Shares of Axon Enterprise, Inc. (NASDAQ: AXON) tumbled 7.55% in after-hours trading on Wednesday, following the release of the company's fiscal second-quarter 2026 earnings report. The decline came despite revenue exceeding analyst expectations and the company raising its full-year growth outlook.
Axon reported Q2 revenue of $904.4 million, up 35.3% year-over-year and above the consensus estimate of $876.5 million. Adjusted EBITDA surged 41% to $242 million, and adjusted earnings per share of $1.88 edged past the $1.85 analyst forecast. However, GAAP net income fell 18.5% to $29.4 million, with diluted EPS declining to $0.36 from $0.44 a year earlier, as the prior-year quarter benefited from a $75 million income tax benefit. Non-GAAP diluted EPS also declined 13.8% to $1.88 from $2.18.
Investors appeared to focus on margin pressures in the Software & Services segment, where gross margin contracted 430 basis points to 71.3%, driven by a greater mix of professional services and costs associated with scaling newer offerings. Additionally, stock-based compensation of approximately $144 million weighed on GAAP profitability, while free cash flow remained slightly negative. The mixed results prompted a sharp sell-off in after-hours trading, despite the company's raised full-year revenue growth guidance of 32% to 34%.
Comments