Key Takeaways
- Axon shares fell 17% after third-quarter revenue of $909 million missed estimates and the company cut its 2026 growth outlook to about 30%.
- About $130 million of delayed federal Dedrone deployments drove the cut, while software and services revenue grew 43%, so this looks like timing.
- Axon’s $1.2 billion Skydio deal makes it Skydio’s exclusive public-safety distributor, a challenge to Motorola Solutions.
- Memory costs squeezed Axon’s margins, and the stock trades far below its five-year average forward P/E.
Axon Enterprise (AXON) is down 17% today after a third-quarter report that missed on revenue, cut its outlook and committed $1.2 billion to drones.
The drone deal lands a day after Motorola Solutions (MSI), Axon’s main rival, raised its own outlook. And the memory costs that dented Axon’s margins are behind record profits at Micron Technology (MU).
A $130 million hole
Revenue rose 28% to a record $909 million, short of the roughly $937 million analysts expected going in.
Axon now expects about 30% growth for 2026, down from 32% to 34%, because three federal Dedrone counter-drone deployments worth about $130 million won’t land this year. Software & Services revenue still rose 43%.
Gross margin fell to 56.7% from 60.1%, partly on memory.
Going in, analysts expected 2026 revenue of $3.71 billion.
The new guidance sits about $90 million below that. If the delayed deployments land in 2027 instead, they’d add about $130 million to next year.
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Axon wants the whole drone channel
Axon is paying $1.2 billion in cash and stock for about 20% more of Skydio, taking its stake to 37%, and becomes Skydio’s exclusive public-safety distributor.
Founder and CEO Rick Smith is thinking big: “Within a decade, millions of drones will be working across America.”
That’s a shot at Motorola, which reported 12% sales growth and a record $16.6 billion backlog on Nov. 4 and just closed its purchase of Dedrone rival D-Fend. We’ll learn on its next report how it competes in police drones without Skydio.
Micron is on the other side of the memory trade, with an 87.0% non-GAAP gross margin in its fiscal fourth quarter. Until its mid-December report shows memory prices cooling, I’d expect Axon’s hardware margins to stay squeezed.
Priced for worse
Before today’s drop, Axon traded at about 48x forward earnings, against a five-year average of 77x.
At today’s price, it’s around its five-year low of 43x.
The way I see it, this is a timing miss in a business whose recurring revenue is still growing 40%, and the stock is already priced for worse. If those deployments haven’t landed by Axon’s fourth-quarter report in late February, I’d stop calling it timing.
So what is Axon stock actually worth?
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