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Taser maker Axon felt the pain of tariffs in the third quarter.
The company reported earnings misses that sent the stock into a 9% drop the next day. It closed just under $640, its lowest close in six months.
Axon said this was the first full quarter that it was exposed to tariff disruptions, which weighed on its margins. It logged a net loss of $2 million. That amounted to a loss of 3 cents per share.
“As long as tariffs stay in place, I view that as sort of a onetime adjustment,” CFO Brittany Bagley said on a call with analysts.
The tariffs mostly impacted the company’s hardware business, which includes Taser. Bagley expects growth in the company’s software business units to begin to offset the losses in hardware.
The stumble is a blip in a year of consistent growth for Axon. Revenue grew by nearly a third year-over-year to $711 million, bolstered by its software and services segment, which grew in part as customers upgraded to its premium software products.
The company revised its 2025 revenue projections slightly upwards to $2.74 billion, above analyst estimates.
“It seems as though investors were quick to find chinks in the normally impenetrable armor usually associated with Axon’s quarterly results,” said Trevor Walsh, an analyst at Citizen’s Bank in a note to clients.
The company’s investment in software has paid dividends as it transforms from a hardware company to a full-service partner for law enforcement agencies, with new offerings ranging from emergency dispatching to AI-generated police reporting. While much of its revenue still comes from its core business – Tasers, body cameras, and evidence management software – this is starting to shift.
“More and more of our deals now include the full breadth of our portfolio,” President Josh Isner told analysts during the earnings call on Tuesday.
The company’s AI Era plan, which includes AI-generated police reporting, was the fastest-growing software product in the company’s history, according to Isner. AI products are on track to make up 10% of the company’s new contracts with state and local law enforcement in 2025, he said.
“What’s inspiring confidence is: when you get to the out-years, like in 2027, 2028, and ‘29, then you have things like Fusus” and possibly the AI Era plan meaningfully contributing to revenue growth, said Needham analyst Josh Reilly.
Axon acquired Fusus in 2024, which integrates surveillance feeds into one real-time view. On Tuesday, it announced it would buy Carbyne, its second emergency response acquisition in two months.
Even with this week’s downturn, Axon’s stock has soared 35% in the last 12 months, outperforming the NASDAQ 100. It’s also grown almost 400% in the past five years, fueling concerns the stock is overvalued.
“The key issue is really the valuation,” said Reilly, referring to a metric used to compare stock performance. “This is the biggest debate with investors, that no one really knows the answer to: what is the appropriate multiple for this stock?”
But yesterday’s mixed report was mostly bad timing, Walsh wrote. “Not due to any glaring missteps or fundamental deficiencies related to the overall story.”