TASER maker Axon plunges 17% after earnings fall short due to tariff hit

Axon Enterprise experienced a significant 17% decline in its stock value following a disappointing earnings report that fell short of Wall Street expectations for the third quarter. The company, known for its TASER products, reported adjusted earnings of $1.17 per share, which was notably lower than the anticipated $1.52 per share forecasted by analysts from LSEG. The challenges were compounded by a decrease in adjusted gross margins, which fell by 50 basis points from the previous year, settling at 62.7%. Axon attributed this dip primarily to the impact of tariffs. The company's connected devices segment, which includes TASER and drone countermeasures, was hit hardest in this quarter, as it marked the first full period of tariff implementation. Despite these challenges, this segment generated over $405 million in revenue, reflecting a robust 24% year-over-year growth. During the earnings call, Axon's finance chief, Brittany Bagley, remarked, "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." She expressed optimism that growth in the software division would help counterbalance the margin losses in the long run. Revenues from software and services surged by 41% year-on-year, reaching $305 million. Overall, Axon reported total revenues of $711 million for the quarter, surpassing the $704 million forecasted by analysts. The U.S. market was a significant contributor, accounting for 84% of total sales. However, the company reported a net loss of $2.2 million, equating to a loss of 3 cents per share, a stark contrast to the net income of $67 million or 86 cents per share recorded in the same quarter last year. Looking ahead, Axon raised its full-year revenue guidance to $2.74 billion, up from a previous range of $2.65 billion to $2.73 billion. Analysts had anticipated a midpoint of $2.72 billion. For the fourth quarter, Axon expects revenues between $750 million and $755 million, exceeding the $746 million expected by LSEG analysts. In addition to financial updates, Axon announced plans to acquire Carbyne, an emergency communications platform, in a deal valued at $625 million, which is set to close in the first quarter of the next year. Despite the recent stock drop, Axon's shares have increased over 60% in the past year and 18% year-to-date, driven by rising demand for its security solutions. Josh Isner, Axon's president, concluded the earnings call on an optimistic note, stating, "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."