QS Research · Michael Burry's Scion Capital analyst template · 2006
AXON ENTERPRISE, INC. (AXON)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +6% · downside -20% · upside +40%
The market is not missing the Q3 2026 guidance cut: it is discounting ~$130M of Federal Dedrone revenue that slipped and a thin FCF profile (TTM FCF $80.9M, 0.3% yield; N19, N31). It may be over-discounting the timing, because Q3 2026 software rose 43% to $437M, Platform Solutions rose 106%, and AI ARR is above $100M (S102, S5), but at 7.82x EV/Sales and 139.9x EV/EBITDA the stock still needs years of high growth (N26, N27). Using the FY2026 guidance midpoint $3.62B (S5) at 7.82x EV/Sales (N26) gives EV $28.31B; less $1.23B net debt (N23) = $27.08B equity / 81.43M shares (N5) = $332.5, +6.2% vs $313.00. Downside at FY2025 revenue $2.78B (S24) is $251.9 (-19.5%); upside at 30% FY2027 revenue growth to $4.71B is $436.8 (+39.6%). That asymmetry is positive but the base is not +30%, so the rule gives watch, not long; I would need a lower price or a higher revenue base to get a margin of safety.
Key numbers
- Share price: $313.00
- Market cap: $25.49B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $3.42B
- EV / EBITDA (TTM): 139.9x
- P/E (TTM): 98.6x
- Price / book: 6.77x
The 15 boxes
- ✓ 1. Long-form business notes
Axon's FY2025 10-K describes a two-segment business: Software and Services (SaaS plus professional services/on-prem licenses) and Connected Devices (TASER, cameras, drones, accessories, warranties). The FY2025 report realigned the old FY2020 segments, TASER and Software and Sensors, to separate software/services from hardware. Revenue grew from $1.19B in FY2022 to $2.78B in FY2025, but FY2025 operating income was -$62.1M while net income was $124.7M; the XBRL source does not explain the reconciling items.
- ✓ 2. Competitive advantage
The sources show a high-gross-margin, increasingly scale-driven franchise (gross profit $726.1M on $1.19B revenue in FY2022 rising to $1.66B on $2.78B in FY2025, ~60% both years) whose FY2025 operating result was still a loss of $62.1M, so the advantage is visible in gross profit dollars, not in operating returns. The 10-K describes every market Axon sells into as 'highly competitive' and 'highly fragmented' (more than 50 RMS providers; ~30 named body-camera/in-car video competitors), with Motorola Solutions, Genetec, Flock Safety and dozens of others named across categories. Axon's only stated edge is self-asserted: a network of camera sensors plus its digital evidence platform, reinforced by a patent/trademark portfolio (over 370 U.S. patents as of 2025-12-31) and a TASER line whose competitors the 10-K says are 'primarily outside of the United States'.
- ✓ 3. 10-Q takeaways
Q3 2026 revenue rose 27.8% to $908.6 million, with Software & Services up 43.2% and Platform Solutions up 105.6%, but gross margin compressed to 56.7% (adjusted 59.2%) and operating income was $42.1 million. Net income of $57.0 million was boosted by $64.1 million of strategic-investment income, so the operating result is the cleaner read. Q4 2026 guidance is $990 million-$1.01 billion revenue and $245 million-$250 million Adjusted EBITDA, while the FY2026 outlook excludes about $130 million of Federal Dedrone revenue; the 10-Q also reports higher cash and inventory purchases and a post-quarter $1.2 billion Skydio investment.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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