Key Highlights

  • Third-quarter Revenue rose 28% to USD 908.6 million, with Software and Services up 43.2% to USD 437.0 million and Connected Devices up 16.3% to USD 471.5 million.
  • Full-year 2026 revenue growth guidance was cut to about 30% from 32% to 34%, a range of USD 3.61 billion to USD 3.63 billion, after about USD 130 million of federal drone revenue was removed.
  • Axon agreed an additional USD 1.2 billion Investment in Skydio, lifting its fully diluted stake to 37% and making it exclusive public safety distributor in the U.S. and Canada.
  • Free Cash Flow was negative USD 18.9 million in the quarter, and the full-year free cash flow target was lowered to USD 350 million to USD 400 million from USD 450 million.

Strong Quarter, Smaller Growth Outlook

Axon Enterprise (NASDAQ:AXON) reported third-quarter results on November 5, 2026. Revenue of USD 908.6 million rose 28% from USD 710.6 million, annual Recurring Revenue reached USD 1.75 billion, up 40%, and future contracted bookings hit USD 15.8 billion. GAAP Net Income was USD 57.0 million, or USD 0.68 per diluted share, against a small loss a year earlier, while adjusted EBITDA rose 33% to USD 235.7 million, a 25.9% margin. Despite those figures, an evening quote showed shares down about 6.7% after hours on Thursday, per published market data. Other evening quotes were not verified. Adjusted gross Margin was 59.2%, Platform Solutions revenue more than doubled to USD 125.0 million, and AI annual recurring revenue exceeded USD 100 million.

Why Federal Drone Revenue Reset the Guide

The company said it removed about USD 130 million of Federal Dedrone revenue from 2026 expectations, including a USD 30 million deployment planned for the third quarter and USD 100 million previously expected in the fourth. Management said growth would have been nearly 500 basis points higher without that change. Fourth-quarter revenue is guided to USD 990 million to USD 1.01 billion and adjusted EBITDA to USD 245 million to USD 250 million. Full-year adjusted EBITDA is guided to USD 924 million to USD 929 million, a margin of about 25.6%. Stock-based compensation and Capital spending guidance were also lowered. Capital spending guidance fell to USD 130 million to USD 150 million from USD 160 million to USD 190 million.

Skydio Stake, Cash Burn and Debt

The Skydio deal is the largest investment in Axon history and ties the company to a drone maker whose products it will now distribute exclusively. Axon Enterprise (NASDAQ:AXON) held about USD 1.64 billion of cash and short-term investments, against USD 2.9 billion of long-term note principal, leaving net Debt of about USD 1.2 billion, up USD 182 million from the prior quarter. Operating Cash Flow was only USD 19.7 million after roughly USD 100 million of strategic inventory spending. Risks include federal procurement timing, further guidance resets and the size of the commitment relative to cash. No consensus figures were verified.

Where Things Stand

Axon Enterprise (NASDAQ:AXON) is falling because the growth outlook was trimmed, not because the quarter was weak. Revenue grew 28%, recurring revenue grew 40% and profit improved, yet the 2026 growth range fell to about 30% as federal drone deployments slipped. Negative free cash flow, a lowered cash target and the USD 1.2 billion Skydio commitment add to the caution. Next markers are fourth-quarter revenue against the USD 990 million to USD 1.01 billion guide and progress on federal drone orders.