,7… 5,741
on
ca…
and
ca…
eq…
Net
ch…
in
ca… 862… 138… 808,… 258,… 969,…
and
ca…
eq…
Ca…
and
ca…
eq…
and 609… 471… 627,… 1,21… 466,…
re…
ca…
be…
of
pe…
Ca…
and
ca…
eq…
and $ 1,4… $ 609… $ 1,43… $ 1,47… $ 1,43…
re…
ca…
end
of
pe…
AXON ENTERPRISE, INC.
SELECTED CASH FLOW INFORMATION
(in thousands)
THREE 30 30 NINE 30
MONTHS SEP 30 JUN SEP MONTHS SEP 30 SEP
ENDED 2026 2026 2025 ENDED 2026 2025
──────────────────────────────────────────────────────────────────────────────
Net
cash
pro…
by $ 19,6… $ 20,077 $ 60,0… $ 8,247 $ -5,896
(us…
in)
ope…
act…
Pur…
of
pro… -38,… -21,0… -26,… -82,… -74,4…
and
equ…
Free
cash
flo… -18,… -972 33,3… -74,… -80,3…
a
non…
mea…
Bond
pre… 68 — 2,902 434 7,451
amo…
Net
cam… 889 262 355 1,303 1,524
inv…
Adj…
free
cash
flo… $ -17,… $ -710 $ 36,6… $ -72,… $ -71,3…
a
non…
mea…
AXON ENTERPRISE, INC.
SUPPLEMENTAL TABLES
(in thousands)
30 SEP 2026 31 DEC 2025
──────────────────────────────────────────────────────────────────────────────
Cash and cash equivalents $ 1,458,817 $ 1,201,147
Restricted cash 13,211 12,246
Short-term investments 181,587 505,417
Cash, cash equivalents, restricted cash 1,653,615 1,718,810
and investments, net
Current portion of notes payable, — -81,110
principal amount
Long-term notes payable, principal -2,900,000 -1,750,000
amount
Total cash, cash equivalents, restricted
cash and investments, net of notes $ -1,246,385 $ -112,300
payable