Why Is Axon (AXON) Down 11.5% Since Last Earnings Report?

A month has gone by since the last earnings report for Axon Enterprise (AXON). Shares have lost about 11.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Axon due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Axon Enterprise, Inc before we dive into how investors and analysts have reacted as of late.

Axon's Q4 Earnings Top Estimates, Connected Devices’ Sales Increase Y/Y

Axon reported fourth-quarter 2025 adjusted earnings of $2.15 per share, which beat the Zacks Consensus Estimate of $1.67. The bottom line increased 3.4% year over year.

Total revenues of $797 million surpassed the consensus estimate of $753.6 million and increased 39% year over year. The top line benefited from strong demand for TASER 10, Axon Body 4 and counter-drone equipment. Growing adoption of premium software solutions also augmented the top-line results.

In 2025, it reported net revenues of $2.78 billion, which increased 33.5% year over year. The company’s adjusted earnings were $6.85 per share, up 15.3% on a year-over-year basis.

Q4 Business Segment Performance

Effective first-quarter 2025, Axon realigned its business segments. The company now reports results under two business segments, namely Connected Devices and Software & Services.

Connected Devices: The segment’s revenues jumped 37.6% year over year to $454.2 million, driven by an increase in demand for TASER 10 devices, Axon Body 4, counter-drone products and fleet systems. However, the adjusted gross margin decreased year over year to 49.3% from 52.2%. The Zacks Consensus Estimate for Connected Devices’ revenues was pegged at $417 million.

Software & Services: The segment’s revenues rose 39.8% year over year to $342.5 million. The uptick was driven by an increase in the aggregate number of users and growing adoption of premium software offerings. However, the adjusted gross margin decreased to 76.7% from 78% in the year-ago period. The Zacks Consensus Estimate for Software & Services’ revenues was pegged at $336 million.

Margin Profile

Axon’s cost of sales increased 46.3% year over year to $335.4 million. Selling, general and administrative expenses increased 39.8% year over year to $317.4 million.

Total operating expenses climbed 41.1% year over year to $511.4 million. The adjusted gross margin decreased to 61.1% from 63.2% in the year-ago period, owing to global tariff-related impacts and a higher Platform Solutions product mix in Connected Devices.

Balance Sheet & Cash Flow

At the end of fourth-quarter 2025, Axon had cash and cash equivalents of $1.20 billion compared with $454.8 million at December 2024-end. Long-term lease liabilities totaled $98.9 million compared with $41.4 million at 2024-end.

In 2025, the company generated net cash of $211.3 million from operating activities compared with $408.3 million in the previous year period.

Adjusted free cash flow was $85.6 million in 2025 compared with $344.3 million in the prior-year period.

Outlook for 2026

For 2026, Axon expects revenues to grow 27-30% year over year. Adjusted EBITDA margin is expected to be 25.5%.

The company expects capital expenditures to be between $185 million and $215 million. This includes investments in long-term research & development projects, continued capacity expansion, global facility build-outs and new product development. It anticipates stock-based compensation expenses to be $230 million.

Outlook for 2028

In 2028, Axon anticipates achieving revenues of $6 billion annually. Adjusted EBITDA margin is projected to be about 28%. The company aims to generate strong cash flow, with adjusted free cash flow equal to 60% of adjusted EBITDA. It plans to limit annual dilution from stock-based compensation to less than 2.5%.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -76.6% due to these changes.

VGM Scores

Currently, Axon has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock has a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Axon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Axon is part of the Zacks Aerospace - Defense Equipment industry. Over the past month, Curtiss-Wright (CW), a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended December 2025 more than a month ago.

Curtiss-Wright reported revenues of $946.98 million in the last reported quarter, representing a year-over-year change of +14.9%. EPS of $3.79 for the same period compares with $3.27 a year ago.

For the current quarter, Curtiss-Wright is expected to post earnings of $3.24 per share, indicating a change of +14.9% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Curtiss-Wright. Also, the stock has a VGM Score of C.

Zacks Names #1 Semiconductor Stock

This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.

With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.

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