AXON — Earnings Review Q4 FY25 (Atlas)

Original date: 2026-02-24 | Refreshed: 2026-04-28 (post Axon Week 2026 + market reset) Quarter: Q4 FY25 (Dec-2025), reported Feb 24, 2026 Market cap: ~32.4B|Price 403 (down ~33% over 90 days, ~54% off 52w high $886) EV/TTM Rev: ~11.7x | Revenue growth: +38.5% YoY (Q4) / +33.5% (FY25)

Verdict

Q4 FY25 is the cleanest "thesis-affirming" print of the FY25 cycle: revenue reaccelerated to 38.5% (highest in 12 quarters), net new ARR reversed its 4-quarter deceleration ($69M → $95M), Future Contracted Bookings jumped a record $3.0B sequentially to 14.4B, andmanagementintroducedcredible2028targets(6B revenue, 28% EBITDA, 60% FCF conversion, <2.5% dilution). The post-earnings price action — AXON down ~33% from the print to today — is a multiple compression story, not a fundamental break: Axon Week 2026 (April 7-10) delivered the promised "transformative" AI roadmap (Axon Vision, expanded Assistant, Axon 911 cloud). Conviction unchanged at 4/5, but margin of safety is materially better than 60 days ago: EV/TTM Rev re-rated from ~14x at the print to ~11.7x while TTM revenue is still growing 33%+. The two structural watch items remain GAAP gross margin compression (57.9%, first sub-60 print since Q1 FY24) and SBC at 26% of Q4 revenue.

Qualification Gate

Criterion Threshold Actual Pass
Revenue YoY growth >30% +38.5% (Q4), +33.5% (FY25) ✅
Gross margin >60% 57.9% GAAP / 61.1% Adj (Q4) ⚠️ Adj passes, GAAP fails
Revenue per quarter >$50M $796.7M ✅
Data availability 4+ quarters 24 quarters ✅
Share dilution <10% annual ~2.2% (FY25) ✅
GAAP profitability trajectory Improving/positive FY25 GAAP NI 124.7M(+); Q4op−50M (SBC + $32M severance) ⚠️ Mixed

Gate: PASS with caveats. GAAP GM dipping below 60% and Q4 GAAP op loss are the yellow flags. Adj GM 61.1% remains above bar; FY25 GAAP NI positive.

Six-Factor Score

Factor Rating Detail
Growth Strong Q4 +38.5% YoY, FY25 +33.5%; Q4 broke the ~31% band that held for 7 quarters
Trajectory Re-accelerating Q4 reaccel after 4 quarters of low-30s; ARR YoY moderated to 35% but $ adds reversed (Q3 $69 → Q4 $95)
Margins Mid, mixed direction Adj EBITDA 25.9% record; Adj GM 61.1% (down 210bps YoY); GAAP op margin -6.3% on SBC + severance
Dominance Dominant ~80%+ share US LE body cams; TASER virtually unchallenged; 125% NRR record; FCB $14.4B = 4.5 yrs revenue
Valuation Fair (was Rich) EV/TTM Rev ~11.7x vs ~14x at FY25 peak; Rule of 40 = 53-55; FY26 EV/Rev ~9x
Special Present (a) 2028 target reset; (b) Axon Week launches (Vision, Assistant, 911); (c) ~33% drawdown creates entry; (d) Carbyne integration

The Numbers (12-quarter view)

| | Q1_23 | Q2_23 | Q3_23 | Q4_23 | Q1_24 | Q2_24 | Q3_24 | Q4_24 | Q1_25 | Q2_25 | Q3_25 | Q4_25 | | | Mar23 | Jun23 | Sep23 | Dec23 | Mar24 | Jun24 | Sep24 | Dec24 | Mar25 | Jun25 | Sep25 | Dec25 | |---|---|---|---|---|---|---|---|---|---|---|---|---| | Revenue ($M) | 343 | 375 | 414 | 432 | 461 | 504 | 544 | 575 | 604 | 669 | 711 | 797 | | YoY % | 33.8 | 31.2 | 32.6 | 28.6 | 34.3 | 34.6 | 31.6 | 33.1 | 31.0 | 32.6 | 30.6 | 38.5 | | QoQ % | 2.1 | 9.2 | 10.4 | 4.5 | 6.6 | 9.4 | 8.0 | 5.7 | 5.0 | 10.8 | 6.3 | 12.1 | | GAAP GM % | 59.4 | 61.8 | 62.1 | 61.0 | 56.2 | 60.9 | 60.8 | 60.1 | 60.6 | 60.4 | 60.1 | 57.9 | | Adj GM % | 59.5 | 62.0 | 61.7 | — | 63.2 | 62.5 | 63.2 | 63.2 | 63.6 | 63.3 | 62.7 | 61.1 | | GAAP Op Mgn % | 5.1 | 10.5 | 13.9 | 9.9 | 3.5 | 6.5 | 4.4 | -2.7 | -1.5 | -0.1 | -0.3 | -6.3 | | Adj EBITDA Mgn % | 18.9 | 21.8 | 22.1 | 21.1 | 23.6 | 24.5 | 26.7 | 24.6 | 25.7 | 25.7 | 24.9 | 25.9 | | Non-GAAP EPS | — | — | — | 1.12 | 1.15 | 1.20 | 1.45 | 2.08 | 1.41 | 2.12 | 1.17 | 2.15 | | FCF ($M) | -60 | 34 | 53 | 116 | -32 | 75 | 68 | 225 | 1 | 111 | 33 | 155 | | ARR (M)|551|590|652|732|825|850|885|1, 001|1, 104|1, 183|1, 252|1, 347||NetnewARR(M) | 48 | 39 | 62 | 80 | 93 | 25 | 35 | 116 | 103 | 79 | 69 | 95 | | NRR % | 121 | 122 | 122 | 122 | 122 | 122 | 123 | 123 | 123 | 124 | 124 | 125 | | FCB ($B) | — | — | — | 7.1 | — | — | 7.7 | 10.1 | 9.9 | 10.7 | 11.4 | 14.4 |

Prior Beliefs / Updated Beliefs

Metric / Belief Prior (going into print) Actual Verdict
Q4 revenue Guide 750 − 755M; expected 760-770M (5% beat pattern) $796.7M Beat by $44M (+5.9%)
ARR sequential add Watch >$80M to confirm reversal $95M Reversal confirmed
NRR 124% sustained 125% record Beat
Adj EBITDA margin ~25% 25.9% Beat
FCB Grind to $12-13B 14.4B(+3.0B QoQ) Substantial beat
GAAP gross margin Stable ~60% 57.9% (-210bps YoY) Miss / structural concern
FY26 guide 30%+ growth midpoint 27-30% (ceiling 30%) Slightly conservative
New 3-yr targets Possible Q4 unveil $6B / 28% EBITDA / 60% FCF conv / <2.5% dilution Delivered

Delta: Headline numbers exceeded a high bar. The two negatives — gross margin compression and FY26 guide ceiling at 30% — are valuation-relevant but not thesis-breaking. The $3.0B sequential FCB add and $95M net new ARR reversal are the most decision-relevant data points: they re-establish the leading-indicator runway that Q3 had put in question.

Leading Indicators

Bullish divergence has firmed up. Through Q3 FY25 the worry was that ARR YoY was accelerating (41%) while net new $ adds were decelerating (93→25→35→116→103→79→$69) — a base-effect distortion. Q4 broke the pattern:

The single bearish indicator is ARR YoY moderating from 41% to 35% — a base-effect mechanic (Q4 FY24 was a $116M AI Era spike), not a demand signal.

Implication: With FCB at 14.4B(4.5yearsofrevenueatrun − rate)andmanagementguiding20 − 252.9-3.6B), the FY26 27-30% guide is mathematically conservative. Pattern says raises ahead.

Scuttlebutt Findings (April 2026 update)

Valuation Context

Metric Today (Apr-28) At Q4 print (Feb-24) 1Y ago Peer Median* Assessment
Market cap ~$32.4B ~$48B ~$45B — Down 33% in 60 days
EV/TTM Rev ~11.7x ~14.0x ~21x 7-9x Premium, but compressed
EV/TTM Gross Profit ~19.6x ~24x ~34x — Compressed
EV/TTM Adj EBITDA ~46x ~57x ~80x — Premium for quality
P/E (norm) ~58x ~73x ~110x — Expensive but growing into it
FY26 EV/Rev ~9.0-9.2x ~11x — — Fair given 27-30% growth + 25.5% EBITDA
Rule-of-40 (FY25 actual) 59 59 56 — Top decile

*Peer median uses a blended public-safety/SaaS basket. AXON is a one-of-one hybrid (hardware + sticky public-sector SaaS + counter-drone + 911 + ALPR), so peer comp is illustrative.

Key insight: The 90-day drawdown took ~$16B of market cap out without a corresponding fundamental change. Bookings, ARR, and NRR all improved during this window. This is multiple compression in a high-quality compounder — the type of move that historically marks better entry points than tops.

Platform & Secular Position

Key Risks

  1. GAAP gross margin compression structural, not transitory. Adj GM falling below 61% sustainably weakens the long-term margin expansion to 28%.
  2. Tariff durability. Q4's 210bps GM compression was partly tariff-driven. If tariffs stay elevated, hardware margin remains pressured.
  3. M&A integration concurrency. Prepared, Carbyne, Fusus, Dedrone all integrating in parallel.
  4. SBC dilution. $209M Q4 SBC (incl. $32M severance) = 26% of revenue. FY26 guide $590-620M (~16.5-17.3% of revenue) is the credibility bridge.
  5. Multiple compression continuation. At 11.7x EV/Rev still a premium asset; further growth-stock de-rate could keep AXON under pressure regardless of fundamentals.

Key Catalysts

  1. Q1 FY26 earnings (May 2026). First print under 27-30% framework + first quarter post-Axon Week. Pattern says raise.
  2. Axon Vision adoption pace. Real ALPR/object-detect inside the ecosystem competes with Flock; first attach data will be material.
  3. Axon Body Mini enterprise launch (mid-2026). First true non-public-safety vertical entry; pre-order data prices the enterprise option.
  4. Axon 911 revenue line emergence. Carbyne closed Q1 FY26 — watch for first reportable 911 revenue contribution and customer count.
  5. 2028 target reaffirmation cadence. $6B / 28% / 60% FCF conv / <2.5% dilution — quarters that affirm or imply a raise reprice the long-duration option.

Position Disclosure

Atlas is a synthesised analyst — no position. Reference portfolios across atlas/wsm/saul/bear/gaucho/joe/muji/wpr generally hold AXON; the post-print drawdown improves the entry profile relative to the Feb-24 take.

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