Axon vs. Teledyne: Which Defense & Security Stock has Greater Upside?

Axon Enterprise, Inc. AXON and Teledyne Technologies Incorporated TDY are two familiar names operating in the aerospace and defense equipment industry. As rivals, both companies are engaged in manufacturing highly engineered public security and digital imaging solutions in the United States and internationally.

Both companies have been enjoying significant growth opportunities in the public safety and surveillance industries on account of growing instances of terrorism and criminal activities across the world. Let’s take a closer look at their fundamentals, growth prospects and challenges.

The Case for Axon

The strongest driver of Axon’s business at the moment is the persistent strength in its Connected Devices segment. Solid demand for virtual reality training services, TASER 10 handle and counter-drone equipment supports the segment’s growth. Segmental revenues increased 29.1% year over year in 2025.

Axon introduced its next-generation body-worn camera, Axon Body 4, in 2023. Featuring upgraded features like a bi-directional communications facility and point-of-view camera module option, this body camera is generating significant demand, thus boosting the segment’s growth.

In 2025, revenues from the company’s TASER product line increased 21.8% year over year, driven by TASER 10, while those from the Personal Sensors surged 25.3%, led by Axon Body 4. Also, revenues from Platform Solutions product line soared 72.5%, supported by counter-drone, virtual reality and fleet.

The company is also witnessing strong momentum in its Software & Services segment. After witnessing a year-over-year 33.4% jump in revenues in 2024, revenues from the segment increased 39.6% in 2025. Continued momentum in digital evidence management and increased demand for premium add-on features are driving the segment’s growth.

Adoption of premium subscription plans continues to rise as more customers recognize the value of enhanced capabilities. The company is also strengthening its position in the counter-drone space with the growing capabilities of its Dedrone offerings and Artificial Intelligence (AI)-powered command-and-control platform.

On the flip side, escalating costs and expenses are a concern for Axon’s margins and profitability. In first-quarter 2025, its cost of sales and SG&A expenses increased 18.2% and 48%, respectively, year over year. Total operating expenses climbed 54.7% year over year to $374.5 million. AXON incurred high costs and expenses related to business integration activities, an increase in headcount, and higher wages and stock-based compensation expenses.

The Case for Teledyne

Teledyne is witnessing strong demand from the defense sector, particularly in Europe, driven by rising regional defense spending. A favorable macroeconomic environment and the current U.S. administration’s inclination toward increased defense spending, with the nation being the largest weapons exporter, have been aiding the growth.

A steady rebound in commercial air travel continues to serve as a key growth driver for Teledyne, which supplies onboard avionics systems and ground-based applications for commercial aircraft. According to the International Air Transport Association’s (IATA) December 2025 outlook, the demand for air travel is expected to rise 4.9% in 2026, measured in Revenue Passenger Kilometers, supporting further momentum in the aerospace sector.

During the fourth quarter of 2025, Teledyne recorded higher commercial aerospace aftermarket sales, while Original Equipment Manufacturer orders for 2026 deliveries also remained strong. Sales from the Aerospace and Defense Electronics segment rose 40.4% year over year, fueled by acquisitions and organic growth in defense electronics products. These positive trends are expected to further strengthen Teledyne’s Aerospace and Defense Electronics segment’s revenues in the coming quarters.

Teledyne continues to strengthen its portfolio with strategic acquisitions. In January 2026, AXON acquired DD-Scientific Holdings Limited and its subsidiary DD-Scientific Limited. The acquisition of DD-Scientific fits well with Teledyne’s long-term strategy of adding differentiated sensing and electronics businesses with strong technology content. Also, in October 2025, Teledyne acquired the TransponderTech business from Saab AB, adding a range of connected commercial maritime products.

However, TDY experienced supply-chain challenges, including increased lead times, as well as cost inflation for parts and components, logistics and labor due to availability constraints and high demand in the recent past. The overall dismal supply-chain situation, further impacted by tariffs, may lead to a slower pace of aircraft deliveries in the aerospace sector and such sluggish deliveries might result in slow cash flow for aircraft component manufacturers like Teledyne.

Price Performance

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In the past six months, Axon shares have lost 28.8%, while Teledyne stock has gained 10.2%.

The Zacks Consensus Estimate for AXON & TDY

The Zacks Consensus Estimate for AXON’s 2026 sales and earnings per share (EPS) implies year-over-year growth of 28.3% and 18.5%, respectively. The EPS estimates for 2026 and 2027 have increased over the past 60 days.

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The Zacks Consensus Estimate for TDY’s 2026 sales implies growth of 4.1% year over year, while the EPS estimate indicates an increase of 8.5%. TDY’s EPS estimates have been trending northward for both 2026 and 2027 over the past 60 days.

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Teledyne’s Valuation Attractive Than Axon

Teledyne is trading at a forward 12-month price-to-earnings ratio of 25.68X, while Axon’s forward earnings multiple sits much higher at 58.32X.

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Final Take

Axon and Teledyne currently have a Zacks Rank #3 (Hold) each, which makes choosing one stock a difficult task. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Axon’s diversified product portfolio, growth investments and persistent strength in the Connected Devices and Software & Services segments provide it with a competitive advantage to leverage the long-term demand prospects in the public safety markets. However, Axon’s strength in the segments has been dented by rising costs and expenses, which might affect its margins and profitability. Also, AXON’s expensive valuation warrants a cautious approach for existing investors.

In contrast, Teledyne’s growth prospects remain solid, backed by enhanced U.S. defense funding and solid projections for commercial air travel. Additionally, TDY’s attractive valuation is more appealing and its upwardly revised earnings estimates instill confidence. Given these factors, Teledyne seems a better pick for investors than Axon currently.

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This article originally published on Zacks Investment Research (zacks.com).

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