AXON 10-K & 10-Q changes, risk factors and insider trading
Axon Enterprise, Inc. · Nasdaq · Ordnance & Accessories, (No Vehicles/guided Missiles) · CIK 1069183 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Uncertainties with complex U.S. federal, state and local and foreign procurement laws and regulations of governments could cause us to incur costs, which could have a material adverse effect on our business, financial position, results of operations and cash flows.”
New heading “Our indebtedness contains restrictive covenants that could limit our operational flexibility and adversely affect the value of our common stock.”
Removed heading “Our future success depends on our ability to expand sales through direct sales and distributors and our inability to increase direct sales or recruit new distributors would negatively affect our sales.”
Removed heading “We depend on the services of our executive officers, including Patrick W. Smith, our Chief Executive Officer. Our failure to retain executive officers could adversely impact our business.”
Removed heading “If demand for our products increases, our future success will depend on our ability to manage our growth and to increase manufacturing production capacity.”
Removed heading “The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.”
Removed heading “Conversion of the Notes may dilute the ownership interest of our shareholders or could depress the price of our common stock.”
Removed heading “Changes in the accounting treatment for the Notes could have a material effect on our reported financial results.”
Largest changes
see in full comparisonAs of December 31, 2024, we had $690.0 million in aggregate principal amount outstanding under our 2027 Notes.Our ability to meet our debt obligations, includingmaking ourmaking, scheduledpayments of theprincipal and interest payments or refinancingour indebtedness,obligations, depends on our futureperformance, which is subject to economic, financial, competitive,performance andotherexternalfactors, many of which arefactors beyond our control. If our business fails to generate sufficient cash flow from operations to meet these obligations and fund capital expenditures, we may be required to adoptonealternativesor(formore alternatives, such asexample, asset sales, debtrestructuring,restructuring orraising additionalequitycapital,financing)whichthatcouldmayinvolvebe on unfavorable or dilutive terms.Additionally,Further, our ability to refinance our indebtedness will depend on market conditions and our financial standing at such time, which maynotbe unfavorable. If we are unable to identify or pursue acceptable alternatives on commercially reasonable terms, we could befavorable. Failureunable toengagemeetinouranydebtofobligations,these activities on desirable termswhich could result in adefault on our debt obligations.default.
see in full comparisonIfAs significant tariffs or other restrictions continue to be placed on foreign imports by the United States, our sales and results of operations may be harmed.ForRecently,example,theongoingU.S. government has indicated its intent to modify U.S. tradetensionspolicybetweenand,theinUnitedsomeStates and China have ledcases, toarenegotiate,seriesorofpotentiallysignificant tariffs on the importation ofterminate, certainproductexistingcategoriesbilateralintoorthemulti-lateralUnitedtradeStatesagreements.over recent years. In retaliation for these tarrifs, ChinaIt hasrecentlyalsoplacedimposedrestrictions on the export of certain raw materials, including gallium and germanium. Further, President Trumpor hasproposedindicatedsignificantlyits intent to impose increased tariffs on foreign imports into the United States, particularly fromChina,theMexicoPeople’s Republic of China (“PRC”), Mexico, and Canada. Such tariffs could have a significant impact on our business, particularly the importation of products used in our business that are manufactured outside the United States,orwhich have resulted and could result inour products exported from the United States being subject toretaliatory tariffs imposedbyonotherproductscountries.we export. We also source certain raw materials from foreign countries, as do some of our suppliers. The implementation of tariffs and trade restrictions as well as changes in trade policies between the United States and such foreign countries have resulted and could continue to lead to increases in our supply costs and make it more difficult to obtain suppliers and may have an adverse effect on our supply chain from a cost and sourcing perspective. If we attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective.WeFinally,mighttariffsalsoandconsiderinternationalincreasingtradepricesarrangements may continue tothechange,endpotentially without warning and to an extent that is difficult to predict. Changing tariff rates and shifting trade regulations may create significant uncertainty for vendors, consumers, and us; may increase our merchandise costs; negatively impact consumer;however,demandthis could reduce the competitiveness offor our products andadverselyservices;affectornetotherwisesales.negatively impact our operating results. We may not be able to forecast such impacts accurately. If we fail to manage these dynamics successfully, gross margins and profitability could be adversely affected. Increased tariffs or trade restrictions implemented by the United States could have a material adverse effect on our business prospects, operating results and financial condition.
“Our indebtedness contains restrictive covenants that could limit our operational flexibility and adversely affect the value of our common stock.”see in full comparison
“•write-downs or impairment of goodwill or other intangible assets if the acquired business underperforms expectations;”see in full comparison
“Uncertainties with complex U.S. federal, state and local and foreign procurement laws and regulations of governments could cause us to incur costs, which could have a material adverse effect on our business, financial position, results of operations and cash flows.”see in full comparison
“We may finance acquisitions or investments through the issuance of equity or debt. The issuance of equity could dilute existing shareholders, and the issuance of debt could reduce liquidity or increase leverage and interest expense. Debt financing activities may also include restrictive covenants or repayment obligations that limit operational flexibility or our ability to pursue additional strategic transactions.”see in full comparison
Full comparison: every changed paragraph (202)
•We substantially depend on continued acceptance of our products and services by law enforcement agencies throughout the world. If law enforcement agencies do not continue to purchaseworldwide, and useany ourreduction productsin anddemand services, our business prospects, operating results and financial condition will becould materially adversely affected.affect our business.
•We substantially depend on sales of our CEDs, and if these products do not continue to be widely accepted, our businessgrowth prospects, operating results and financial condition will be diminished.
•Our future success depends on our ability to expand sales through direct sales and distributors and our inability to increase direct sales or recruit new distributors would negatively affect our sales.
•Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute shareholder value, andor adversely affect our operating results.
•We depend on the services of our executive officers, including Patrick W. Smith, our Chief Executive Officer. Our failure to retain executive officers could adversely impact our business.
•If demand for our products increases, our future success will depend on our ability to manage our growth and to increase manufacturing production capacity.
•If our security measures or those of our third-partythird party providers, including cloud storage providers, are breached, resulting in unauthorized access to our andor our customers’ data, it could undermine the confidence in our network, data centerscenters, and services,services leading to reduced customer use of our products and services and significant legal and financial exposure and liabilities.
•Failure to comply with federal, state, or local regulations applicable to our firearm product, the TASER 10 CED, could result in governmental actions or litigation, potentially harming our business prospects, operating results,results and financial condition.
•Our revision and our restatement of previously issued consolidated financial statements may adversely affect investor confidence and could result in regulatory actions and stockholder litigation.
•We hold the majority of our cash balances, some of which are not insured, at twothree depository institutions.
•We may face personal injury, wrongful death, product liability and other liability claims that could harm our reputation and adversely affect our business prospects, operating results and financial condition.
•We have in the past and may in the future be subject to intellectual property infringement and other claims, which could incur substantial litigation costs, result in significant damages awards, inhibit our use of certain technologies,technologies and divert management attention from our business.
•Uncertainties with complex U.S. federal, state and local and foreign procurement laws and regulations could cause us to incur costs that could have a material adverse effect on our business, financial position, results of operations and cash flow.
•We are subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to environmental, social and governance (“ESG”) matters,expectations that could expose us to numerous risks.
Risks Related to our Convertible NotesIndebtedness
•The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
•Conversion of the Notes may dilute the shareholder ownership and could depress the price of our common stock.
•Changes in the accounting treatment for the Notes may have a material effect on our reported financial results.
•The 2027 Note Hedge and Warrant transactions may impact the value of the Notes and our common stock.
•Our indebtedness contains restrictive covenants that could limit our operational flexibility and adversely affect the value of our common stock.
We substantially depend on continued acceptance of our products and services by law enforcement agencies throughout the world. If law enforcement agencies do not continue to purchaseworldwide, and useany ourreduction productsin anddemand services, our business prospects, operating results and financial condition will becould materially adversely affected.affect our business.
Our largest customer vertical is U.S. federal, state and local law enforcement. Axon has a customer relationship with a substantial number of federal, state and local law enforcement agencies in the United States. At any point, whether or not related to the performance of our products and services, law enforcement agencies may elect to no longer purchase or use our CEDs or other products and services. For example, we believe that in the past our sales were adversely impacted by negative coverage and publicity surrounding our products and services and their use and this could occur in the future, including as a result of factors beyond our control. If law enforcement agencies nomaterially longerreduce purchaseor discontinue purchases of our products and services, or materially decrease their purchases, our business prospects, operating results and financial condition will be materially adversely affected.
We substantially depend on sales of our CEDs, and if these products do not continue to be widely accepted, our businessgrowth prospects, operating results,results and financial condition couldwill be diminished.
ForWe the years ended December 31, 2024, 2023 and 2022, we derivedderive a significant portion of our revenues from sales of CEDs and related products and services, whether sold individually or as part of a subscription plan offering. We anticipate that these products will continue to account for a significant portion of our revenue for the foreseeable future. The acceptance of these devices is critical to our business prospects, operating results and financial condition. If we cannot continue to meet customer demands or achieve more widespread market acceptance of these products, our business prospects, operating results, and financial condition will be materially adversely affected.
Demand for CED products is affected by several factors, many of which are beyond our control, including continued market acceptance of our products by our customers, technological change, and growth or contraction of the economy in general. Additionally, our CEDs and other offerings or products could fail to maintain or attain sufficient customer acceptance for many reasons, some of which are beyond our control, including:
•real or perceived failure to offer complementary products that enhance the functionality of our offerings;
A decrease in the selling prices of or demand for these products, or their failure to maintain broad market acceptance, wouldcould significantly harm our competitive position, and adversely affect our business prospects, operating results and financial condition.
We have devoted, and continue to devote, significant resources to develop and deploy SaaS solutions to a large number of customers. If there is a substantial increase of new customers in a small window, we may have difficulty deploying these solutions in a way that meets market demand. Increases in customer demand may require us to change our information technology (“IT”) infrastructure, expand our IT infrastructure or replace our IT infrastructure entirely. Scaling and adapting our IT infrastructure is likely to be complex and require additional technical expertise. If we are required to make any changes to our IT infrastructure, we may incur substantial costs and experience delays or interruptions in our solutions. These delays or interruptions may cause customers to become dissatisfied with our solutions and move to competing providers. Our failure to accommodate increased traffic, increased costs, inefficiencies or failures to adapt to new technologies or customer requirements and the associated adjustments to our IT infrastructure could harm our business prospects, operating results and financial condition.
Additionally, customers’ requirements for these products are complex and varied. If we cannot develop scalable solutions that can be consistently configured for customers with minimal effort or grow and maintain asufficient professional servicesservice teamresources that can consistentlyto configure our products to meet the requirements of large numbers of customers in a timely and cost-effective manner, our ability to broadly scale SaaS solutions could be negatively impacted, and our business prospects, operating results and financial condition could be negatively impacted.
We cannot provideassure any assuranceyou that new products thator weproduct may develop in the futurefeatures will achieve market acceptance. If we fail to develop new products or new product features on a timely basis that achieve market acceptance, our business, financial results and competitive position could be adversely affected.
The technology associated with law enforcement devices and software receives significant attention and is rapidly evolving. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete and unmarketable.obsolete. In particular, AI and machine learning technologies are rapidly developing and as these technologies are incorporated into our products and the operations of our customers, the pace of change has in the past and may in the future continue to accelerate. Additionally, we expect our products to meet and keep pace with evolving security standards and requirements of our industry and customers, including those of the U.S. federal government and international governments. While we have some patent protection in certain key areas of our Axon devices, CEDs and SaaS technology, new technology may result in competing products that operate outside our patents and could present significant competition for our products, which could adversely affect our business, financial results and competitive position. Additionally, our competitors may develop competing technologies or products with superior features or lower costs, respond quickermore quickly to emerging technologies, conduct more extensive marketing campaigns, haveor greaterotherwise financial, marketing, manufacturing and other resources, and may becompete more successfuleffectively inthan attractingwe potential customers, employees and strategic partners.do. If we cannot compete effectively, our business and financial results could be adversely affected.
Our future success depends on our ability to expand sales through direct sales and distributors and our inability to increase direct sales or recruit new distributors would negatively affect our sales.
Our distribution strategy is to pursue sales through multiple channels primarily through direct sales and independent distributors. We focus on direct sales to larger agencies and our inability to grow sales to these agencies in this manner would materially adversely affect our business prospects, operating results, and financial condition. In addition, our inability to establish relationships with and retain distributors who we believe can successfully sell our products would materially adversely affect our business prospects, operating results, and financial condition. If we do not competitively price our products, meet the requirements of our distributors or end-users, provide adequate marketing support, or comply with the terms of our distribution arrangements, our distributors may fail to aggressively market our products or may terminate their relationships with us. These developments would likely have a material adverse effect on our sales. Our reliance on the sales of our products by others also makes it more difficult to predict our revenue, cash flow, and operating results.
In certain states and foreign jurisdictions, we have chosen to sell directly with law enforcement customers rather than through established distribution channels. However, some of our customers may have strong working relationships with distributors, and we may face resistance to this change. Failure to overcome this resistance and successfully establish direct relationships with our customers could negatively impact sales, or our competitors may be better positioned by continuing to sell through distributors, which could adversely affect our business prospects, operating results and financial condition.
Our business depends on the reputation of the Axon brand. If we are unable to maintain the position of the Axon brand, our business may be adversely affected by diminishing the appeal of the brand to our customer base.base, This could resultresulting in lower sales and earnings.
Our reputation and our brands have in the past been, and could in the future be, damaged by negative publicity, whether or not merited or as a result of actions that are within our control.merited. Negative publicity could relate to our company, our brands, our products, our supply chain, our packaging, our employees or any other aspectaspects of our business. We could experience negative publicity (which may be raised by consumer advocacy groups, third-partythird party interest groups, investors, employees or other stakeholders) for a variety of reasons, including as a result of product safety issues, threatened or pending legal or regulatory proceedings, product claims, advertising and promotional practices, sustainability or policy issues, materials sourcing or cybersecurity incidents. Negative publicity that damages one of our brands could be compounded by having an adverse effect on our other brands or our company as a whole.
In addition, unfavorable media or investor and analyst reports related to our industry, company, brand, marketing, personnel, operations, business performance, or prospects may affect our common stock price and the performance of our business, even if the publicity is not directly related to our company or our brands and even if the publicity is not accurate. Furthermore, the speed at which negative publicity is disseminated has dramatically increased through use of electronic communication, including social media outlets, websites and other digital platforms. Alternatively,Additionally, our employees may knowingly or inadvertentlyemployees' use of digital or social media platforms in ways that may not be aligned with outour digital or social media strategy andpolicies could damage our reputation or our brands. Our success in maintaining and enhancing our brand depends on our ability to adapt to rapidly changing media environments. Adverse publicity or negative commentary from any media outlet could damage our reputation, require us to expend substantial resources to remedy the damage or reduce the demand for our products and services, which would all adversely affectaffecting our business and financial results.
Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute shareholder value, andor adversely affect our operating results.
Our business strategy has included, and may continue to include, acquiring or investing in other complementary products, technologies, or businesses. IdentifyingIdentifying, negotiating, and negotiatingcompleting these transactions can be time-consuming, difficult, and expensive. Additionally,In some cases, our ability to close thesesuch transactions has previously, and may in the future, dependdepends on obtaining third-partythird party approvals, such as government regulatory approvals and clearances, which are beyond our control. Consequently,As wea result, there can makebe no assurance that theseany transactionsannounced onceacquisition undertakenor and announced,investment, will close.close on the anticipated timeline or at all.
Acquisitions orand investments may present unforeseen operatingoperating, difficulties and expenses. If we acquire businesses, technologiesfinancial, or products,compliance wechallenges. Many of these challenges may encounterarise difficultiesfrom inactions, successfullyomissions, integratingbusiness practices, contractual arrangements, or operational decisions of the acquired business or investee entity that occurred prior to or independently of our ownership or involvement. Integrating acquired personnel, operations, systems, technologies, orand products successfully, or effectively managing the combined business.business can be complex, costly, and disruptive. Our ability to identify and assess material risks and liabilities through due diligence may be limited, particularly where sellers restrict access to information, transaction timelines are compressed, or we acquire a non-controlling interest. Anticipated benefits of such transactions may not materialize due to factors such as:
•inability to integrate or profitably benefit from acquired products, technologies (including AI and machine learning models), or businesses; inherited risks associated with AI or machine learning models (including model performance limitations, bias, explainability challenges, or reliance on training data) that may be incomplete, inaccurate, or subject to regulatory restrictions;
•inability to integrate or profitably benefit from acquired products, technologies or businesses;
•failure to obtain required regulatory approvals, clearances or certifications;
•exposure to unexpected regulatory obligations, including those related to export controls, data protection, AI, or product safety, which could require significant investment to satisfy;
•unanticipated costs, liabilities, or risks related to litigation (including intellectual property claims and disputes, government inquiries, or regulatory actions); exposure to actual or alleged intellectual property infringement, misappropriation, or other intellectual property claims arising from the technologies, products, software, data, or business practices of an acquired company or an entity in which we hold a minority investment (including claims that pre-date our acquisition or investment, discontinuation of products, modification of technologies, commencement of licensing arrangements on unfavorable terms, or payment of damages, settlements, or ongoing royalties);
•exposure to new regulations related to the acquired products, technologies, or business that are unexpectedly burdensome, negatively impact existing products, technologies or business, or require significant investment in order to achieve compliance;
•unanticipated costs, liabilities, or risks related to the transaction, such as those arising from litigation, government inquiries, regulatory actions;
•identifiedidentification orof previously unknown securitycybersecurity vulnerabilities in acquired technologies that expose us to additional security risks or delayprivacy integrationrisks;
•cultural misalignment with the acquired company, as well as disruptions to our workplace environmentenvironment, or adverse impacts on investor perception;
•unionization orunionization, labor organization effortsefforts, or grievances leading to work stoppages, strikes, or operational disruptions in business operations;
•incurrence of costs related to the transaction and integration;
•difficultydifficulties integrating theaccounting, accountingfinancial reporting, and informationinternal control systems, operationsconsistent with our corporate standards and personnelthe requirements of the acquiredSarbanes-Oxley businessAct of 2002;
•inability to enhance the acquired technologies and platforms to meet the quality, performance, and brand standards expected by our customers;
•difficulties and additional expenses associated with supporting legacy productsproducts, andsoftware, hostingor infrastructure of the acquired business;
•write-downs or impairment of goodwill or other intangible assets if the acquired business underperforms expectations;
•write-offs of acquired assets or investments, credit risks, or other financial impacts associated with acquired customers or contractual obligations;
•challenges transitioning acquired customers to our systems, processes, and contractual termsterms, including risks related to contract assignability or change-of-control provisions;
•loss, modification, or non-renewal of government contracts, framework agreements, or sole-source arrangements following a change of control or integration into our operations;
•diversion of management’s attention and critical resources away from existing business priorities;
•disruption to relationships with existing customers, suppliers, or strategic partners;
Management's Discussion & Analysis (MD&A)
New heading “Other Income, Net”
Removed heading “Interest Income, Net”
Largest changes
“•Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments and marketable securities; transaction and integration costs related to strategic investments and acquisitions including adjustments related to the foreign currency impact of acquired intercompany balances that were unsettled as of the reporting date and plan to be settled in the near term; …”see in full comparison
“Our revenues for the year ended December 31, 2024 were $2.1 billion, an increase of $521.8 million, or 33.4%, from the comparable period in the prior year. We had income from operations of $58.5 million, compared to $156.9 million for the same period in the prior year. Gross margin dollars increased $285.9 million but decreased as a percentage of revenue to 59.6% from 61.2% compared to the same period in the prior year. The decrease was primarily driven by higher stock-based compensation expense and amortization of acquired intangibles. …”see in full comparison
“Our revenues for the year ended December 31, 2025 were $2.8 billion, an increase of $697.0 million, or 33.5%, from the year ended December 31, 2024. We had loss from operations of $62.1 million for the year ended December 31, 2025, compared to income from operations of $58.5 million for the same period in the prior year. Gross margin dollars increased $416.7 million and increased as a percentage of revenue to 59.7% from 59.6% compared to the year ended December 31, 2024. …”see in full comparison
“•Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments, marketable securities, and mark-to-market on our non-qualified deferred compensation liabilities; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; non-recurring severance costs, including employee cash payments, equity, and related benefits; …”see in full comparison
As a percentage of net sales, gross margin for thesee in full comparisonTASERConnected Devices segment decreased to58.6%48.7% from60.6%49.4% for the years ended December 31,20242025 and2023,2024, respectively.The decrease was primarily due to increased stock-based compensation expense. Excluding the impacts of stock-based compensation expense, adjustedAdjusted gross margin for theTASERConnected Devices segmentiswas62.9%51.2% for the year ended December 31,2024,2025, compared to60.9%53.6% for thesameyearperiodended December 31, 2024. The decrease in2023.grossThemarginincreaseand adjusted gross margin is primarilyduedriventobyinvestmentshigherinmixautomationof Platform Solutions revenue andcostglobalreduction initiatives.tariffs.
“Stock-based compensation expense, excluding the impact of non-recurring severance costs, increased $106.6 million in comparison to the prior year December 31, 2024, which was primarily related to an increase in headcount and a full year of expense recognized in the current year for grants of Employee XSP and the CEO Performance Award (as defined below), compared to a partial year of expense recognized in the prior year.”see in full comparison
Full comparison: every changed paragraph (99)
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our consolidated financial statements with a narrative fromprovides the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A should be read in conjunction with the other sections of this Annual Report on Form 10-K,10-K. includingThe “Partdiscussion I,includes Itemreferences 1Ato -non-GAAP Riskfinancial Factors”measures, such as adjusted gross margin, which supplement our GAAP results by providing additional insight into our financial and “Partoperational II,performance. ItemFor 8 - Financial Statementsdefinitions and Supplementaryreconciliations Data.of these non-GAAP measures to the most directly comparable GAAP measures, refer to “Non-GAAP Measures” within this Annual Report on Form 10-K. The various sections of our MD&A contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing. The tables in the MD&A sections below are derived from exact numbers and may have immaterial rounding differences.
Our MD&A discusses our results of operations for the year ended December 31, 2025 as compared to the year ended December 31, 2024. For discussion of the year ended December 31, 2024 as compared to the year ended December 31, 2023. For a discussion and analysis of the year ended December 31, 2023 as compared to the year ended December 31, 2022,2023, refer to Management’s Discussion and Analysis of Financial Condition and Results of OperationsMD&A included in Part II, Item 7 of our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2023,2024, filed with the SEC on FebruaryMay 27,7, 2024.2025.
Axon is a technology company that provides integrated hardware and software solutions. Our products and services allow customers across the public and private sector to capture and use critical data to support fully-connected operational workflows. Our trusted network seamlessly integrates software and hardware with a range of connected devices, including TASER energy devices, cameras and sensors, drones and robotics, cloud-based evidence management, records management, real-time operations software, critical incident and emergency response systems, immersive training, and productivity tools – all enhanced by AI.
During the year ended December 31, 2025, we realigned our business into two reportable segments, Connected Devices and Software and Services (the “Segment Realignment”). As a result of the Segment Realignment, we have recast our segment and other relevant disclosures for the year ended December 31, 2024 to conform to the new presentation.
Our revenues for the year ended December 31, 2025 were $2.8 billion, an increase of $697.0 million, or 33.5%, from the year ended December 31, 2024. We had loss from operations of $62.1 million for the year ended December 31, 2025, compared to income from operations of $58.5 million for the same period in the prior year. Gross margin dollars increased $416.7 million and increased as a percentage of revenue to 59.7% from 59.6% compared to the year ended December 31, 2024. Adjusted gross margin decreased to 62.6% for the year ended December 31, 2025 compared to 63.2% for the year ended December 31, 2024. The decrease was primarily driven by global tariffs and a higher mix of Platform Solutions revenue. Operating expenses increased by $537.4 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $124.7 million included net realized and unrealized gains of $186.4 million related to our strategic investments and a $105.7 million tax benefit, partially offset by a net realized and unrealized loss of $46.4 million related to our marketable securities, inducement expense of $38.9 million associated with the early repurchase of a portion of our 2027 Notes, and interest loss, net of $18.8 million. Net income of $377.0 million for the year ended December 31, 2024 included net realized and unrealized gains of $162.9 million related to our strategic investments, a net unrealized gain of $120.3 million related to our marketable securities, and interest income, net of $36.6 million.
Axon is building the public safety operating system of the future by integrating a suite of hardware devices and cloud software solutions that not only revolutionize modern policing but also cater to federal agencies, corrections, justice and enterprise-level security and safety needs. Axon’s suite includes cloud-hosted digital evidence management solutions, productivity and real-time operations software, body cameras, in-car cameras, TASER energy devices, robotic security and training solutions. Axon’s growing global customer base includes first responders across international, federal, state, and local law enforcement, fire, corrections, and emergency medical services, as well as the justice sector, commercial enterprises, and consumers.
Our revenues for the year ended December 31, 2024 were $2.1 billion, an increase of $521.8 million, or 33.4%, from the comparable period in the prior year. We had income from operations of $58.5 million, compared to $156.9 million for the same period in the prior year. Gross margin dollars increased $285.9 million but decreased as a percentage of revenue to 59.6% from 61.2% compared to the same period in the prior year. The decrease was primarily driven by higher stock-based compensation expense and amortization of acquired intangibles. Excluding the impacts of stock-based compensation expense and intangibles amortization in costs of goods sold, adjusted gross margin increased to 63.2% for the year ended December 31, 2024, compared to 61.8% for the same period in the prior year, primarily due to an increased mix of high-margin Axon Cloud & Services revenue and investments in TASER automation and cost-reduction initiatives. Operating expenses increased $384.2 million, reflecting an increase in salaries, benefits, and stock-based compensation expenses, as well as an increase in professional and consulting expenses related to transaction costs. For the year ended December 31, 2024, we recorded net income of $377.0 million which included net realized and unrealized gains on fair value adjustments of strategic investments of $162.9 million, a net unrealized gain on marketable securities of $120.3 million, and interest income, net of $36.6 million. Net income of $175.8 million for the comparable period in the prior year reflected net unrealized losses of $80.5 million related to impairment and observable price changes for our existing investments and related warrants, interest income, net of $42.1 million, and a net unrealized gain of $38.7 million on marketable securities.
Certain prior period amounts previously reported on our consolidated financial statements have been revised to correct for immaterial errors, as described in Note 1, Note 23 and Note 24 included in Part II, Item 8 of this Annual Report on Form 10-K.
Additionally, in Q1 2025 we approved a plan to realign our business to better reflect our continued growth and expansion of product, software and service offerings. Previously reported within two reportable segments, TASER and Software and Sensors, we will prospectively reorganize our business in a manner that provides increased transparency and distinction between our hardware and software and services components. As a result of the reorganization, effective with the first quarter of fiscal year 2025, our financial results will be reported in two reportable segments, Connected Devices and Software & Services, which our CODM will use to regularly review information, allocate resources and assess performance. Connected Devices will include hardware products, such as CEDs, body cameras, and drones. Software & Services will include products that integrate with our suite of connected devices, such as Axon Evidence, RMS and other cloud services.
We are currently assessing the impact of this change on our financial reporting and related segment disclosures. We intend to recast prior period segment information to conform to the new reporting structure, as necessary, to ensure consistency and comparability across reporting periods.
The following table presents data from our consolidated statements of operations and comprehensive income as well as the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (dollars in thousands):
International revenue increased as a percentage of revenue compared to the prior year,year 2024 comparative period, primarily driven by increased sales in our Americas region (i.e., Central America, South America, and Canada).region.
(1)'TASER' includes TASER handles, cartridges and related extended warranties.
(2)'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3)'Platform Solutions' primarily includes fleet in-car video, interview room, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
Net sales for the Connected Devices segment increased 29.1% for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase of $163.7 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $80.1 million, which was primarily driven by the continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $111.7 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment, virtual reality training, and fleet systems.
Net sales for the Software and Services segment increased 39.6% for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $341.4 million.
(1)TASER segment “Other” includes smaller categories, such as VR hardware, weapons training revenue such as revenue associated with our Master Instructor School, and TASER consumer device sales.
(2)Software and Sensors segment “Other” includes revenue from items including Signal Sidearm, Interview Room, Axon Air, partners' contra-revenue and other sensors and equipment.
Net sales for the TASER segment for the year ended December 31, 2024 increased $205.2 million, or 33.4%, as compared to the prior year, primarily due to an increase of $119.1 million in TASER devices and an increase of $53.5 million in cartridge revenue. The increase is primarily related to continued adoption of our newest device, TASER 10. The increase in revenue from Axon Evidence and cloud services of $19.2 million was driven by an increase in the number of cloud-connected TASER devices in the field and software revenue tied to our VR solution. An increase in TASER devices in the field drove the $5.8 million increase in extended warranties, as most of those devices are sold with extended warranties. The $7.5 million increase in "Other" revenue is primarily driven by increased VR hardware volume.
Net sales for the Software and Sensors segment for the year ended December 31, 2024 increased $316.7 million, or 33.4%, as compared to the prior year, as we continued to add users and associated devices to our network. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase in Axon Evidence and cloud services revenue of $242.3 million. Axon Body cameras and accessories revenue increased $63.8 million due to higher unit sales. Partially offsetting the increase was a $17.0 million decrease in Axon Fleet systems revenue reflecting lower unit volumes on more normalized deployment timelines. An increase in cameras and docks in the field drove the $11.0 million increase in extended warranties, as most of those devices are sold with extended warranties. The $16.5 million increase in “Other” revenue was primarily driven by demand for other product offerings within the Software and Sensors segment.
As a percentage of net sales, gross margin for the TASERConnected Devices segment decreased to 58.6%48.7% from 60.6%49.4% for the years ended December 31, 20242025 and 2023,2024, respectively. The decrease was primarily due to increased stock-based compensation expense. Excluding the impacts of stock-based compensation expense, adjustedAdjusted gross margin for the TASERConnected Devices segment iswas 62.9%51.2% for the year ended December 31, 2024,2025, compared to 60.9%53.6% for the sameyear periodended December 31, 2024. The decrease in 2023.gross Themargin increaseand adjusted gross margin is primarily duedriven toby investmentshigher inmix automationof Platform Solutions revenue and costglobal reduction initiatives.tariffs.
As a percentage of net sales, gross margin for the Software and SensorsServices segment decreased to 60.2%74.0% from 61.6%74.1% for the years ended December 31, 20242025 and 2023,2024, respectively. WithinThe decrease was primarily driven by higher stock-based compensation expense and acquired intangibles amortization. Adjusted gross margin for the Software and SensorsServices segment,segment hardwareincreased grossto margin was 37.7%77.5% for the year ended December 31, 2024,2025, compared to 45.8% for the same period in 2023. Excluding the impacts of stock-based compensation expense and amortization of acquired intangible assets, hardware adjusted gross margin decreased to 41.4%76.8% for the year ended December 31, 2024,2024. comparedThe toincrease 46.2% for the same period in 2023was primarily duedriven to product mix and inventory reserve charges associated with legacy products. Service gross margin increased to 73.0% for the year ended December 31, 2024 compared to 72.6% for the same period in 2023. Excluding the impacts of stock-based compensation expense and intangibles amortization, service adjusted gross margin increased to 75.8% for the year ended December 31, 2024, compared to 73.6% for the same period in 2023, due toby higher software revenue mix.
For the year ended December 31, 2024, we have seen an increase in stock-based compensation expense within our cost of goods sold as a result of RSUs granted in January 2024 that generally vest in five annual installments from March 2024 through March 2028. These RSUs were granted to employees whose compensation was under a specified threshold, including production-line employees. As previously disclosed in Note 15 to our consolidated financial statements included within our Annual Report on Form 10-K for the year ended December 31, 2023, Patrick W. Smith, our Chief Executive Officer, agreed to compensation in a lesser amount than the Compensation Committee of our Board of Directors was otherwise willing to provide so that we could instead provide enhanced compensation opportunities to certain of our other employees.
We incurred non-recurring severance costs during the three months ended December 31, 2025 of $28.7 million, which consisted of stock-based compensation, cash payments and employee benefits.
Salaries, benefits and bonus expense increased $36.0 million in comparison to the prior year, which was primarily attributable to an increase in headcount and higher wages.
Sales and marketing expense increased $17.1 million in comparison to the prior year, which was primarily attributable to increased commissions of $12.4 million and an increase of $4.7 million related to in-person events.
Stock-based compensation expenseexpense, excluding the impact of non-recurring severance costs, increased $132.0$127.8 million in comparison to the prior year,year December 31, 2024 comparable period, which was primarily related to an increase in headcount and a full year of expense recognized in the 2024current year for grants of Employee XSP and the 2024 CEO Performance Award that(as weredefined approvedbelow), bycompared shareholdersto a partial year of expense recognized in the 2024prior Annual Meeting of Shareholders and increased headcount.year.
Salaries, benefits and bonus expense, excluding the impact of non-recurring severance costs, increased $73.2 million in comparison to the prior year December 31, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.
OtherSales SG&Aand expensesmarketing expense increased $61.2$17.5 million in comparison to the prior year,year December 31, 2024 comparable period, which was primarily drivenattributable byto theincreased following:commissions.
Other SG&A expenses increased $47.4 million in comparison to the prior year, partially driven by $11.9 million in increased travel expenses. Further increases were driven by litigation and regulatory costs, as well as professional and consulting costs.
•Professional and consulting expenses increased $21.5 million, primarily driven by transaction costs related to business acquisitions and strategic investments for Fusus and Dedrone;
•Travel expenses increased $9.5 million, as a result of increased in-person meetings and lodging costs;
•Office and building expenses increased $7.1 million relating to building rent and property taxes;
•Supplies expenses increased $6.7 million primarily due to an increase in computer licenses.
We incurred non-recurring severance costs during the three months ended December 31, 2025 of $1.1 million, which consisted of stock-based compensation, cash payments and employee benefits.
Stock-based compensation expense, excluding the impact of non-recurring severance costs, increased $106.6 million in comparison to the prior year December 31, 2024, which was primarily related to an increase in headcount and a full year of expense recognized in the current year for grants of Employee XSP and the CEO Performance Award (as defined below), compared to a partial year of expense recognized in the prior year.
Salaries, benefits, and bonus expenseexpense, excluding the impact of non-recurring severance costs, increased $54.6$78.7 million in comparison to the prior-year comparableDecember period,31, 2024, which was primarily attributable to an increase in headcount and higher wages.
Stock-based compensation expense increased $65.7 million which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.
Other R&D expenses increased $17.6$56.3 million,million primarilyin relatedcomparison to increasedthe prior year December 31, 2024, partially driven by an increase in professional and consulting expenses of $24.9 million related to the launchdevelopment of new products of $6.6 million, and increased internal cloud storage and service costs related to software product development of $3.9 million.products.
Interest Income, Net
Interest income, net, was as follows (in thousands):
The decrease in interest income for the year ended December 31, 2024 is primarily related to lower balances of available-for-sale securities during the year. There were no material changes in interest expense for the year ended December 31, 2024 when compared against the prior comparable period.
OtherInterest Income (Loss), Net
OtherInterest income (loss), net, was as follows (in thousands):
(1)Interest income increased in comparison to the year ended December 31, 2024 comparable period primarily as a result of higher balances of available-for-sale securities during the year.
(2)Interest expense increased in comparison to the year ended December 31, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.
Other Income, Net
Other income, net, was as follows (in thousands):
(1)Reflects the net realized and unrealized gain associated with our strategic investments during the years ended December 31, 2025 and December 31, 2024, as discussed within Note 7.
(2)Reflects the net realized and unrealized gain (loss) on marketable securities during the years ended December 31, 2025 and December 31, 2024, as discussed within Note 3.
(3)Reflects the inducement expense associated with the early repurchase of a portion of our 2027 Notes in both the first and fourth quarters of 2025, as discussed further within Note 10.
In 2024, we recorded a realized gain of $93.9 million related to acquiring the remaining outstanding equity interests of two previously held strategic investments and an unrealized gain of $75.6 million related to an observable price change for an existing strategic investment and related warrants. The increase in unrealized gain on marketable securities for the year ended December 31, 2024 is driven by fair value changes for our existing marketable securities.
In 2023, we recorded a net unrealized impairment loss of $71.9 million for an existing strategic investment and related warrants and an unrealized loss of $8.6 million related to observable price changes for our existing investments and related warrants.
The effective tax rate was (557.0)% for the year ended December 31, 2025, compared to 1.2% for the year ended December 31, 2024. The change is primarily attributable to the net tax benefit related to stock-based compensation and R&D tax credits, partially offset by increased unrecognized tax benefits. The overall change in the effective tax rate also reflects the impact of lower pre-tax book income in the current period, which magnifies the relative effect of permanent adjustments.
The effective tax rate was 1.2% for the year ended December 31, 2024, compared to (11.9)% for the year ended December 31, 2023. The increase in the effective tax rate is primarily driven by higher pre-tax income, which reduced the relative impact of favorable tax adjustments. The increase in current year rate is primarily driven by a lesser percentage of allowable stock based compensation adjustment in comparison to pre-tax book income. Additionally, the R&D credit was a lesser percentage of pretax income which was offset by the reversal of nontaxable gain on investments.
Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):
We recorded net income of $124.7 million for the year ended December 31, 2025 compared to net income of $377.0 million for the year ended December 31, 2024 compared to a net income of $175.8 million in 2023.2024. Net income per basic share was $4.98$1.60 and diluted net income per share was $4.80$1.51 for 2024,the year ended December 31, 2025, compared to net income per basic share of $2.37$4.98 and diluted net income per share of $2.33$4.80 for 2023.the year ended December 31, 2024.
The reduction in net income when compared to the prior period is partially driven by a loss from operations of $62.1 million for the year ended December 31, 2025 compared to income from operations of $58.5 million for the year ended December 31, 2024. This loss from operations was primarily driven by stock-based compensation expense and increased headcount to support business growth. Further drivers of the reduction in net income include our net realized and unrealized loss of $46.4 million related to our marketable securities, inducement expense of $38.9 million associated with the early repurchase of a portion of our 2027 Notes, and interest loss, net of $18.8 million, among other items.
We utilize certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted gross margin as defined below to enhance understanding of our financial results and related measures. Beginning with our first fiscal quarter of 2024, we have added adjusted gross margin to our non-GAAP financial measures. We have adjusted for expenses that we believe are not indicative of our core operating results.results, including stock-based compensation expense and amortization of acquired intangible assets. To improve comparability, prior periods have been conformed to the current period presentation. WeOur usemanagement uses these non-GAAP financial measures in evaluating our operating performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented below.
What changed in the latest 10-Q
Risk Factors
There have been no significant changes to the risk factors outlined in our Annual Report on Form 10-K for the year ended December 31, 2025.
Full comparison: every changed paragraph (1)
As of the three months ended March 31, 2026, thereThere have been no significant changes to the risk factors outlined in our Annual Report on Form 10-K for the year ended December 31, 2025.
Management's Discussion & Analysis (MD&A)
New heading “Other Income (Loss), Net”
New heading “Provision for (Benefit from) Income Taxes”
New heading “Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025”
New heading “Selling, General and Administrative Expenses”
New heading “Research and Development Expenses”
New heading “Interest Income (Expense), Net”
Largest changes
“Our revenues for the six months ended June 30, 2026 were $1.7 billion, an increase of $439.6 million, or 34.6%, from the six months ended June 30, 2025. We had income from operations of $76.0 million, compared to loss from operations of $9.8 million for the same period in the prior year. Gross margin dollars increased $254.3 million and decreased as a percentage of revenue to 59.8% from 60.5% compared to the six months ended June 30, 2025. Adjusted gross margin decreased to 62.3% for the six months ended June 30, 2026 compared to 63.4% for the same period in the prior year. …”see in full comparison
Our revenues for the three months endedsee in full comparisonMarchJune31,30, 2026 were$807.3$904.4 million, an increase of$203.7$235.9 million, or33.7%,35.3%, from the three months endedMarchJune31,30, 2025. We had income from operations of$29.2$46.8 million, compared to loss from operations of$8.8$1.0 million for the same period in the prior year. Gross margin dollars increased$111.5$142.7 millionandreflectingdecreased as aconsistent percentage of revenuetoat59.1%60.4%,from 60.6%when compared to the three months endedMarchJune31,30, 2025. Adjusted gross margin decreased to61.6%62.9% for the three months endedMarchJune31,30, 2026 compared to63.6%63.3% for the same period in the prior year. The decrease in gross margin and adjusted gross margin was primarily driven byglobal tariffs,a higher mix ofPlatform Solutions revenue, and higherprofessional servicescosts.revenue and scaling new product offerings, partially offset by tariff refunds received in the quarter. Operating expenses increased by$73.5$94.9 million, primarily reflecting increased headcount andcommissionsinvestments in AI and other initiatives to support businessgrowth and consulting expenses.growth. Net income of$169.3$29.4 million included a$30.9$3.3 million tax provision, income from strategic investments, net, of$196.6$5.7 million, and a net realized and unrealizedlossgain of$5.5$1.1 million related to our marketable securities. Net income of$88.0$36.1 million for the three months endedMarchJune31,30, 2025 includednetarealized$75.0andmillionunrealizedtaxgainsbenefit,from strategic investments of $167.3 million,partially offset by a noncash unrealized loss of$23.4$30.9 million related to ourinvestment inmarketablesecurities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes.securities.
“Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025”see in full comparison
Full comparison: every changed paragraph (73)
The following discussion and analysis of our financial condition as of MarchJune 31,30, 2026, and results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025, should be read in conjunction with the unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes in our 2025 Annual Report on Form 10-K for the year ended December 31, 2025. The discussion includes references to non-GAAP financial measures, such as adjusted gross margin, which supplement our GAAP results by providing additional insight into our financial and operational performance. For definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, refer to “Non-GAAP Measures” within this Quarterly Report on Form 10-Q. This discussion also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements.
Our revenues for the three months ended MarchJune 31,30, 2026 were $807.3$904.4 million, an increase of $203.7$235.9 million, or 33.7%,35.3%, from the three months ended MarchJune 31,30, 2025. We had income from operations of $29.2$46.8 million, compared to loss from operations of $8.8$1.0 million for the same period in the prior year. Gross margin dollars increased $111.5$142.7 million andreflecting decreased as aconsistent percentage of revenue toat 59.1%60.4%, from 60.6%when compared to the three months ended MarchJune 31,30, 2025. Adjusted gross margin decreased to 61.6%62.9% for the three months ended MarchJune 31,30, 2026 compared to 63.6%63.3% for the same period in the prior year. The decrease in gross margin and adjusted gross margin was primarily driven by global tariffs, a higher mix of Platform Solutions revenue, and higher professional services costs.revenue and scaling new product offerings, partially offset by tariff refunds received in the quarter. Operating expenses increased by $73.5$94.9 million, primarily reflecting increased headcount and commissionsinvestments in AI and other initiatives to support business growth and consulting expenses.growth. Net income of $169.3$29.4 million included a $30.9$3.3 million tax provision, income from strategic investments, net, of $196.6$5.7 million, and a net realized and unrealized lossgain of $5.5$1.1 million related to our marketable securities. Net income of $88.0$36.1 million for the three months ended MarchJune 31,30, 2025 included neta realized$75.0 andmillion unrealizedtax gainsbenefit, from strategic investments of $167.3 million,partially offset by a noncash unrealized loss of $23.4$30.9 million related to our investment in marketable securities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes.securities.
Our revenues for the six months ended June 30, 2026 were $1.7 billion, an increase of $439.6 million, or 34.6%, from the six months ended June 30, 2025. We had income from operations of $76.0 million, compared to loss from operations of $9.8 million for the same period in the prior year. Gross margin dollars increased $254.3 million and decreased as a percentage of revenue to 59.8% from 60.5% compared to the six months ended June 30, 2025. Adjusted gross margin decreased to 62.3% for the six months ended June 30, 2026 compared to 63.4% for the same period in the prior year. The decrease in gross margin and adjusted gross margin was primarily due to a higher mix of professional services revenue and scaling new product offerings, partially offset by tariff refunds received in the quarter. Operating expenses increased by $168.4 million, primarily reflecting increased headcount and investments in AI and other initiatives to support business growth. Net income of $198.7 million included net realized and unrealized gains of $202.3 million related to our strategic investments and a $34.2 million tax provision, partially offset by a noncash unrealized loss of $4.4 million related to our marketable securities. Net income of $124.1 million for the six months ended June 30, 2025 included net realized and unrealized gains of $166.0 million related to our strategic investments and a $54.6 million tax benefit, partially offset by a noncash unrealized loss of $54.3 million related to our marketable securities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes.
On February 20, 2026, the Supreme Court determined that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized. During the three months ended June 30, 2026, we received $47.4 million in refunds. Of this amount, $18.1 million had been previously expensed in 2025 to cost of sales and the remaining is associated with amounts primarily classified as inventory and property and equipment, net, for which the majority would have been expensed in the current year.
On February 20, 2026, the Supreme Court determined that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized. The ruling did not provide guidance regarding the recovery of amounts previously remitted. As of March 31, 2026, we have not recorded a benefit for any potential refunds of IEEPA tariffs previously paid, as recovery is not considered probable. We continue to monitor trade policy developments and will reassess the accounting treatment as additional information becomes available.
Three Months Ended MarchJune 31,30, 2026 Compared to the Three Months Ended MarchJune 31,30, 2025
International revenue increased compared to the prior year MarchJune 31,30, 2025 comparative period, primarily driven by increased sales in our EMEA region.
Net sales for the Connected Devices segment increased 32.8%34.6% for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. The increase of $37.4$45.1 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $20.3$2.6 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $54.2$82.5 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and fleet systems.equipment.
Net sales for the Software and Services segment increased 34.9%36.2% for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. The increase in the aggregate number of users and growing adoption of our premium add-on featuressolutions by existing customers drove the majority of the increase of $91.8$105.7 million.
As a percentage of net sales, gross margin for the Connected Devices segment decreasedincreased to 48.7%51.9% from 50.1%48.6% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Adjusted gross margin for the Connected Devices segment was 50.4%53.4% for the three months ended MarchJune 31,30, 2026, compared to 52.8%51.1% for the three months ended MarchJune 31,30, 2025. The decreaseincrease in gross margin and adjusted gross margin was primarily driven by globaltariff tariffsrefunds, andpartially aoffset higherby increased mix ofto Platformcounter-drone Solutions revenue.equipment.
As a percentage of net sales, gross margin for the Software and Services segment decreased to 72.4%71.3% from 74.2%75.6% for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Adjusted gross margin for the Software and Services segment decreased to 75.8%75.1% for the three months ended MarchJune 31,30, 2026, compared to 77.7%78.9% for the three months ended MarchJune 31,30, 2025. The decrease in gross margin and adjusted gross margin was primarily driven by a higher mix of professional services costs.revenue and scaling new product offerings.
Salaries, benefits and bonus expense increased $10.8$12.0 million in comparison to the prior year MarchJune 31,30, 2025 comparable period, primarily attributable to an increase in headcount and higher wages.headcount.
Sales and marketing expense increased $10.2$8.9 million in comparison to the prior year MarchJune 31,30, 2025 comparable period, primarily attributable to increased commissions.
Other SG&A expenses increased $14.6$27.9 million in comparison to the prior year MarchJune 31,30, 2025 comparable period, primarily driven by anincreased increase in professional and consultingadvisory expenses of $9.1$8.7 million.million, increased travel expenses of $5.4 million, and increased technology license expenses of $4.4 million as a result of the continued adoption of AI initiatives.
Salaries, benefits and bonus expense increased $21.3$20.1 million in comparison to the prior year MarchJune 31,30, 2025 comparable period, which was primarily attributable to an increase in headcount and higher wages.headcount.
OtherStock-based R&Dcompensation expensesexpense increased $16.6$7.2 million in comparison to the prior year MarchJune 31,30, 2025 comparable period, partiallyprimarily driven by anincreased increase in professional and consulting expenses of $6.8 million.headcount.
Other R&D expenses increased $18.8 million in comparison to the prior year June 30, 2025 comparable period, primarily driven by an increase in engineering expenses of $6.2 million and an increase in technology license expenses of $5.1 million as a result of the continued adoption of AI initiatives.
Other Income (Loss), Net
Other income (loss), net, was as follows (in thousands):
(1)Reflects the net realized and unrealized income (loss) associated with our strategic investments, during the three months ended June 30, 2026 and 2025, as discussed within Note 6.
(2)Reflects the net realized and unrealized gain (loss) on marketable securities, during the three months ended June 30, 2026 and 2025, as discussed within Note 3.
Provision for (Benefit from) Income Taxes
The effective tax rate was 10.0%, for the three months ended June 30, 2026, compared to 192.9% for the three months ended June 30, 2025. The decrease in effective tax rate for the quarter was primarily driven by a less favorable net tax benefit related to stock-based compensation, R&D tax credits and an increase in pre-tax book income, which reduced the relative impact of other permanent and discrete items.
Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):
Net Income
We recorded net income of $29.4 million for the three months ended June 30, 2026 compared to net income of $36.1 million for the three months ended June 30, 2025. Net income per basic share was $0.37 for the three months ended June 30, 2026 compared to $0.46 for the three months ended June 30, 2025. Net income per diluted share was $0.36 for the three months ended June 30, 2026 compared to $0.44 for the three months ended June 30, 2025.
Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 2025
The following table presents data from our consolidated statements of operations as well as the percentage relationship to total net sales (dollars in thousands):
The following table presents our revenues disaggregated by geography (dollars in thousands):
(1)InterestInternational expenserevenue increased in comparisoncompared to the prior year MarchJune 31,30, 2025 comparablecomparative periodperiod, primarily asdriven aby resultincreased of the issuance of the Senior Notessales in Marchour 2025,EMEA as discussed further within Note 8.region.
Net Sales
Net sales by product line were as follows (dollars in thousands):
(1)'TASER' includes TASER handles, cartridges and related extended warranties.
(2)'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3)'Platform Solutions' primarily includes fleet in-car video, interview room, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
Net sales for the Connected Devices segment increased 33.8% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase of $82.4 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $22.9 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $136.8 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment.
Net sales for the Software and Services segment increased 35.6% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $197.4 million.
Gross Margin
As a percentage of net sales, gross margin for the Connected Devices segment increased to 50.4% from 49.3% for the six months ended June 30, 2026 and 2025, respectively. Adjusted gross margin for the Connected Devices segment was 52.0% for the six months ended June 30, 2026, compared to 51.9% for the six months ended June 30, 2025. The increase in gross margin and adjusted gross margin was primarily driven by tariff refunds, partially offset by increased mix to counter-drone equipment.
As a percentage of net sales, gross margin for the Software and Services segment decreased to 71.8% from 75.0% for the six months ended June 30, 2026 and 2025, respectively. Adjusted gross margin for the Software and Services segment decreased to 75.4% for the six months ended June 30, 2026, compared to 78.3% for the six months ended June 30, 2025. The decrease in gross margin and adjusted gross margin was primarily driven by a higher mix of professional services revenue and scaling new product offerings.
Selling, General and Administrative Expenses
SG&A expenses were as follows (dollars in thousands):
Salaries, benefits and bonus expense increased $22.8 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to an increase in headcount.
Sales and marketing expense increased $19.1 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to increased commissions.
Other SG&A expenses increased $42.4 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to increased advisory expenses of $17.8 million and increased travel expenses of $8.0 million.
Research and Development Expenses
R&D expenses were as follows (dollars in thousands):
Salaries, benefits and bonus expense increased $41.5 million in comparison to the prior year June 30, 2025 comparable period, which was primarily attributable to an increase in headcount.
Stock-based compensation expense increased $8.6 million in comparison to the prior year June 30, 2025 comparable period, partially attributable to increased headcount.
Other R&D expenses increased $33.9 million in comparison to the prior year June 30, 2025 comparable period, primarily driven by $13.0 million of increased engineering expenses and $6.5 million of increased technology license expenses as a result of the continued adoption of AI initiatives.
Interest Income (Expense), Net
Interest income (expense), net, was as follows (in thousands):
Other income,income (loss), net, was as follows (in thousands):
(1)Reflects the net realized and unrealized income associated with our strategic investments, during the threesix months ended MarchJune 31,30, 2026 and 2025, as discussed within Note 6.
(2)Reflects the net realized and unrealized loss on marketable securities, during the threesix months ended MarchJune 31,30, 2026 and 2025, as discussed within Note 3.
The effective tax rate was 15.4%,14.7%, for the threesix months ended MarchJune 31,30, 2026, compared to 18.8%(78.5)% for the threesix months ended MarchJune 31,30, 2025. The decreaseincrease in effective tax rate for the quartersix months ended June 30, 2026 was primarily driven by a nontaxableless gainfavorable onnet antax investmentbenefit transactionrelated to stock-based compensation, R&D tax credits and an increase in pre-tax book income, which reduced the relative impact of other permanent and discrete items.
Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):
We recorded net income of $169.3$198.7 million for the threesix months ended MarchJune 31,30, 2026 compared to net income of $88.0$124.1 million for the threesix months ended MarchJune 31,30, 2025. Net income per basic share was $2.11$2.47 for the threesix months ended MarchJune 31,30, 2026 compared to $1.14$1.60 for the threesix months ended MarchJune 31,30, 2025. Net income per diluted share was $2.05$2.41 for the threesix months ended MarchJune 31,30, 2026 compared to $1.08$1.52 for the threesix months ended MarchJune 31,30, 2025.
Furthermore, beginning in the quarterly period ended June 30, 2026, we updated the calculation of Adjusted EBITDA and Adjusted Gross Margin to exclude additional jurisdiction-specific compensation-related taxes incurred as a direct result of Employee XSP vesting events. This update expands upon our existing adjustment, which was historically limited to payroll taxes related to Employee XSP vesting events. For all comparable prior periods presented, our adjustment does not include any incremental jurisdiction-specific compensation-related taxes, as the impact of this change on historical periods was determined to be de minimis. Accordingly, compensation taxes related to Employee XSP vesting for all comparable prior periods has not been recast and solely reflects adjustment for payroll taxes incurred.
•Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; all components of other income (loss), net, which is primarily comprised of fair value adjustments and income or losses related to strategic investments and marketable securities, debt inducement expense associated with the early repurchase of a portion of our 2027 Notes, foreign currency exchange gains and losses, net, and fees incurred related to our Credit Agreement; noncash stock-based compensation expense; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; non-recurring severance costs, including employee cash payments, equity, and related benefits; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; mark-to-market adjustments on our non-qualified deferred compensation liabilities; payrollcompensation taxes related to Employee XSP vesting; losses incurred as a result of the disposal, abandonment, and impairment of property, equipment and intangible assets, net; and inventory step-up amortization related to acquisitions.
AXON insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 16 filings (9 insiders, 12 trade dates, 112,355 shares, about $60.1M; 11 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: -112,355 (purchases minus sales); net value about -$60.1M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-10-01 | Brooks Cameron |
Shares withheld for tax | 5,850 | $422.21 | $2.5M |
| 2026-09-11 | Fields Isaiah |
Open-market sale |
1,017 | $480.45 | $488.6K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
749 | $507.48 | $380.1K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
1,774 | $508.45 | $902.0K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
1,319 | $509.32 | $671.8K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
71 | $501.99 | $35.6K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
410 | $503.74 | $206.5K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
1,104 | $505.59 | $558.2K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
744 | $506.48 | $376.8K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
1,348 | $510.59 | $688.3K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
1,251 | $511.43 | $639.8K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
1,033 | $512.70 | $529.6K |
| 2026-09-08 | Smith Patrick W |
Open-market sale |
197 | $513.38 | $101.1K |
| 2026-08-31 | Mak Jennifer H |
Shares withheld for tax | 156 | $566.56 | $88.2K |
| 2026-08-31 | Brooks Cameron |
Shares withheld for tax | 735 | $566.56 | $416.3K |
| 2026-08-31 | Coughlin Elizabeth Reid |
Shares withheld for tax | 479 | $566.56 | $271.5K |
| 2026-08-31 | Fields Isaiah |
Shares withheld for tax | 763 | $566.56 | $432.4K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
347 | $561.08 | $194.7K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
373 | $562.27 | $209.7K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
359 | $563.50 | $202.3K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
1,232 | $564.47 | $695.4K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
661 | $565.37 | $373.7K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
188 | $566.32 | $106.5K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
193 | $567.53 | $109.5K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
1,684 | $568.95 | $958.1K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
898 | $569.70 | $511.6K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
643 | $570.94 | $367.1K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
677 | $571.98 | $387.2K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
314 | $573.37 | $180.0K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
283 | $574.67 | $162.6K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
1,108 | $575.79 | $638.0K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
1,075 | $576.80 | $620.1K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
625 | $577.74 | $361.1K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
1,379 | $578.73 | $798.1K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
1,663 | $579.76 | $964.1K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
793 | $580.59 | $460.4K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
318 | $581.76 | $185.0K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
120 | $582.84 | $69.9K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
477 | $584.54 | $278.8K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
565 | $585.72 | $330.9K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
280 | $586.43 | $164.2K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
280 | $588.46 | $164.8K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
109 | $590.21 | $64.3K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
91 | $592.51 | $53.9K |
| 2026-08-31 | Isner Joshua |
Open-market sale |
40 | $595.17 | $23.8K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
1,200 | $629.09 | $754.9K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
80 | $607.89 | $48.6K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
1,350 | $631.24 | $852.2K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
1,050 | $632.23 | $663.8K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
440 | $633.12 | $278.6K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
615 | $634.20 | $390.0K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
345 | $635.02 | $219.1K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
40 | $605.77 | $24.2K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
160 | $609.56 | $97.5K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
141 | $610.13 | $86.0K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
139 | $611.50 | $85.0K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
200 | $612.78 | $122.6K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
240 | $613.65 | $147.3K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
80 | $614.72 | $49.2K |
| 2026-08-21 | Kunins Jeffrey C |
Open-market sale |
280 | $616.32 | $172.6K |
Well-known investors holding AXON (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Baillie Gifford | 2026-06-30 | 3,059,487 | $1.7B | 1.56% | Added 24% |
| PRIMECAP Management | 2026-06-30 | 133,820 | $75.0M | 0.04% | Added 1015% |
| Altimeter Capital (Brad Gerstner) | 2026-06-30 | 148,986 | $63.3M | — | Sold out |
| Millennium Management (Israel Englander) | 2026-06-30 | 84,224 | $47.2M | 0.03% | Reduced 32% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 47,359 | $26.5M | 0.02% | Reduced 76% |
| Gotham Asset Management (Joel Greenblatt) | 2026-06-30 | 35,967 | $20.2M | 0.05% | Added 145% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 25,887 | $14.2M | 0.0% | Reduced 9% |
| D. E. Shaw & Co. | 2026-06-30 | 5,411 | $3.0M | 0.0% | Reduced 34% |