Should Axon Stock’s Drop After Earnings Worry You?
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Shares of Axon Enterprise (AXON) fell 18.2% on November 6, 2026, during the session following its fiscal Q3 2026 report, while the S&P 500 rose 0.3%. The decline was specific to the company, as peers experienced much smaller moves, including a 0.5% drop for Motorola Solutions. Alongside the earnings release, Axon cut its forecast for full-year revenue growth to 30%, down from the 33% it expected in August. So where did those three points of growth go?
Axon No Longer Counts On Three Federal Deals
Axon’s lower forecast leaves out three federal deployments of Dedrone, its counter-drone business. Management’s fourth-quarter outlook no longer assumes two of them, worth about $100 million together. The third, worth about $30 million, moved out of the September quarter. By management’s count, the three deals add up to nearly five percentage points of Axon’s 2026 growth, more than the three points the forecast came down. Management said the deals were in its earlier plans for the second half, so the rest of the forecast went up by the difference.
The transaction that moved out of September also affected results for the quarter itself. Fiscal Q3 2026 revenue reached $909 million, an increase of 27.8% from a year earlier, and management said growth would have topped 30% if the contract had landed in the period. As a result, management changed how Axon builds its forecasts: large agreements are now included only when the company is confident they will ship during the quarter. Management said this approach preserves those deals as upside.
Is Axon’s Growth Slowing Beyond Those Deals?
Total growth did slow in fiscal Q3 2026, but Axon’s software business grew faster. Revenue growth was the slowest of the last five quarters, down from 35.3% in the June quarter. Even with the delayed $30 million deal added back, growth would have stayed below June’s pace. Connected Devices revenue rose 16%, management said, while TASER revenue dipped on lower sales of TASER 7.
Software and Services trended in the opposite direction. Management said growth for the segment accelerated to 43%, bringing it to $437 million and putting it close to half of Axon’s total revenue. Annual recurring revenue, representing the yearly value of Axon’s recurring contracts, increased 40% from a year earlier.
Over the twelve months to September 30, 2026, Axon’s sales grew 33.6%, a little faster than the 32.0% of the twelve months before. One slower quarter has not yet changed that yearly pace. Still, Axon’s forecast of 30% growth for full-year 2026 is below that pace.
What Else Did Axon Change In Its Forecast?
Axon also lowered its 2026 free cash flow forecast to a range of $350 million to $400 million, down from a target of $450 million, and management said the company is putting more money into inventory. Management expects inventory to reach its target level in the first half of 2027, with the cash drain easing from there.
Memory chips are also becoming more expensive. Management said these costs will shave about half a percentage point off margins in 2026, with the largest impact occurring in the fourth quarter. Even so, Axon nudged its forecast for full-year adjusted EBITDA margin, its own profit measure, up to 25.6% from 25.5%.
Management said the company will share more details regarding 2027 and its longer-term outlook alongside its fourth-quarter results. Fourth-quarter revenue, which Axon guided to a range of $990 million to $1.01 billion, is the number to watch when the company reports in February 2027.
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