What Management Said
Read the full Q3 2025 transcript ↗During this call, we will discuss our business outlook and make forward-looking statements. So I'd like to welcome everybody to our third quarter 2025 earnings call. When you make that call, a network of connected devices and software across your city will activate instantly, analyzing information, prompting decisions, and allowing the human operator to coordinate a faster, more informed response. The AI Aeroplan continues to be the fastest booked Axon software product to date.
The momentum highlights another key part of our growth strategy, how we pour fuel on the fire when we acquire great businesses. Looking ahead, we're executing against a growing pipeline, and we're not slowing down. I have no doubt we will deliver another record year in 2026, something that I'm sure many of you are wondering about. Going into next year, look for us to continue to drive record growth, ensuring better execution through the use of AI tools and efficient decentralized ownership to tackle new markets and opportunities.
Third-quarter revenue of $711 million increased 31% year-over-year, marking our seventh consecutive quarter of 30% or greater growth, underscoring the robust demand we are seeing. Software and services was again the leader, increasing 41% year-over-year to $305 million of revenue. This growth reflects both new customers and existing customers expanding their use of our platform and capabilities. We continue to have strong net revenue retention at 124% again this quarter, and ARR grew 41% to $1.3 billion.
What went well
- Third-quarter revenue of $711 million grew 31% year-over-year, marking the seventh consecutive quarter of 30% or greater growth, while Software and Services revenue rose 41% to $305 million and ARR grew 41% to $1.3 billion.
- Net revenue retention remained strong at 124%, and two of the top 10 state-and-local deals broke the $600 per-user-per-month threshold, reflecting deep multi-product adoption across the portfolio.
- Year-to-date bookings are up in excess of 30% and accelerating versus last year, with corrections bookings up more than 2x and newer offerings (Axon Air, Dedrone, Fusus) up more than 3x year-to-date.
- International delivered two of the top 10 deals overall plus an additional nine-figure cloud deal in Europe that closed in October, and seven of the top 10 Q3 international deals were driven by TASER 10.
- The company welcomed the Prepared team and announced the Carbyne acquisition (expected to close early 2026), building the foundation for Axon 911 and entering the voice-communications layer of public safety.
- Axon delivered on its full-year 25% Adjusted EBITDA margin commitment despite tariffs and increased R&D, balancing growth and profitability at over 55 on the Rule of 40.
What went wrong
- Adjusted gross margin of 62.7% declined 50 basis points year-over-year, primarily due to tariffs hitting for the first full quarter, plus the lower-margin scaling of platform solutions.
- Adjusted EBITDA margin of 24.9% reflected the drag from tariffs and planned increased R&D investments.
- Analysts noted U.S. revenue and overall bookings appeared to decelerate or soften in the quarter; management attributed this to software revenue-recognition timing and lumpy deal timing rather than any fundamental weakness.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Q4 revenue | Q4 2025 | $750–$755 million (new) |
| Full-year revenue | FY2025 | about $2.74 billion (~31% growth at midpoint) (raised) |
| Q4 Adjusted EBITDA | Q4 2025 | $178–$182 million (new) |
| Full-year Adjusted EBITDA margin | FY2025 | 25% (maintained) (maintained) |
| Bookings growth | FY2025 | high 30s% year-over-year (reaffirmed) (reaffirmed) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +31% | Robust broad-based demand; seventh consecutive quarter of 30%+ growth |
| Software and services revenue | +41% | New customers plus existing customers expanding use of the platform and capabilities |
| ARR | +41% | Continued expansion of recurring software business; reached $1.3 billion |
| Connected devices revenue | +24% | Broad-based demand across hardware lines |
| TASER revenue | +17% | Led by TASER 10 |
| Personal sensors revenue | +20% | Driven by Axon Body 4 |
| Platform solutions revenue | +71% | Driven by CounterDrone, virtual reality, and Fleet |
| Adjusted gross margin | -50 bps (to 62.7%) | First full quarter of tariff impact and scaling of lower-margin platform solutions, partly offset by software growth |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Axon 911 / voice communications | — | Acquired Prepared and announced Carbyne to build Axon 911, entering the 911 call-handling and voice-infrastructure layer; Prepared can autonomously handle up to half of non-critical calls | New |
| AI Aeroplan / AI bookings | Fastest-booked software product to date | On pace for AI bookings to exceed 10% of U.S. state-and-local bookings this year; adding live translation and policy chat features | Up |
| International expansion | Investing for years to open the cloud in Europe | Nine-figure E.U. cloud deal closed in October, two top-10 deals; first major customer going all-in on the cloud in the E.U. | Up |
| Per-user value / ten-year contracts | A few deals approaching $600 per user per month last quarter | Two top-10 deals broke the $600 per-user-per-month threshold; shift toward more ten-year contracts driven by customer trust | Up |
| Acquisitions (Fusus, Dedrone) | Recently acquired, integrating | Outperforming initial bookings expectations; bookings for newer offerings up more than 3x year-to-date | Up |
| Enterprise / Axon Body Workforce Mini | Retail trials in pipeline | ABW Mini launches next year with pent-up demand; enterprise viewed as potentially the biggest part of the business long term | Up |
| Tariffs | — | First full quarter of impact on connected devices, treated as a one-time step-down baked into margins going forward | Headwind |
| Federal | Not a big part of guidance for the year | Expect Q4 to be the best federal quarter of the year despite the government shutdown; more upside than risk | Up |
Q&A Summary
AI is guided to ~10% of bookings this year, but bookings looked softer this quarter—were there delayed contract decisions in Q3?
Management reaffirmed full-year bookings growth in the high 30s% year-over-year, implying a large Q4, and pointed to that as the answer rather than any delayed decisions.
What's the industrial logic for buying Prepared and Carbyne in the 911 space given the competitive landscape?
Information enters public safety through 911 call centers; after exiting dispatch/CAD (little room to innovate), Axon sees 911 as the entry point to connect callers into its ecosystem. Prepared is an easy-to-deploy AI overlay that goes wide; Carbyne is a high-reliability cloud voice platform that goes deep—together making Axon a major player in voice communications well beyond 911.
How do the trends among software/services, ARR, and connected devices play out, and is that the growth shape for the next 3–5 years?
Software and services will stay an above-average growth category driven by both more features per customer and growing user count; TASER, body cameras, and connected sensors also continue solid growth (helped by new products like ABW Mini). Expect a similar growth profile over the next three to five years, with user growth a major contributor.
Between Axon 911 and Dedrone, which will be more material faster?
Prepared and Carbyne are software businesses, so revenue accumulates over time; Dedrone, being partly hardware with nine-figure shipments, will hit revenue first in a big way. 911 is the larger long-term disruption opportunity. Management also flagged Fusus and organic ALPR/vehicle-intelligence investments as not to be discounted.
Q4 guidance implies revenue acceleration—what gives the confidence?
Stronger-than-ever bookings momentum, a recurring software business hitting on all cylinders, and strong visibility into Q4 deals; the main variability is mix and timing of what books and gets recognized when.
U.S. revenue decelerated again despite strong software growth—what's the dynamic?
U.S. bookings are actually accelerating and ahead of plan; reported revenue lags due to software revenue-recognition timing and larger deals taking longer to close. Q4 is historically the biggest domestic quarter, October was strong, and management sees no fundamental concern.
More on Axon Enterprise, Inc.
Reported 2025-11-04 · figures from the Axon Enterprise, Inc. Q3 2025 earnings call.
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