Axon Just Delivered a Huge Beat-and-Raise. So Why Is the Stock Down?

Axon beat estimates on the top and bottom lines, and raised its full-year guidance.

Gross margin compressed in the key software and services segment.

Axon Enterprise (NASDAQ: AXON) stepped up to deliver its second-quarter earnings report after hours on Wednesday and reported another smash hit.

Revenue growth topped 30% for the tenth quarter in a row, coming in at 35% to reach $904 million, which was well ahead of estimates at $876.5 million.

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The law enforcement technology company, which is best known for the TASER electrical weapon, delivered strong top-line growth across the board, with TASER revenue up 21% to $261.3 million. Platform solutions jumped 123% to $149.8 million, driven by strong growth in its drone business, and software and services revenue was up 36% to $397.8 million, including 700% growth in the AI Era plan, a subscription service for Axon's AI tools.

On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) rose 40% to $242 million, and adjusted earnings per share came in at $1.88, ahead of estimates of $1.84. Axon also reported generally accepted accounting principles ( GAAP ) EPS of $0.29.

In addition to the strong quarterly results, Axon also lifted its full-year revenue guidance, calling for growth of 32%-34% compared to an earlier range of 30%-32%. It maintained adjusted EBITDA margin guidance of 25.5%.