Axon Earnings Lifted by AI-Driven Software Growth
Axon earnings showed accelerating software and AI adoption that strengthened margins and could drive investor flows after 2026 guidance.
KEY TAKEAWAYS
- Q4 revenue reached $797 million, driven by $343 million software and services with a 72.9% gross margin.
- Management guided 2026 revenue growth of 27%-30% with a 25.5% Adjusted EBITDA margin.
- Bookings totaled $7.4 billion with $1.3 billion ARR and 125% net revenue retention.
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Axon Enterprise reported Q4 2025 results on Feb. 24, 2026, showing stronger demand for software and AI products. The company updated its 2026 guidance and set new multi-year targets as management highlighted accelerating AI adoption.
Quarter Results and Profitability
Axon’s Q4 2025 revenue reached $797 million, up 39% year over year. Software and services revenue rose 40% to $343 million, with a 72.9% gross margin. Connected devices contributed $454 million, up 38%, with a 46.6% gross margin. GAAP net income was $3 million, a 0.3% margin. Non-GAAP net income was $178 million, or $2.15 per share. Adjusted EBITDA increased 46% to $206 million, a 25.9% margin.
Guidance, Bookings, and Multi-Year Targets
For 2026, Axon guided to revenue growth of 27% to 30% and an Adjusted EBITDA margin of 25.5%. The company expects stock-based compensation between $590 million and $620 million and capital expenditures of $185 million to $215 million. This outlook covers the full calendar year from 2025 and factors in a 15% global tariff assumption, inflation on components and memory, and costs from scaling acquisitions, with no significant M&A planned.
Full-year 2025 revenue reached $2.8 billion, up 33%, supported by $1.3 billion in annual recurring revenue (ARR). Bookings totaled $7.4 billion, a 46% increase, while total future contracted bookings rose 43% to $14.4 billion. Net revenue retention accelerated to 125%, reflecting the company’s ability to deliver additional value with minimal attrition. Management set 2028 targets of $6.0 billion in annual revenue and about a 28% Adjusted EBITDA margin. The company aims for Adjusted free-cash-flow conversion of 60% of Adjusted EBITDA and annual stock-based compensation dilution below 2.5%.
Cash Flow and Balance Sheet
As of Dec. 31, 2025, Axon held $1.7 billion in cash, cash equivalents, and short-term investments, with net debt of $112 million. The company generated $217 million in operating cash flow and $155 million in free cash flow in the fourth quarter. This liquidity supports its expansion in hardware, software, and AI.
The quarter highlighted a shift toward higher-margin software and services and a growing recurring-revenue base. Management linked this mix change to improved adjusted margins and the guidance and targets for 2026 and beyond, emphasizing the impact of accelerating AI adoption and a large backlog of contracted bookings on Axon’s growth profile.
