Key Stats for Axon Stock
- YTD Price Change for Axon stock: -2%
- $AXON Share Price as of Dec. 26: $584
- 52-Week High: $886
- $AXON Stock Price Target: $820
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What Happened?
Axon (AXON) stock has taken a beating over the past two months, dropping more than 33% from its all-time high.
The public safety technology company has faced a double whammy of concerns that have spooked investors despite solid revenue growth.
The trouble started in late September when Axon stock fell 10% after announcing it would acquire Prepared, an AI-powered 911 communication platform.
Investors worried about the price tag and what it meant for the company’s already rising expenses. Then in early November, shares dropped another 9% after the company missed third-quarter profit expectations, with adjusted earnings of $1.17 per share falling well short of the $1.52 forecast.
The culprit? Tariffs. Axon’s adjusted gross margins declined 50 basis points year-over-year to 62.7%, which CFO Brittany Bagley directly attributed to tariff impacts.
The company’s connected devices business, which includes TASERs and counter-drone equipment, felt the biggest squeeze during the first full quarter under tariffs. This segment pulled in over $405 million in revenue, up 24% from last year, but margins took a hit.
Then, in December, Axon announced another acquisition, buying the emergency communications platform Carbyne for $625 million. The deal is expected to close in early 2026.
While management sees these acquisitions as critical to building out its 911 ecosystem, investors are questioning whether the company is overpaying and stretching its margins too thin.
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What the Market Is Telling Us About Axon Stock
Despite the recent pullback, Axon stock still trades at a sky-high P/E ratio of 85x, which suggests investors are pricing in massive future growth. The question is whether that growth can materialize while the company navigates tariff headwinds and digests two major acquisitions.
The good news is that Axon’s core business is firing on all cylinders. Revenue grew 31% year-over-year to $711 million in the third quarter, beating analyst expectations of $704 million. Even more impressive, the company’s software and services business jumped 41% to $305 million, and annual recurring revenue (ARR) grew 41% to $1.3 billion.
Bagley expects the high-margin software business to offset the margin pressure from tariffs eventually. She noted that “as long as tariffs stay in place, I view that as sort of a one-time adjustment. Now that’s baked into the gross margins.”
The company also raised its full-year revenue outlook to $2.74 billion, up from a prior range of $2.65 billion to $2.73 billion. Management maintains a 25% adjusted EBITDA margin target despite the tariff impact and increased R&D spending.
President Josh Isner struck an optimistic tone on the earnings call: “We are building an elite business that is still nowhere near its ultimate potential, and we are doing it with a team that is rapidly bought into the mission.”
However, some analysts warn that further downside is possible. With Axon stock trading at such a rich valuation and the recent correction showing no signs of stopping, a price of $377 isn’t out of the question, especially since the stock hit that level within the past five years.
For long-term investors, the key question is whether Axon can successfully integrate Prepared and Carbyne while maintaining its growth trajectory in body cameras, TASERs, and AI-powered software.
If the company can do that, today’s pullback could represent a buying opportunity. If not, there may be more pain ahead.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
