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Axon Enterprise, Inc. (AXON - Free Report) , a leading manufacturer of conducted energy devices (CEDs), has seen a 31.1% drop in its stock price in the past six months, underperforming the industry as well as the S&P 500. While the industry grew 3.8% over the same time frame, the S&P 500 advanced 17.9%. The company’s peers, Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) and Teledyne Technologies Incorporated (TDY - Free Report) , have returned 80.2% and 0.8%, respectively, over the same period.
Axon Stock Lags Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
Despite AXON’s recent share price decline, the stock has delivered an impressive performance, reflected by its 134.6% shareholder return over the past couple of years. However, its recent share price volatility amid tariff-related concerns has left investors wondering how to approach the stock. Let’s take a closer look at AXON’s fundamentals, growth prospects and challenges to make an informed choice.
Near-Term Headwinds
The escalating costs and expenses are a concern for Axon’s bottom line. The company’s cost of sales increased 18.2%, 34.4% and 32.7% in the first, second and third quarters of 2025, respectively, on a year-over-year basis. Also, in 2024, Axon’s cost of sales soared 39% year over year. The metric, as a percentage of sales, was 39.9% in the third quarter of 2025, up 70 basis points year over year.
The company incurred high costs and expenses related to business integration activities, an increase in headcount and higher wages and stock-based compensation expenses. Axon’s selling, general and administrative expenses surged 48%, 41.7% and 31.5% in the first, second and third quarters of 2025, respectively, on a year-over-year basis. The same rose 49.8% year over year in 2024.
Axon has been facing the pressure of rising debt levels. Exiting third-quarter 2025, the company’s long-term notes payable (net) were $1.73 billion. The same stood at zero at 2024-end. This increase was primarily attributable to funds raised to support the company’s strategic investments, expansion activities and potential acquisitions. Also, Axon’s interest expense totaled $65.4 million in the first nine months, reflecting a notable increase from $5.3 million in the year-ago period.
Stretched Valuation
AXON’s lofty valuation remains another concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 71.25X, significantly higher than the industry average of 42.55X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. In comparison with AXON’s valuation, Kratos Defense & Security and Teledyne Technologies are trading at 105.88X and 21.32X, respectively.
Image Source: Zacks Investment Research
Long-Term Growth Prospects Remain Bright
The strongest driver of Axon’s business at the moment is solid momentum in its Connected Devices segment. The segment’s revenues increased 26% year over year in the first nine months of 2025. The company continues to witness growing popularity for its next-generation TASER 10 products, whose shipment began in 2023. Growth in cartridge revenues, driven by the higher adoption of the TASER products, is likely to drive the segment’s performance.
Axon introduced its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera continues to generate significant demand, thus bolstering the segment’s growth. Shipment of this body camera began in June 2023 and the customer response has been impressive so far. Revenues from the company’s TASER product line increased 17% year over year, driven by TASER 10, while those from the Personal Sensors surged 20%, led by Axon Body 4.
An increase in the aggregate number of users to the Axon network is aiding the Software & Services segment. After witnessing a year-over-year 33.4% jump in revenues in 2024, revenues from the segment increased 39.6% in the first nine months of 2025. Continued momentum in digital evidence management and increased demand for premium add-on features are driving the segment’s growth.
Given the rising global demand for Counter-Unmanned Aircraft Systems (CUAS), Axon is also expected to witness strong demand for its Dedrone platform from NATO’s airspace defense agencies. Strong customer alignment, broader adoption across sectors and continuous product innovation led Axon to raise guidance for 2025. AXON currently expects revenues to be about $2.74 billion compared with $2.65-$2.73 billion expected earlier, indicating growth of approximately 31% year over year.
Better-Than-Industry Returns
Axon’s trailing 12-month return on equity (ROE) is indicative of its growth potential. Exiting the third quarter, ROE for the trailing 12 months was 20.84%, much higher than the industry’s 9.44%. This reflects the company’s efficient usage of shareholder funds. In comparison, ROE for its peers, Kratos Defense & Security Solutions and Teledyne Technologies, is pegged at 4.80% and 9.95%, respectively.
Image Source: Zacks Investment Research
Earnings Estimate Revision
The Zacks Consensus Estimate for 2025 earnings is pegged at $6.35 per share, reflecting a decrease of 8.1% in the past 60 days. However, the figure indicates year-over-year growth of 6.9%. The consensus mark for 2026 earnings is pinned at $7.73 per share, decreasing 5.2% in the past 60 days. The figure indicates year-over-year growth of 21.7%.
Image Source: Zacks Investment Research
Final Take
Persistent strength across the Connected Devices and Software & Services segments, along with its investments in the AI space, drones and robotics, positions AXON favorably for impressive growth in the long run. Also, its strategic collaborations with other companies to enhance public safety offerings and market position instill investor confidence. However, a few challenges, such as escalating operating expenses, rising debt levels and premium valuation, are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.
Image: Bigstock
Axon Plunges 31.1% in 6 Months: Should You Hold or Fold the Stock?
Key Takeaways
Axon Enterprise, Inc. (AXON - Free Report) , a leading manufacturer of conducted energy devices (CEDs), has seen a 31.1% drop in its stock price in the past six months, underperforming the industry as well as the S&P 500. While the industry grew 3.8% over the same time frame, the S&P 500 advanced 17.9%. The company’s peers, Kratos Defense & Security Solutions, Inc. (KTOS - Free Report) and Teledyne Technologies Incorporated (TDY - Free Report) , have returned 80.2% and 0.8%, respectively, over the same period.
Axon Stock Lags Industry, S&P 500 & Peers
Image Source: Zacks Investment Research
Despite AXON’s recent share price decline, the stock has delivered an impressive performance, reflected by its 134.6% shareholder return over the past couple of years. However, its recent share price volatility amid tariff-related concerns has left investors wondering how to approach the stock. Let’s take a closer look at AXON’s fundamentals, growth prospects and challenges to make an informed choice.
Near-Term Headwinds
The escalating costs and expenses are a concern for Axon’s bottom line. The company’s cost of sales increased 18.2%, 34.4% and 32.7% in the first, second and third quarters of 2025, respectively, on a year-over-year basis. Also, in 2024, Axon’s cost of sales soared 39% year over year. The metric, as a percentage of sales, was 39.9% in the third quarter of 2025, up 70 basis points year over year.
The company incurred high costs and expenses related to business integration activities, an increase in headcount and higher wages and stock-based compensation expenses. Axon’s selling, general and administrative expenses surged 48%, 41.7% and 31.5% in the first, second and third quarters of 2025, respectively, on a year-over-year basis. The same rose 49.8% year over year in 2024.
Axon has been facing the pressure of rising debt levels. Exiting third-quarter 2025, the company’s long-term notes payable (net) were $1.73 billion. The same stood at zero at 2024-end. This increase was primarily attributable to funds raised to support the company’s strategic investments, expansion activities and potential acquisitions. Also, Axon’s interest expense totaled $65.4 million in the first nine months, reflecting a notable increase from $5.3 million in the year-ago period.
Stretched Valuation
AXON’s lofty valuation remains another concern. The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 71.25X, significantly higher than the industry average of 42.55X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. In comparison with AXON’s valuation, Kratos Defense & Security and Teledyne Technologies are trading at 105.88X and 21.32X, respectively.
Image Source: Zacks Investment Research
Long-Term Growth Prospects Remain Bright
The strongest driver of Axon’s business at the moment is solid momentum in its Connected Devices segment. The segment’s revenues increased 26% year over year in the first nine months of 2025. The company continues to witness growing popularity for its next-generation TASER 10 products, whose shipment began in 2023. Growth in cartridge revenues, driven by the higher adoption of the TASER products, is likely to drive the segment’s performance.
Axon introduced its next-generation body-worn camera, Axon Body 4, in April 2023. With upgraded features such as a bi-directional communications facility and a point-of-view camera module option, this body camera continues to generate significant demand, thus bolstering the segment’s growth.
Shipment of this body camera began in June 2023 and the customer response has been impressive so far. Revenues from the company’s TASER product line increased 17% year over year, driven by TASER 10, while those from the Personal Sensors surged 20%, led by Axon Body 4.
An increase in the aggregate number of users to the Axon network is aiding the Software & Services segment. After witnessing a year-over-year 33.4% jump in revenues in 2024, revenues from the segment increased 39.6% in the first nine months of 2025. Continued momentum in digital evidence management and increased demand for premium add-on features are driving the segment’s growth.
Given the rising global demand for Counter-Unmanned Aircraft Systems (CUAS), Axon is also expected to witness strong demand for its Dedrone platform from NATO’s airspace defense agencies. Strong customer alignment, broader adoption across sectors and continuous product innovation led Axon to raise guidance for 2025. AXON currently expects revenues to be about $2.74 billion compared with $2.65-$2.73 billion expected earlier, indicating growth of approximately 31% year over year.
Better-Than-Industry Returns
Axon’s trailing 12-month return on equity (ROE) is indicative of its growth potential. Exiting the third quarter, ROE for the trailing 12 months was 20.84%, much higher than the industry’s 9.44%. This reflects the company’s efficient usage of shareholder funds. In comparison, ROE for its peers, Kratos Defense & Security Solutions and Teledyne Technologies, is pegged at 4.80% and 9.95%, respectively.
Image Source: Zacks Investment Research
Earnings Estimate Revision
The Zacks Consensus Estimate for 2025 earnings is pegged at $6.35 per share, reflecting a decrease of 8.1% in the past 60 days. However, the figure indicates year-over-year growth of 6.9%. The consensus mark for 2026 earnings is pinned at $7.73 per share, decreasing 5.2% in the past 60 days. The figure indicates year-over-year growth of 21.7%.
Image Source: Zacks Investment Research
Final Take
Persistent strength across the Connected Devices and Software & Services segments, along with its investments in the AI space, drones and robotics, positions AXON favorably for impressive growth in the long run. Also, its strategic collaborations with other companies to enhance public safety offerings and market position instill investor confidence. However, a few challenges, such as escalating operating expenses, rising debt levels and premium valuation, are limiting this Zacks Rank #3 (Hold) company’s near-term prospects.
While current shareholders should hold their positions, new investors should wait for the stock to retract some of its recent gains and provide a better entry point. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.