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Should You Buy, Hold or Sell AXON Stock Post Q3 Earnings Release?
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Key Takeaways
AXON's Q3 earnings miss estimates by 9.5%, while revenues fell short by 2.4%, despite year-over-year growth.
Axon's Software & Services revenues surged 43.2%, while Connected Devices sales rose 16.3% in Q3 2026.
AXON's rising costs, margin pressures and delayed Dedrone projects weigh on its outlook.
Axon Enterprise, Inc. (AXON - Free Report) reported third-quarter 2026 results on Nov. 5, wherein its earnings and revenues missed the Zacks Consensus Estimate but increased year over year. While its earnings per share of $1.72 missed the consensus estimate by 9.5%, it surged 38.7% year over year.
Total revenues of $909 million fell short of the consensus estimate by 2.4% but increased 28% year over year. The year-over-year increase was driven by solid momentum in its Connected Devices and Software & Services segments.
AXON has been reporting strong top-line results courtesy of solid operational performance from both of its segments. However, the company’s margins have been affected by increased memory costs, a higher mix of counter-drone equipment and investments in newer product categories.
Factors Influencing Axon Stock’s Performance
Axon’s Connected Devices segment is thriving on the back of strong demand for TASER 10 devices. Solid demand for its next-generation body-worn camera, Axon Body 4, and counter-drone equipment is also supporting its growth. However, the growth has been partially offset by lower TASER 7 sales and the delayed recognition of approximately $30 million from a federal Dedrone deployment.
In the third quarter of 2026, revenues from the company’s TASER product line decreased 2% year over year, while those from the Personal Sensors increased 6.4%, led by Axon Body 4. Also, revenues from the Platform Solutions product line soared 105.6%, supported by counter-drone, virtual reality and fleet. Revenues from the Connected Devices segment surged 16.3% year over year to $471.5 million in the quarter.
The company is also witnessing solid momentum in its Software & Services segment, driven by an increase in the aggregate number of users to the Axon network. Continued momentum in digital evidence management and increased adoption of its premium offerings like Axon Fusus, the AI Era Plan and Axon 911 are driving its results. Revenues from the segment surged 43.2% year over year to $437 million in third-quarter 2026.
The company’s investments in newer areas within the software business, like AI products, real-time operations, drones and robotics, bode well for growth. The company highlighted the recent introduction of TASER Ion and also unveiled Axon Body 5, with the latter’s commercial availability expected in spring 2027, creating another potential hardware upgrade cycle.
However, Axon lowered its 2026 revenue outlook to $3.61-$3.63 billion, representing approximately 30% annual growth, from its previous expectation of 32-34% growth. The downward revision stems from delays in three federal Dedrone projects worth approximately $130 million, prompting their removal from the 2026 revenue forecast.
The escalating costs and expenses remain a concern for Axon’s bottom line. In the first nine months of 2026, the company’s cost of sales soared 37.6% year over year. The metric, as a percentage of sales, was 41.3%, up 170 basis points on high costs and expenses related to business integration activities and stock-based compensation expenses. The increase in operating expenses has been adversely impacting the company’s margins of late. In third-quarter 2026, Axon’s adjusted gross margin declined 350 basis points year over year.
Shares of the company have lost 20.9% in the past six months compared with the industry and S&P 500 composite’s decline of 14.6% and 0.5%, respectively. It has also underperformed compared with other industry players like Teledyne Technologies Incorporated (TDY - Free Report) and Woodward, Inc. (WWD - Free Report) , which have returned 1.4% and lost 9.2%, respectively, over the said time frame.
AXON Stock’s Six-Month Price Performance
Image Source: Zacks Investment Research
Axon’s Valuation Profile
The stock trades at a forward 12-month price-to-earnings (P/E) ratio of 30.70X, lower than the industry average of 33.10X. In comparison, Teledyne is trading cheaper, while Woodward is trading at a premium. Notably, Teledyne and Woodward are trading at 23.53X and 31.28X, respectively.
Image Source: Zacks Investment Research
Earnings Estimates
The Zacks Consensus Estimate for 2026 earnings inched down 0.1% to $7.87 per share, suggesting year-over-year growth of 14.9%. The consensus mark for 2027 earnings moved down 0.8% to $10.33 per share, indicating a year-over-year increase of 31.3%.
Image Source: Zacks Investment Research
Our Final Take
Persistent strength across the Connected Devices and Software & Services segments, along with its investments in AI products, drones and robotics, positions AXON favorably for impressive growth in the long run. However, near-term challenges, such as escalating operating expenses, margin pressure and lower return compared with the industry, 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.
View the Zacks #1 Rank List
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Should You Buy, Hold or Sell AXON Stock Post Q3 Earnings Release?
Key Takeaways
Axon Enterprise, Inc. (AXON - Free Report) reported third-quarter 2026 results on Nov. 5, wherein its earnings and revenues missed the Zacks Consensus Estimate but increased year over year. While its earnings per share of $1.72 missed the consensus estimate by 9.5%, it surged 38.7% year over year.
Total revenues of $909 million fell short of the consensus estimate by 2.4% but increased 28% year over year. The year-over-year increase was driven by solid momentum in its Connected Devices and Software & Services segments.
AXON has been reporting strong top-line results courtesy of solid operational performance from both of its segments. However, the company’s margins have been affected by increased memory costs, a higher mix of counter-drone equipment and investments in newer product categories.
Factors Influencing Axon Stock’s Performance
Axon’s Connected Devices segment is thriving on the back of strong demand for TASER 10 devices. Solid demand for its next-generation body-worn camera, Axon Body 4, and counter-drone equipment is also supporting its growth. However, the growth has been partially offset by lower TASER 7 sales and the delayed recognition of approximately $30 million from a federal Dedrone deployment.
In the third quarter of 2026, revenues from the company’s TASER product line decreased 2% year over year, while those from the Personal Sensors increased 6.4%, led by Axon Body 4. Also, revenues from the Platform Solutions product line soared 105.6%, supported by counter-drone, virtual reality and fleet. Revenues from the Connected Devices segment surged 16.3% year over year to $471.5 million in the quarter.
The company is also witnessing solid momentum in its Software & Services segment, driven by an increase in the aggregate number of users to the Axon network. Continued momentum in digital evidence management and increased adoption of its premium offerings like Axon Fusus, the AI Era Plan and Axon 911 are driving its results. Revenues from the segment surged 43.2% year over year to $437 million in third-quarter 2026.
The company’s investments in newer areas within the software business, like AI products, real-time operations, drones and robotics, bode well for growth. The company highlighted the recent introduction of TASER Ion and also unveiled Axon Body 5, with the latter’s commercial availability expected in spring 2027, creating another potential hardware upgrade cycle.
However, Axon lowered its 2026 revenue outlook to $3.61-$3.63 billion, representing approximately 30% annual growth, from its previous expectation of 32-34% growth. The downward revision stems from delays in three federal Dedrone projects worth approximately $130 million, prompting their removal from the 2026 revenue forecast.
The escalating costs and expenses remain a concern for Axon’s bottom line. In the first nine months of 2026, the company’s cost of sales soared 37.6% year over year. The metric, as a percentage of sales, was 41.3%, up 170 basis points on high costs and expenses related to business integration activities and stock-based compensation expenses. The increase in operating expenses has been adversely impacting the company’s margins of late. In third-quarter 2026, Axon’s adjusted gross margin declined 350 basis points year over year.
AXON Shares Underperform Industry, S&P 500 & Peers
Shares of the company have lost 20.9% in the past six months compared with the industry and S&P 500 composite’s decline of 14.6% and 0.5%, respectively. It has also underperformed compared with other industry players like Teledyne Technologies Incorporated (TDY - Free Report) and Woodward, Inc. (WWD - Free Report) , which have returned 1.4% and lost 9.2%, respectively, over the said time frame.
AXON Stock’s Six-Month Price Performance
Image Source: Zacks Investment Research
Axon’s Valuation Profile
The stock trades at a forward 12-month price-to-earnings (P/E) ratio of 30.70X, lower than the industry average of 33.10X. In comparison, Teledyne is trading cheaper, while Woodward is trading at a premium. Notably, Teledyne and Woodward are trading at 23.53X and 31.28X, respectively.
Image Source: Zacks Investment Research
Earnings Estimates
The Zacks Consensus Estimate for 2026 earnings inched down 0.1% to $7.87 per share, suggesting year-over-year growth of 14.9%. The consensus mark for 2027 earnings moved down 0.8% to $10.33 per share, indicating a year-over-year increase of 31.3%.
Image Source: Zacks Investment Research
Our Final Take
Persistent strength across the Connected Devices and Software & Services segments, along with its investments in AI products, drones and robotics, positions AXON favorably for impressive growth in the long run. However, near-term challenges, such as escalating operating expenses, margin pressure and lower return compared with the industry, 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.