muji (CMF_muji) | February 22, 2026
Long AXON 6.1% equity + 6.3% LEAPS Jan'28 $440C
Seven consecutive quarters of 30%+ revenue growth. That is the headline. But IMHO, the real story is in the leading indicators — because reported revenue is the lagging signal here.
ARR: $1,252m +41% YoY ^^ FCB: $11,400m +39% YoY !! NRR: 124% +1pp YoY ^^
ARR and FCB are both outpacing reported revenue by 8-9 percentage points. This is a textbook software inflection signal. The revenue acceleration is baked in — it's just a matter of when the FCB converts.
| Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | YoY | |
|---|---|---|---|---|---|---|
| Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | ||
| Revenue ($m) | 544 | 573 | 611 | 627 | 711 | +30.6% |
| S&S Revenue ($m) | 216 | 233 | 258 | 281 | 305 | +41.2% ^^ |
| S&S Mix | 39.7% | 40.7% | 42.2% | 44.8% | 42.9% | +3.2pp |
| Gross Margin [Non-GAAP] | 62.1% | 62.1% | 62.4% | 63.0% | 62.7% | +0.6pp |
| EBITDA Margin | 26.6% | 24.8% | 25.4% | 27.4% | 24.9% | -1.7pp |
| Op Margin [GAAP] | 4.4% | -2.7% | -1.4% | -0.1% | -0.3% | -4.7pp |
| FCF ($m) | 68 | 225 | 1 | 111 | 33 | -51% |
| FCF Margin | 12.5% | 39.3% | 0.1% | 17.7% | 4.7% | -7.8pp |
| EPS [Non-GAAP] | $1.45 | -- | $1.41 | $1.30 | $1.17 | -19.3% |
| Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | YoY | |
|---|---|---|---|---|---|---|
| ARR ($m) | 887 | 945 | 1,005 | 1,083 | 1,252 | +41.2% ^^ |
| Net New ARR ($m) | -- | 58 | 60 | 78 | 169 | !! |
| NRR | 123% | 123% | 122% | 122% | 124% | +1pp |
| FCB ($m) | 8,200 | 9,600 | 10,200 | 10,700 | 11,400 | +39.0% !! |
| Deferred Revenue ($m) | 723 | 822 | 895 | 936 | 1,004 | +38.8% |
| RPO ($m) | -- | -- | -- | -- | 11,400 | +39% |
| SBC ($m) | -- | -- | -- | -- | 146 | 20.5% of rev |
Here's the thing — AXON is one of the clearest "scale in platform" stories in my portfolio. Let me lay out the architecture:
The stack:
This is a building block architecture. Each product embeds deeper into the agency workflow. The NRR of 124% is the proof — agencies don't just renew, they expand. And the top-10 deals in Q3 included two at $600+/user/month — several multiples above the average. That's what platform pricing power looks like.
Platform score (muji framework):
Axon 911 — the big one. Two-part strategy:
Patrick Smith framing: "We are not rebuilding CAD. We are building a parallel AI layer." Smart. Less integration risk, faster deployment.
ABW Mini (enterprise body camera): Launching mid-2026. This is the play for corporate security, hospitality, healthcare — entirely new buyer. If it hits product-market fit (Smith's words: "next PMF moment"), it opens a 10x TAM expansion for the camera/Evidence stack.
Dedrone / DFR: Bookings up 3x YTD. Nine-figure drone pipeline. State/local waiting on legislation — federal + international moving now. World Cup 2026 is a real near-term catalyst.
Fusus: All Respond users migrated. 12,000 US agencies, all should eventually have RTCC. Jeff Kunins: "Every agency of all size." DFR adoption pulls Fusus adoption — they're co-dependent.
Patrick Smith: "Our team is probably doing as good a job as I've seen of any company turning the AI hype into real valuable products for customers and real repeatable, scalable, profitable revenue for our investors."
Josh Isner on 2026: "I have no doubt we will deliver another record year in 2026."
Isner on top deals: "Two deals at $600+/user/month, several multiples above our average." — this is what ARPU expansion looks like.
Bagley on Q4 bookings: "Expecting really big bookings quarter in Q4." Direct quote. Full-year bookings growth "high 30s" YoY.
Customer quote (via transcript): "We would love to just have Axon take over all the tech for our agency." — that is platform lock-in speaking.
1. GAAP op margin went negative and Non-GAAP EPS is declining. GAAP op margin: -0.3%. Non-GAAP EPS: $1.17 vs $1.45 a year ago — that's a -19% decline YoY despite 31% revenue growth. SBC is the driver at $146m/quarter, 20.5% of revenue. This is a real concern, not a GAAP-purist technicality. Dilution is running at 6.4% annually. The software margin story requires S&S mix to keep expanding — at 43% today vs a path to 60%+, the EBITDA expansion thesis holds, but it takes time. I want to see SBC as % of revenue compress as the mix shifts.
2. FCF is lumpy and looks weak in Q3. $33m FCF in Q3 (4.7% margin) vs $111m in Q2 and $225m in Q4 FY24. FCF seasonality in public safety is real — Q4 is always the strongest (budget cycles). The 9-month FCF is $145m on $1.95B revenue = ~7.4% margin. Not alarming, but I want this trending toward 15%+ as software mix improves.
3. 911 revenue is a long-dated option. Carbyne + Prepared are going to be multi-year ramps. Don't expect Q4 FY25 or even FY26 to show 911 revenue at scale. This is a 2027-2030 story. The FCB is the proxy for now — $11.4B tells you agencies are committing long-term, the 911 layer will get bolted on to existing contracts.
4. The divergence between ARR and revenue growth is the signal. ARR +41% vs revenue +31% = a 10pp divergence. This divergence narrows over time as deferred revenue converts. FCB $11.4B is 4.5x trailing revenue — that's extraordinary forward visibility. Analysts fixated on quarterly revenue beats are looking at the wrong number.
5. Competitive moat is real but not impenetrable. Motorola/SBX question from Piper Sandler got a dismissive response: "Our customers don't see that." Management confidence is high, but Motorola is a serious operator with deep agency relationships. I don't think AXON loses on product quality, but I want to see international traction continue (nine-figure EU cloud deal!) as the ex-US proof point that the platform travels.
| Quarter | Beat/Miss | Comment |
|---|---|---|
| Q1 FY25 | +2.5% beat | Consistent |
| Q2 FY25 | In-line | |
| Q3 FY25 | Slight beat ($711m vs $705-710m) | 7th 30%+ quarter |
| Q4 FY25 (guide) | $750-755m (~31% YoY) | "Really big bookings quarter" |
Full-year FY25 guide raised four times: $2.55-2.65B → $2.60-2.70B → 2.65 − 2.73B→ 2.74B. This is what a compounding guidance raise looks like. Conservative guidance, consistent beats.
Tier 2 (reported revenue 31%), trending Tier 1 on leading indicators (ARR 41%)
The reported revenue tier undersells the platform. ARR growth of 41% would put AXON squarely in Tier 1 territory. The gap between ARR and revenue growth is timing — it closes. My allocation (6.1% equity + 6.3% LEAPS) reflects Tier 1 conviction on a Tier 2 current print.
Rule of 40: 31% revenue + 24.9% EBITDA margin = 55.9% !! — exceptional.
| Metric | Value |
|---|---|
| Market Cap | $32.7B |
| EV | ~34.4B(netdebt 1.7B adjusted) |
| TTM Revenue | ~$2.5B |
| EV/TTM Rev | ~12.6x [Non-GAAP] |
| EV/TTM EBITDA | ~50x |
| EV/TTM FCF | ~87x (lumpy, don't use this) |
| FY25 P/S | ~11.9x |
| FCB/Market Cap | 0.35x |
Rich? Yes. Unjustified? No. Here's the thing — when FCB is $11.4B and growing 39%, you're essentially getting revenue visibility that most SaaS companies would kill for. The software platform at scale with 124% NRR and FCB at 4.5x revenue doesn't trade at 6x. The premium is the option value on 911, DFR, ABW Mini — none of which is in the current ARR.
I don't love paying 12.6x revenue. But I'm not selling into a compounding platform with this level of forward visibility and multiple expanding TAMs. The LEAPS position reflects the asymmetry — if any of the 911/ABW Mini/DFR options hit, the stock re-rates significantly higher.
Prior (no written prior — first analysis): Based on portfolio context: AXON was a known compounder, held at 6.1% + LEAPS. Thesis was software inflection + public safety platform dominance.
Updated:
Hold / Add on weakness. Do not chase at current levels.
AXON is executing exactly as a platform company should — ARR and FCB leading reported revenue, NRR expanding, product cadence accelerating, and new TAMs opening. The thesis is intact and strengthening.
The constraint to adding is valuation (12.6x EV/Rev) and SBC headwinds. I'd add on a 15%+ pullback. The existing LEAPS position already captures the asymmetric upside on 911 + ABW Mini catalysts.
Q4 FY25 (results Feb 2026) is the next real test: "really big bookings quarter" + "best federal quarter of the year." If both deliver, the ARR exits Q4 above $1.4B and the FY26 narrative becomes a Tier 1 story on reported revenue.
Catalysts to watch:
Long AXON 6.1% equity + 6.3% LEAPS Jan'28 $440C
-muji