Axon shares surge 16% on record revenue that eases tariff worries
Law enforcement technology company delivers 39% sales growth, confident 2026 outlook
Axon Enterprise shares surged as much as 16% in premarket trading after the law enforcement technology company reported quarterly results that handily exceeded expectations and provided an optimistic outlook that appears to have put investor concerns about tariffs to rest.
The Scottsdale, Arizona-based company reported fourth-quarter revenue of $797 million, representing a 39% increase from the same period a year earlier. Non-GAAP earnings per share reached $2.15, significantly topping analyst projections of $1.67, according to the company's earnings release.
The strong performance capped what was already a remarkable year for the maker of TASER conducted energy weapons and body-worn cameras. Full-year 2025 revenue climbed 33% to $2.8 billion, marking Axon's fourth consecutive year of annual growth exceeding 30%. Annual recurring revenue surpassed $1.3 billion, up 35% year-over-year, demonstrating the growing adoption of the company's cloud-based software and services.
Investors had been punishing the stock in recent months amid growing worries about the impact of global tariffs on Axon's profit margins. Those concerns appeared valid in the third quarter, when adjusted earnings per share of $1.17 fell short of the $1.54 analysts expected, triggering a 20% plunge in the share price.
But Tuesday's results, coupled with management's confident guidance for 2026, suggest the company has successfully navigated those headwinds. Chief Financial Officer Brittany Bagley confirmed that a "new 15% global tariff" has been incorporated into the company's projections for 2026, with no assumptions about potential refunds until the process becomes clearer.
The company's Connected Devices segment, which includes TASER devices and body cameras, saw gross margins decline to 46.6% from 49.4% a year earlier, with tariffs and product mix changes cited as contributing factors. Yet Axon's overall adjusted EBITDA margin still expanded to 25.9% in the fourth quarter, up 150 basis points from the prior year.
Perhaps most reassuring to investors was the guidance Axon provided for 2026. The company projects revenue growth of 27% to 30% year-over-year, which management described as its "strongest outlook going into a new year." Adjusted EBITDA margin is expected to remain healthy at 25.5%, despite increased investments in product development and market expansion, inflationary costs, and the impact of tariffs.
Looking further ahead, Axon established new targets for 2028, including approximately $6 billion in annual revenue and an Adjusted EBITDA margin of 28%. The company also expects to generate strong cash flow, targeting Adjusted Free Cash Flow conversion of 60% of Adjusted EBITDA and maintaining annual dilution from stock-based compensation below 2.5%.
Analysts have maintained a largely positive stance on the stock despite recent volatility. The consensus rating among Wall Street analysts is a "Buy," with 14 out of 20 brokerage firms rating it a "Strong Buy." The average price target of approximately $784 implies substantial upside from current trading levels, according to MarketBeat data.
Rick Smith, Axon's founder and chief executive, emphasized the company's strategic positioning in a statement accompanying the results. "We completed another record year with revenue growing 33% year-over-year, demonstrating sustained demand for our ecosystem," Smith said. He highlighted the company's "disciplined execution, strong product market fit, and trusted customer relationships" as drivers of what he described as "accelerating momentum into 2026."
The company's software and services business, which now accounts for a significant portion of revenue, grew 40% year-over-year to $343 million in the fourth quarter. Net revenue retention reached 125%, indicating that existing customers continue to expand their spending on Axon's products and services.
Axon's push into artificial intelligence appears to be gaining traction. Smith noted that new AI-powered features like Axon Assistant and Axon Vehicle Intelligence are seeing strong adoption, as the company focuses on integrating AI functionality into real-world police operations. The company is also expanding into new product categories, including Axon Body Mini for commercial environments and Axon 911 to modernize emergency call handling.
The stock has been on a volatile ride in recent months, falling from a 52-week high of $885.92 in October to around $442 before Tuesday's rally. The shares trade at a premium valuation, with a price-to-earnings ratio of approximately 137 times trailing earnings, reflecting investor expectations for continued high growth.
Tuesday's earnings report suggests those expectations may be well-placed, as Axon demonstrated an ability to grow revenue at a rapid pace while maintaining healthy profitability despite significant macroeconomic headwinds. The company's disciplined approach to costs and its expanding suite of hardware, software, and AI-powered solutions appear to be positioning it as an increasingly indispensable partner to law enforcement agencies worldwide.