Analysis
Axon Fell 18% as Delayed Drone Contracts Cut Its Outlook
Axon shares fell 18.2% to $313 on Friday after third-quarter revenue of $908.6 million missed estimates and the company cut its 2026 growth forecast to about 30%.
Axon, the maker of Taser stun guns and police body cameras, reported after the close on Thursday, November 5, and the market took two sessions to finish reacting. Third-quarter revenue rose 28% to $908.55 million, short of the roughly $940 million analysts expected, and adjusted earnings of $1.72 a share missed the $1.91 consensus, Investing.com reported. The shares fell about 14% after hours and closed Friday at $313.00, down 18.2% on the day and at their lowest since August 2024, according to GuruFocus.
The forecast did the damage. Axon now expects 2026 revenue of about $3.61 billion to $3.63 billion, growth of roughly 30%, against the 32% to 34% it projected before. Three federal deployments of its Dedrone counter-drone systems, worth about $130 million, are no longer expected this year because government procurement has slowed; management said growth would have been nearly 500 basis points higher with them. The free cash flow forecast was lowered to $350 million to $400 million from about $450 million, and fourth-quarter revenue is guided to $990 million to $1.01 billion.
The rest of the business kept growing quickly. Software and services revenue rose 43% to $437 million, with annual recurring revenue from AI products passing $100 million, connected devices rose 16% to $472 million and adjusted EBITDA grew 33% to $236 million, a margin of 25.9%. Net income was $57 million, against a $2 million loss a year earlier.
Axon also chose this report to make its largest bet yet on drones. It will pay $1.2 billion in cash and stock for roughly another 20% of Skydio, the US drone maker, lifting its stake to 37% and becoming Skydio's exclusive distributor to public-safety agencies. "Within a decade, millions of drones will be working across America," chief executive Rick Smith said. Needham cut its price target to $500 from $750 while keeping a buy rating, and the median target among 22 analysts fell to $575, Benzinga reported.
The size of the reaction is the lesson. A delay worth about 3.6% of annual revenue, none of it cancelled, took the stock 26% below Wednesday's close of $424.18 in two sessions, although part of Thursday's fall came with the whole market. Shares priced for decades of high growth have little room for a quarter in which the growth arrives late. Investors will check in late February whether the Dedrone deployments have started and how much of the Skydio cost shows up in margins.