Axon’s Q4 Surge: Strong Earnings, AI Expansion, and a Market Comeback

Axon Enterprise (AXON), the maker of Tasers and surveillance technology, delivered a strong fourth-quarter earnings report, surpassing analyst expectations and reigniting investor confidence. Shares, which had recently tumbled from $715 to $480, surged more than 15% in premarket trading to $564 on the better-than-expected results and outlook. However, the gap-down resistance at $590 remains a key technical level to watch.

Q4 Performance: Strong Beats Across the Board

Axon’s fourth-quarter results exceeded expectations across key financial metrics. The company reported adjusted EPS of $2.08, well ahead of the consensus estimate of $1.40 and up from $1.12 a year ago. Revenue climbed 34 percent year-over-year to $575.1 million, surpassing the expected $566.7 million. Net income surged 137 percent to $135.2 million from $57.1 million a year earlier.

Segment-wise, Axon saw impressive growth in its taser division, which generated $221.2 million in revenue, up 37 percent year-over-year and above the projected $212.8 million. Software and sensors sales came in at $353.9 million, marking a 31 percent increase from the previous year and slightly exceeding estimates. However, gross margin declined slightly to 60.1 percent from 61.1 percent a year ago, missing expectations of 61.7 percent.

Key Metrics Driving the Stock

Beyond revenue and earnings beats, investors are focusing on Axon’s adjusted EBITDA, which came in at $141.6 million, up 55 percent year-over-year and above estimates of 133.6 million. The company’s future contracted bookings also rose significantly, reaching $10.1 billion from $8.2 billion at the end of Q3, signaling continued demand for its law enforcement and security solutions.

Management’s full-year guidance further reinforced positive sentiment. Axon expects fiscal year 2025 revenue between $2.55 billion and $2.65 billion, slightly above analyst estimates of $2.566 billion. Adjusted EBITDA guidance of $640 million to $670 million is also in line with expectations, reinforcing confidence in the company’s ability to sustain its growth trajectory.

AI Expansion and Federal Spending Concerns

Axon’s push into AI-powered public safety technology has been a key focus for investors. The company introduced its AI Era plan, which includes Draft One, a tool that converts body camera audio into the first draft of police reports, and live translation software supporting over 100 languages. These innovations are expected to drive higher customer contract values and expand Axon’s total addressable market, which the company recently increased to $129 billion from $77 billion a year ago.

However, questions remain about potential federal spending constraints and the DOGE (Department of Government Expenditures) effect on Axon’s growth. While some analysts have pointed to possible slowdowns in federal contract signings, Axon’s management downplayed these risks. Executives highlighted the continued demand for law enforcement tools, with four of the top ten domestic deals in Q4 coming from federal agencies, including the Department of Homeland Security, Internal Revenue Service, and Amtrak.

Strategic Growth and Market Penetration

Axon is also expanding its reach beyond law enforcement. In Q4, the company secured the largest contract in its history with a global logistics provider, reflecting growing adoption of its technology in private sector security applications. The enterprise market is expected to be a major future growth driver, with Axon integrating AI-powered surveillance solutions across different industries.

The company continues to explore partnerships, including efforts to mend its fractured relationship with Flock Safety, a former partner turned competitor in automated license plate reader technology. Axon has proposed new terms for integration, and executives noted that Flock Safety has been receptive to discussions, suggesting potential collaboration in the future.

Market Reaction and Technical Levels

Despite the strong results, Axon’s stock remains well below its February highs of $715, reflecting the sharp decline it experienced ahead of earnings. The stock rebounded to $564 in premarket trading, but gap-down resistance at $590 remains a critical level to watch. Analysts from Citizens reiterated an outperform rating with a $725 price target, while JPMorgan raised its target to $665 from $530, citing strong demand trends and product innovation.

Conclusion

Axon’s Q4 report provided much-needed reassurance to investors after a steep sell-off, with strong revenue growth, record bookings, and an expanding AI-driven product suite. While concerns over federal spending and competitive pressures persist, the company’s ability to broaden its market reach, increase software adoption, and expand internationally positions it well for continued growth. As Axon navigates 2025, investors will be watching how the company executes its AI strategy and whether it can sustain its momentum amid broader market uncertainties.