It has been about a month since the last earnings report for Axon Enterprise (AXON Quick QuoteAXON - Free Report) . Shares have added about 3% in that time frame, outperforming the S&P 500.

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 catalysts.

Axon Q2 Earnings Miss Estimates Despite Strong Software and Device Growth

Axon reported second-quarter 2026 adjusted earnings of $1.88 per share, down 13.8% year over year. The figure missed the Zacks Consensus Estimate of $1.89 by 0.5%.

Total revenues were $904.4 million, up 35.3% year over year and ahead of the consensus estimate of $868.4 million by 4.2%.

Q2 Business Segment Performance

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

Connected Devices: The segment’s revenues increased 34.6% year over year to $506.6 million, driven by strong demand for Dedrone, TASER 10 and Axon Body 4. The adjusted gross margin expanded to 53.4% from 51.1% in the year-ago quarter, primarily aided by tariff refunds, partly offset by a higher mix of Dedrone revenues.

Software & Services: The segment’s revenues rose 36.2% year over year to $397.8 million, supported by new users and increased adoption of premium software offerings, including Axon Fusus, the AI Era Plan and Axon 911. However, the adjusted gross margin decreased to 75.1% from 78.9% in the prior-year quarter, reflecting a higher mix of professional services revenues and investments in newer offerings.

Margin Profile

Axon’s cost of sales increased 35.2% year over year to $357.9 million. Selling, general and administrative expenses were $291 million, while research and development expenses totaled $209 million.

The adjusted gross margin decreased to 62.9% from 63.3% in the year-ago period. A higher mix of professional services revenues and the scaling of newer products more than offset the benefits from global tariff refunds.

Balance Sheet & Cash Flow

At the end of second-quarter 2026, Axon had cash and cash equivalents of $597.7 million compared with $1.20 billion at December 2025-end. Long-term lease liabilities totaled $101.7 million compared with $98.9 million at 2025-end.

In the first six months of 2026, the company used net cash of $11.4 million in operating activities compared with $65.9 million used in the prior-year period. Adjusted free cash outflow was $54.8 million in the first six months of 2026 compared with $108 million in the prior-year period.

Axon Raises 2026 Revenue Outlook

Management raised its full-year revenue outlook to 32-34% annual growth, up from 30-32% expected earlier, while maintaining an adjusted EBITDA margin target of approximately 25.5%. The updated view reflects continued momentum across the company’s connected devices and software offerings.

Axon also maintained its capital expenditure projection at $160-$190 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted 5.71% due to these changes.

VGM Scores

Currently, Axon has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock has a score 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 indicates a downward shift. Interestingly, Axon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.