Rick Smith, CEO of Axon Enterprises.
Adam Jeffery | CNBC
Axon Enterprise‘s stock plummeted 17% after the TASER maker missed Wall Street’s third-quarter profit expectations as it grapples with tariff constraints.
Adjusted earnings totaled $1.17 per share adj., falling short of a $1.52 per share forecast from LSEG. Adjusted gross margins fell 50 basis points from a year ago to 62.7%, which Axon attributed to tariff impacts.
Axon’s connected devices business, which includes its TASER and counter drone equipment, felt the biggest pinch during the first full quarter with tariffs. The business segment accounted for over $405 million in revenues, increasing 24% year over year.
“As long as tariffs stay in place, I view that as sort of a one-time adjustment,” finance chief Brittany Bagley said during the earnings call. “Now that’s baked into the gross margins.”
Bagley expects growth in the company’s software business to eventually offset margin losses long-term. Software and services revenues jumped 41% from a year ago to $305 million.
Total revenues grew 31% from a year ago to $711 million, topping the $704 million expected by analysts polled by LSEG. The U.S. accounted for 84% of sales.
The Arizona-based company reported a net loss of $2.2 million, a loss of 3 cents per share, versus net income of $67 million, or 86 cents per share in the year-ago period.
Axon lifted its full-year revenue outlook to $2.74 billion, from between $2.65 billion and $2.73 billion. FactSet analysts expected $2.72 billion at the midpoint.
The company expects revenues between $750 million and $755 million during the fourth quarter, which was above LSEG analyst expectations of $746 million.
Along with the results, Axon said it is acquiring Carbyne in a deal that values the emergency communications platform at $625 million. The deal is expected to close next year in the first quarter.
Axon shares have jumped more than 60% over the last year and are up 18% year to date as demand for its security tools accelerates.
“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,” said Axon’s president Josh Isner on the earnings call.
