What Management Said
Read the full Q1 2026 transcript ↗We made the decision over a decade ago to invest in tightly integrated solutions across hardware and software, creating an ecosystem that allows customers to scale and grow as fast as technology is moving. Our hardware enables software features that wouldn't be possible without capable, connected sensors at the edge. Fusus, Dedrone, Axon 911, license plate readers, vehicle intelligence are being deployed across entire cities and countries. We quickly learn what customers are excited about, what's gaining traction, and ultimately, where our pipeline goes from here.
Q1 was our strongest ever first quarter across revenue, bookings, and new products. The core is off to a great start with sustained TASER growth rates. It tells us that the growth we are seeing is not isolated to one product, one geography, or one customer segment. Across the business, we are tracking indicators like customer engagement, pipeline quality, adoption of new products, and continued strength in the core.
The Axon AI Era Plan is not the only thing driving explosive growth. Now Dedrone has established itself as a further accelerant to our growth. Finally, it is no secret that physical AI infrastructure is going to be a source of record spending in the years to come. The deployment centers around Fusus, which continues to garner interest and drive growth in this segment, along with Axon Body Mini and Axon Outpost.
What went well
- Revenue of $807 million grew 34% year-over-year, marking the ninth consecutive quarter of growth above 30% and a record first quarter across revenue, bookings, and new products.
- AI bookings rose 140% versus Q1 last year and AI product revenue grew more than 700% year-over-year, with nearly all large domestic law enforcement agencies now including AI in their purchases.
- Dedrone bookings were up 500% year-over-year and total Dedrone revenue was up over 300%, with the platform solutions category (including counter-drone hardware) growing 95%.
- International revenue more than doubled year-over-year and represented 20% of total revenue for the quarter, the second consecutive quarter at that level.
- Annual recurring revenue grew 35% year-over-year to $1.5 billion, net revenue retention was 125%, and software and services revenue rose 35% to $355 million.
- The enterprise team delivered over 50% year-over-year Q1 growth and closed a $40 million Fusus-centered deal with one of the largest global telecom providers in April.
What went wrong
- Inflationary component costs, including memory, are a headwind being absorbed into hardware costs, though management said the gross-margin impact was not large enough to break out.
- Free cash flow was pressured in Q1 by seasonal bonus, commission, and semi-annual interest payments plus heavy inventory investment; management said it would otherwise have been free-cash-flow positive in the quarter.
- Software and services stepped down sequentially in Q1, which management attributed to typical Q1 seasonality rather than weakness.
- Platform solutions, which includes Dedrone hardware, carries the lowest gross margin of the three connected-devices hardware lines while it remains at small scale.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Revenue growth | FY2026 | 30%-32% (raised) |
| Adjusted EBITDA margin | FY2026 | 25.5% (reaffirmed) |
| Free cash flow | FY2026 | approximately $450 million |
| Stock-based compensation expense | FY2026 | approximately $590 million-$620 million |
| Average annual dilution | ongoing | less than 2.5% |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +34% | Broad-based strength across all products, markets, and customer segments, with each segment setting first-quarter bookings records. |
| Software and services revenue | +35% | Continued growth across all software products, with AI a standout driver on top of consistent software expansion. |
| AI product revenue | +700%+ | Delivering on strong prior-year bookings off a small revenue base, aided by new features launched at Axon Week. |
| Connected devices revenue | +33% (to $453M) | TASER 10 and Axon Body 4 remained durable drivers and platform solutions grew 95% on counter-drone hardware. |
| Dedrone revenue (hardware and software) | +300%+ | Rising demand for counter-drone capability across multiple markets and large-scale event deployments. |
| International revenue | +100%+ | Delivery on prior-year bookings momentum, a stronger global go-to-market operation, and Dedrone-led expansion. |
| Future contracted bookings | +44% (to $14.3B) | Broad-based momentum across products, end markets, and customer engagement. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| AI ERA Plan adoption | $750 million booked since late-2024 launch | AI bookings up 140%, nearly all large domestic agencies now including AI | Rising |
| Dedrone / counter-drone | acquired ~18 months ago | bookings up 500%, deployed at Super Bowl and Kentucky Derby, limited mainly by ability to scale supply | Rising |
| Enterprise expansion | — | Q1 enterprise up 50%+, $40M telecom Fusus deal closed in April, Axon Vision and Draft One becoming enterprise-ready | Rising |
| International growth | first year over $1 billion in bookings last year | revenue up 100%+, 20% of total, smaller nations going all-in on a national basis | Rising |
| Inventory investment | — | significant sponsored investment in core product inventory to de-risk supply, contemplated in FCF guidance | Rising |
| Axon 911 (Carbyne and Prepared) | — | still early innings, signed some of the largest US jurisdictions on Prepared, targeting market leadership | Rising |
Q&A Summary
Coming out of Axon Week, where did you see the highest customer engagement across the new AI capabilities and how does it fold into the pipeline?
Rick Smith said interest was evenly distributed across personas, with the AI ERA Plan resonating as the way to simplify a fast-moving landscape; this was the first year no customers questioned whether AI was real. Josh Isner added that customer trust earned over two decades lets Axon release new features quickly and they aim to push out a customer-sourced idea to every Axon Week attendee within two months.
On free cash flow and inventory, how much of the inventory build relates to higher memory cost versus meeting demand, and how do you get comfortable with the conversion target?
Brittany Bagley said the inventory investment includes memory but is not solely driven by it; the company would build inventory regardless to ensure supply across all products. Q1 is the seasonally softest free-cash-flow quarter due to bonus, commission, and interest payments, and without the inventory investment Q1 would have been positive; she expressed comfort hitting the roughly $450 million full-year target. CapEx was refined down as the year's projects became clearer.
AI ERA Plan bookings were up 140% and revenue up about 700% - are you hitting a tipping point in adoption?
Josh Isner said large-city AI deals of roughly $50 million-$200 million take 8 to 12 months to close, and belief and engagement keep rising. He cited a Mid-Atlantic city whose council approved a $150 million deal that day including the AI ERA Plan, and noted the $750 million booked since launch is expected to keep climbing.
How much of Dedrone's outsized performance is event-driven versus sustainable demand?
Josh Isner framed Dedrone as infrastructure - events like the Super Bowl are showcases that drive interest but the real value is permanent city and enterprise deployments; hardware adoption is as fast as anything Axon has made. Bagley added that legislation such as the SAFER SKIES Act makes counter-drone sustainable as a multi-year program, and Axon is currently more limited by its ability to scale supply than by opportunities.
Can you quantify the memory cost impact on margins, or is it too small to reprice?
Josh Isner confirmed it is not big enough to reprice. Bagley said memory mainly affects camera products, which are only part of the portfolio, so the basis-point gross-margin impact is not meaningful enough to break out, though it is one of several puts and takes contemplated in full-year guidance.
What is driving the record ARR growth - user growth or AI ERA Plan adoption and higher per-user pricing?
Bagley said it is both, with no single driver; the business is hitting on all cylinders, the AI plan is layering on top, the strong Q4 bookings are flowing into ARR, and net revenue retention held at 125% as existing customers trade up and buy more, showing up in ARR first.
More on Axon Enterprise, Inc.
Reported 2026-05-06 · figures from the Axon Enterprise, Inc. Q1 2026 earnings call.
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