Axon Enterprise Q2 Earnings on Deck: How to Approach the Stock Now?

AXON’s Earnings Surprise History

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The company has surpassed the Zacks Consensus Estimate twice and missed in the other two in the preceding four quarters, the average surprise being 8.8%. In the last reported quarter, it reported earnings of $1.61 per share, which missed the consensus estimate by 3%.

Earnings Whispers for AXON

Our proven model does not conclusively predict an earnings beat for Axon Enterprise this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here, as elaborated below. 

Earnings ESP: AXON has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at $1.89 per share. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: AXON currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Driving AXON’s Performance

Axon Enterprise’s Connected Devices segment’s second-quarter performance is expected to have benefited from solid demand for TASER 10 products and higher cartridge revenues. Also, strong customer response for its next-generation body-worn camera, Axon Body 4, and solid demand for virtual reality training services are expected to have driven the segment’s performance.

Axon Enterprise’s strong presence in the counter-drone space is likely to have contributed to the segment’s growth. The Zacks Consensus Estimate for the Connected Devices segment’s revenues is pegged at $479 million, indicating a 27.4% increase year over year.

The addition of new users and associated devices to the AXON network is expected to have supported the Software & Services segment. Continued momentum in digital evidence management and increased demand for premium add-on features are also likely to have augmented the segmental top line. The Zacks Consensus Estimate for the Software & Services segment’s net sales is pegged at $390 million, indicating a 33.6% increase year over year.

AXON remains focused on acquisitions and strategic collaborations to expand its product offerings and customer base. For instance, in February 2026, the company acquired Carbyne, a well-known provider of cloud contact center technology solutions to public safety agencies. The acquisition integrated Carbyne’s advanced cloud-native 911 technology into the Axon ecosystem to create Axon 911, a state-of-the-art, fully integrated solution that will connect callers and responders instantly. The buyouts are expected to have boosted its top line in the quarter.

Despite the positives, escalating costs and operating expenses have been a concern for the company. High costs related to business integration activities, increased wages and stock-based compensation are expected to have weighed on AXON’s bottom line in the to-be-reported quarter.

Price Performance

AXON’s shares have surged 22.5% in the past six months against the Zacks Aerospace - Defense Equipment industry’s 1.1% decline. The company’s shares have also fared better than the S&P 500’s increase of 8.5%. Shares of its key rivals like Kratos Defense & Security Solutions, Inc. KTOS and Leonardo DRS, Inc. DRS have declined 49% and increased 20.2%, respectively.

Six-Month Price Performance

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AXON’s Valuation Remains a Headwind

The stock is trading at a forward 12-month price-to-earnings (P/E) ratio of 169.05X compared with the industry average of 40.35X. This elevated valuation could make the stock vulnerable to further pullbacks if market sentiment sours. 

Both peers, Kratos Defense and Leonardo DRS, are trading cheaper compared with AXON. Notably, Kratos Defense and Leonardo DRS are trading at 68.49X and 32.43X, respectively.

Price-to-Earnings (Forward 12 Months)

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Investment Thesis

Axon Enterprise is benefiting from strong demand for its TASER devices, body-worn cameras and software solutions, supported by continued customer adoption and innovation. The company's expanding ecosystem, strategic acquisitions such as Carbyne and growing recurring software revenues are expected to drive long-term growth. However, higher operating costs, integration expenses and stock-based compensation may continue to weigh on margins in the near term.

Should You Buy AXON Now?

Strong demand for TASER devices, along with continued customer additions, strategic acquisitions and growth in the counter-drone market, positions AXON favorably for solid second-quarter results. However, rising operating costs, integration expenses and stock-based compensation are likely to weigh on its near-term profitability.

AXON's premium valuation warrants a cautious approach for existing investors. Potential investors should consider waiting for the company's earnings report and a more attractive entry point before investing in the stock.

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This article originally published on Zacks Investment Research (zacks.com).

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