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Axon (AXON) Up 20.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Axon Enterprise (AXON - Free Report) . Shares have added about 20.2% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Axon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
AXON Q1 Earnings Miss Estimates on Tariff-Driven Margins
Axon Enterprise reported first-quarter 2026 adjusted earnings of $1.61 per share, up 9.5% year over year. However, the figure missed the Zacks Consensus Estimate of $1.66.
Total revenues were $807.3 million, up 33.7% year over year and ahead of the consensus estimate of $781 million.
Q1 Business Segment Performance
Effective first-quarter 2025, Axon Enterprise 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 increased 32.8% year over year to $452.8 million, driven by strong demand for TASER 10 devices, Axon Body 4, counter-drone products and fleet systems, along with continued momentum in Platform Solutions. However, the adjusted gross margin decreased year over year to 50.4% from 52.8%.
Software & Services: The segment’s revenues rose 34.9% year over year to $354.5 million, driven by new users and increased adoption of premium software offerings by existing customers. However, the adjusted gross margin decreased to 75.8% from 77.7% in the year-ago period.
Gross Margin Reflects Tariffs and Mix Shift
Axon’s cost of sales increased 38.8% year over year to $330.1 million. Selling, general and administrative expenses were $259 million, up 15.9% year over year.
Total operating expenses climbed 19.6% year over year to $448 million. The adjusted gross margin decreased to 61.6% from 63.6% in the year-ago period, owing to an increase in global tariffs and higher professional services costs.
Balance Sheet & Cash Flow
At the end of first-quarter 2026, Axon Enterprise had cash and cash equivalents of $458.9 million compared with $1.20 billion at December 2025-end. Long-term lease liabilities totaled $97.2 million compared with $98.9 million at 2025-end.
In the first quarter of 2026, the company used net cash of $31.5 million in operating activities against $25.8 million net cash generated in the prior-year period.
Adjusted free cash outflow was $54.1 million in the first quarter of 2026 against an inflow of $2.7 million in the prior-year period.
Axon Raises 2026 Revenue Outlook
Management raised its full-year revenue outlook to 30-32% annual growth, up from 27-30% expected earlier, while maintaining an adjusted EBITDA margin target of approximately 25.5%. The updated view reflects continued momentum across TASER, body-worn cameras, counter-drone, real-time operations and AI-enabled offerings.
Axon Enterprise also expects full-year operating cash flow of more than $600 million and free cash flow of approximately $450 million. Also, capital expenditures are now projected at $160-$190 million, down from the prior $185-$215 million range.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a flat trend in estimates revision.
VGM Scores
At this time, Axon has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Axon has a Zacks Rank #1 (Strong Buy). We expect an above average 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, Mercury Systems (MRCY - Free Report) , a stock from the same industry, has gained 33.8%. The company reported its results for the quarter ended March 2026 more than a month ago.
Mercury Systems reported revenues of $235.76 million in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $0.27 for the same period compares with $0.06 a year ago.
For the current quarter, Mercury Systems is expected to post earnings of $0.44 per share, indicating a change of -6.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Mercury Systems has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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Axon (AXON) Up 20.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Axon Enterprise (AXON - Free Report) . Shares have added about 20.2% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Axon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
AXON Q1 Earnings Miss Estimates on Tariff-Driven Margins
Axon Enterprise reported first-quarter 2026 adjusted earnings of $1.61 per share, up 9.5% year over year. However, the figure missed the Zacks Consensus Estimate of $1.66.
Total revenues were $807.3 million, up 33.7% year over year and ahead of the consensus estimate of $781 million.
Q1 Business Segment Performance
Effective first-quarter 2025, Axon Enterprise 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 increased 32.8% year over year to $452.8 million, driven by strong demand for TASER 10 devices, Axon Body 4, counter-drone products and fleet systems, along with continued momentum in Platform Solutions. However, the adjusted gross margin decreased year over year to 50.4% from 52.8%.
Software & Services: The segment’s revenues rose 34.9% year over year to $354.5 million, driven by new users and increased adoption of premium software offerings by existing customers. However, the adjusted gross margin decreased to 75.8% from 77.7% in the year-ago period.
Gross Margin Reflects Tariffs and Mix Shift
Axon’s cost of sales increased 38.8% year over year to $330.1 million. Selling, general and administrative expenses were $259 million, up 15.9% year over year.
Total operating expenses climbed 19.6% year over year to $448 million. The adjusted gross margin decreased to 61.6% from 63.6% in the year-ago period, owing to an increase in global tariffs and higher professional services costs.
Balance Sheet & Cash Flow
At the end of first-quarter 2026, Axon Enterprise had cash and cash equivalents of $458.9 million compared with $1.20 billion at December 2025-end. Long-term lease liabilities totaled $97.2 million compared with $98.9 million at 2025-end.
In the first quarter of 2026, the company used net cash of $31.5 million in operating activities against $25.8 million net cash generated in the prior-year period.
Adjusted free cash outflow was $54.1 million in the first quarter of 2026 against an inflow of $2.7 million in the prior-year period.
Axon Raises 2026 Revenue Outlook
Management raised its full-year revenue outlook to 30-32% annual growth, up from 27-30% expected earlier, while maintaining an adjusted EBITDA margin target of approximately 25.5%. The updated view reflects continued momentum across TASER, body-worn cameras, counter-drone, real-time operations and AI-enabled offerings.
Axon Enterprise also expects full-year operating cash flow of more than $600 million and free cash flow of approximately $450 million. Also, capital expenditures are now projected at $160-$190 million, down from the prior $185-$215 million range.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a flat trend in estimates revision.
VGM Scores
At this time, Axon has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Axon has a Zacks Rank #1 (Strong Buy). We expect an above average 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, Mercury Systems (MRCY - Free Report) , a stock from the same industry, has gained 33.8%. The company reported its results for the quarter ended March 2026 more than a month ago.
Mercury Systems reported revenues of $235.76 million in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $0.27 for the same period compares with $0.06 a year ago.
For the current quarter, Mercury Systems is expected to post earnings of $0.44 per share, indicating a change of -6.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Mercury Systems has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.