QS Research · Michael Burry's Scion Capital analyst template · 2006
AXON ENTERPRISE, INC. (AXON)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -80% · downside -85% · upside +24%
On the TTM to Sep 30 2026 base, AXON is a $25.49B market-cap / $26.72B EV business earning $68.0M of EBIT, $191.0M of EBITDA and $80.9M of FCF, so today's price is 139.9x EBITDA, 393.0x EBIT and a 0.3% FCF yield (N9,N23,N13,N14,N18,N25,N26,N28). Base case: TYL's 33.1x EV/EBITDA on $191.0M = $6.32B EV; less ~$1.23B net debt = $5.09B equity; /81.43M shares = ~$63, or -80% vs $313 (N14,N23,N5,N1). Downside: MSI's 26.1x = ~$46, -85%; upside: WRAP's 9.61x EV/Sales on $3.42B = ~$389, +24% (N11,N23,N5,N1). The market is missing that the 53% drawdown has not fixed the earnings multiple; the guidance cut is temporary and Software & Services is growing 43%, but even generous peer EBITDA multiples leave the equity far below today's price. Short, medium conviction, because the sales multiple still sits near scaled peers and a positive Q4 could squeeze a 5% short base.
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 sells an integrated hardware-plus-cloud ecosystem to public safety and, increasingly, private-sector customers, and in FY2025 it reorganized from two legacy segments (TASER; Software and Sensors) into Software and Services and Connected Devices. Scale has roughly re-multiplied: revenue was $2.78B in FY2025 against $1.19B in FY2022, with gross profit of $1.66B, but FY2025 operating income was negative at -$62.1M while net income was +$124.7M, so the bottom line is not an operating result. Annual recurring revenue reached $1.3B at 12/31/2025 versus $221.3M at 12/31/2020, the recurring software layer being the stated growth engine. Cash generation softened in FY2025 (operating cash flow $211.3M vs $408.3M in FY2024) as capex rose to $136.3M from $78.8M.
- ✓ 2. Competitive advantage
AXON shows the margin signature of a real product advantage but not a cost advantage: gross profit rose from $726.1M on $1.19B revenue in FY2022 to $1.66B on $2.78B in FY2025, holding near 60% each year, while operating income fell from +$156.8M (FY2023) and +$58.5M (FY2024) to -$62.1M in FY2025 — the gross profit is being spent on selling and R&D, not converted into operating profit. Management's own 10-K calls every market it sells into "highly competitive" and "highly fragmented" and names dozens of rivals, with Motorola Solutions competing in cameras, ALPR, evidence management, RMS, real-time operations and NG911, and Flock Safety in ALPR, real-time operations and drones. The only advantage management asserts in its own words is a belief that the camera-sensor network plus Axon Evidence gives it a strategic edge; the clearest stated moat is TASER, where competitors making CEDs are described as being "primarily outside of the United States". FY2025 net income of $124.7M against $19.0M of pre-tax income is a tax effect, not operating profitability.
- ✓ 3. 10-Q takeaways
Q3 2026 revenue rose 27.8% to $908.6 million and nine-month revenue rose 32.2% to $2.6 billion, but gross margin compressed to 56.7% from 60.1% on counter-drone mix, new-product scaling and higher memory costs. Q3 operating income was $42.1 million, while net income of $57.0 million was lifted by $64.1 million of strategic-investment income; nine-month net income of $255.7 million included $266.4 million of such gains. Nine-month operating cash flow was only $8.2 million as inventory purchases rose $180.0 million, and cash was $1.46 billion at September 30, 2026 before a November 5, 2026 agreement to invest up to $1.2 billion in Skydio.
- ✓ 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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