Axon Enterprise (NASDAQ:AXON), the law enforcement technology company known for Taser electrical weapons and body cameras, tumbled 18% on Friday after it reported third-quarter earnings.
At issue was a significant revenue miss and downbeat guidance for the fourth quarter. In the third quarter, revenue rose 28% to $908.6 million, well below the consensus at $934.3 million. For the fourth quarter, it called for revenue of $990 million-$1.01 billion, up 25%, which would be its slowest revenue growth since the end of 2021, and was below the consensus at $1.07 billion.
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However, the revenue miss was due to a timing issue rather than weak demand or something more structural. The company said that the timing of a $30 million Federal Dedrone deployment was expected to be recognized in the third quarter, but was delayed.
As you can see from the numbers above, if it had booked that revenue, the company would have matched revenue estimates.
Image source: Getty Images.
What’s behind the sell-off
In addition to the Dedrone revenue being pushed out, there were some other items that left some doubts among investors.
Piper Sandler noted that gross margin in its products division, which includes Taser, was below 50%, and said that the quarter may have been Axon’s worst after Q3 2025, which led to a sharp sell-off in the stock. Craig-Hallum downgraded the stock to neutral, citing weak performance at Taser and quarter-to-quarter volatility associated with federal contracts being pushed out.
In addition to the weak revenue result, Axon cut its free cash flow guidance for the year from $450 million to $350 million-$400 million, due to accelerated inventory growth to improve product availability and supply chain resilience.
The company noted lower legacy Taser volume as revenue in connected devices rose 16.3% and adjusted gross margin fell from 52.1% to 44.6% due to increased mix of counter-drone equipment and higher memory costs. Taser sales were down 2% from the quarter a year ago.
Axon just introduced Taser Ion, its most flexible Taser device yet, which should help boost sales of the device.
The company’s fourth-quarter guidance was below expectations because it no longer includes two Federal Dedrone deployments worth $100 million.
