Axon Enterprise, Inc.

(NASDAQ Global Select)
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AXON Q1 Earnings Miss Estimates on Tariff-Driven Margins

AI-generated analysis

📊 Axon Enterprise reported Q1 2026 adjusted earnings of $1.61 per share, representing a 9.5% year-over-year increase but missing the Zacks Consensus Estimate of $1.66.

📈 Total revenues reached $807.3 million, up 33.7% year over year and significantly beating the consensus estimate of $781 million.

🔄 The company realigned its business segments effective Q1 2025 into Connected Devices and Software & Services for reporting purposes.

💸 Connected Devices revenue grew 32.8% to $452.8 million, driven by strong demand for TASER 10, Axon Body 4, counter-drone products, and Platform Solutions.

📉 Adjusted gross margin in the Connected Devices segment decreased to 50.4% from 52.8%, impacting overall profitability metrics.

💻 Software & Services revenue increased 34.9% to $354.5 million, fueled by new users and increased adoption of premium software offerings.

📉 Adjusted gross margin in the Software & Services segment declined to 75.8% from 77.7% in the prior-year period.

⚠️ The overall adjusted gross margin decreased to 61.6% from 63.6%, primarily due to an increase in global tariffs and higher professional services costs.

💰 Cost of sales rose 38.7% year over year to $330.1 million, while SG&A expenses increased 15.9% to $259 million.

📉 Cash and cash equivalents decreased to $458.9 million at the end of Q1 2026 from $1.20 billion at the end of 2025.

💧 Adjusted free cash flow turned negative at -$54.1 million in Q1 2026 compared to an inflow of $2.7 million in the prior-year period.

🔮 Management raised its full-year revenue growth outlook to 30-32% annual growth, up from a previous expectation of 27-30%.

💵 Axon expects full-year adjusted EBITDA margins to remain at approximately 25.5% despite the margin pressures in Q1.

🚀 Future projections include operating cash flow of over $600 million and free cash flow of approximately $450 million for the fiscal year.

🔨 Capital expenditures are projected to decrease to $160-$190 million, down from the prior range of $185-$215 million.

📉 Zacks Investment Research maintains a Rank #3 (Hold) rating for Axon Enterprise based on current performance and outlook.

Full Analysis
Axon Enterprise reported first-quarter 2026 adjusted earnings of $1.61 per share, representing a 9.5% year-over-year increase, but this figure missed the Zacks Consensus Estimate of $1.66 by roughly 3 cents per share. Revenue performance was significantly stronger, coming in at $807.3 million, which is a 33.7% year-over-year increase and beat the consensus estimate of $781 million. The company segmented its reporting into Connected Devices and Software & Services; both segments saw revenue growth exceeding 32%, driven by strong demand for products like the TASER 10, Axon Body 4, counter-drone solutions, and Platform Solutions. However, adjusted gross margins declined to 50.4% in Connected Devices and 75.8% in Software & Services from their respective previous year figures. The decline in overall company-wide adjusted gross margin to 61.6% from the prior year's 63.6% is primarily attributed to higher costs related to global tariffs and increased professional services expenses. Cost of sales rose 38.7% year over year, while selling, general, and administrative expenses increased by 15.9%. Despite these margin pressures, management raised its full-year revenue outlook to an annual growth rate of 30-32%, up from the earlier expectation of 27-30%. The company also maintained its adjusted EBITDA margin target at approximately 25.5%. Financially, Axon ended the quarter with $458.9 million in cash and cash equivalents, down significantly from the $1.20 billion held at the end of 2025. Cash flow dynamics have shifted from inflow to outflow; the company used $31.5 million in net cash for operating activities compared to $25.8 million generated in the prior year period. Adjusted free cash flow turned negative at $54.1 million in Q1 2026, contrasting with an $2.7 million inflow a year ago. Looking ahead, Axon expects full-year operating cash flow to exceed $600 million and anticipates free cash flow of approximately $450 million. Capital expenditures are projected between $160 million and $190 million for the year, which is lower than the previous range of $185-$215 million. The article concludes by noting Axon's current Zacks Rank of #3 (Hold) before briefly listing earnings results for other hardware companies such as Graco and Stanley Black & Decker, which are incidental to the main report on Axon Enterprise.