Axon Enterprise stock crashed 17% Tuesday after the TASER maker's first full quarter under tariffs crushed profit margins and sent earnings tumbling below Wall Street expectations. The Arizona-based company blamed its connected devices business - which includes TASERs and counter-drone equipment - for absorbing the biggest hit from ongoing trade restrictions that squeezed gross margins by 50 basis points.
Axon Enterprise just delivered a harsh reminder of how trade wars hit the bottom line. The TASER maker's stock nosedived 17% after reporting third-quarter earnings that missed Wall Street forecasts by a painful 35 cents per share, with tariffs taking their first full-quarter bite out of the company's hardware margins.
The numbers tell the story of a business caught between growth and geopolitical headwinds. Adjusted earnings came in at $1.17 per share, well short of the $1.52 analysts expected, while gross margins contracted 50 basis points year-over-year to 62.7%. "As long as tariffs stay in place, I view that as sort of a one-time adjustment," CFO Brittany Bagley told investors during the earnings call. "Now that's baked into the gross margins."
The pain concentrated in Axon's connected devices segment, which houses its signature TASER weapons and expanding counter-drone portfolio. Despite pulling in over $405 million in revenue - a solid 24% jump from last year - the business absorbed the brunt of tariff impacts during what executives called their first complete quarter under the trade restrictions. It's a sobering reality check for a company that's been riding high on security spending trends.
But there's a silver lining emerging from Axon's software pivot. The company's software and services division exploded 41% higher to $305 million, suggesting the strategic shift toward recurring revenue streams is gaining real traction. Bagley expects this software growth to eventually offset the hardware margin squeeze, though she didn't specify a timeline for when that balance might tip.
The broader revenue picture actually exceeded expectations, with total sales climbing 31% to $711 million and beating analyst forecasts of $704 million. The U.S. market remains Axon's bread and butter, accounting for 84% of sales as domestic law enforcement agencies continue upgrading their technology arsenals. Yet the company still managed to post a net loss of $2.2 million, a stark reversal from the $67 million profit it recorded in the same quarter last year.
Investors got some forward-looking optimism alongside the disappointing quarterly results. Axon raised its full-year revenue guidance to $2.74 billion from a previous range of $2.65-$2.73 billion, while fourth-quarter revenue expectations of $750-$755 million came in above the $746 million analysts were modeling. The company also announced plans to for $625 million, a deal expected to close in Q1 2026.
