Axon Enterprise (NASDAQ: AXON) reported first-quarter revenue of $807 million, a 34% increase year-over-year and above the Zacks consensus estimate of $780.6 million. The company also raised its full-year 2026 revenue growth outlook to between 30% and 32%, up from the previous range of 27% to 30%.
Adjusted earnings per share came in at $1.61, slightly missing the Zacks forecast of $1.66 but edging past FactSet's $1.60 estimate. The results underscore Axon's continued expansion beyond its core Taser and body-camera business into artificial intelligence and counter-drone technology.
Software and AI Revenue Surge
Software and services revenue climbed 35% to $355 million, while annual recurring revenue also rose 35% to $1.5 billion. The company's AI Era Plan lineup, which includes Draft One and Axon Assistant, saw revenue surge over 700% year-over-year. CEO Rick Smith attributed the growth to "greater transparency and higher expectations" among customers, noting that Axon is "breaking down information barriers" through its secure platform.
Hardware and Drone Segment Growth
The connected devices segment, encompassing Tasers, body cameras, and other hardware, increased 33% to $453 million. Platform Solutions nearly doubled, up 95%, driven largely by Dedrone, Axon's counter-drone unit that detects, tracks, and disrupts unauthorized drones. This positions Axon against broader public-safety tech rivals, including Motorola Solutions, which competes with Axon's Fusus real-time operations platform.
Margins Under Pressure
Despite strong top-line growth, gross margin fell 150 basis points to 59.1%, impacted by global tariffs, increased Dedrone revenue mix, and rising professional services costs. Operating cash flow swung to a $32 million outflow from a $26 million inflow a year ago, due to higher inventory spending and interest costs. The company reiterated its full-year adjusted EBITDA margin target of 25.5% and expects operating cash flow above $600 million and free cash flow near $450 million.
Backlog and Market Context
Axon's future contracted bookings surged 44% to $14.3 billion, with 20% to 25% expected to be delivered within the next year and the remainder over the following ten years. The stock closed at $385.86 on Nasdaq, up 1.38% for the day, but remains roughly 32% lower for 2026. The company aims to convince investors that growth extends beyond its Taser franchise, even as shares have struggled amid broader market headwinds.