0001069183-25-000181
SEC filingAxon's Q2 2025 revenue grew 32.8% to $668.5M, but operating income turned negative due to higher stock-based compensation and non-cash losses, while net income fell to $36.1M.
Axon's Q2 2025 revenue reached $668.5M, up 32.8% year-over-year from $503.2M. Growth was broad-based across segments: Connected Devices rose 28.6% to $376.4M, led by TASER 10 handset demand (19.1% growth) and Platform Solutions surging 86.4% on counter-drone equipment. Software and Services grew 38.8% to $292.2M, driven by user expansion and premium add-ons.
Gross profit increased 31.9% to $403.7M, but gross margin contracted slightly to 60.4% from 60.8%, primarily due to higher stock-based compensation expense. Operating income swung to a loss of $1.0M from a profit of $33.8M, as operating expenses grew 48.6% (SG&A +41.7%, R&D +60.3%) driven by headcount and stock-based comp. Stock-based compensation was $139.2M in Q2, up 86% from $74.8M a year ago.
Net income declined 12.9% to $36.1M, despite a $75.0M tax benefit. The tax benefit was largely from stock-based compensation deductions. Excluding the $30.9M unrealized loss on marketable securities and the $75.0M tax benefit, adjusted net income would have been lower. EPS diluted fell to $0.44 from $0.53.
Total assets rose to $6.22B from $4.47B at year-end 2024, driven by a $1.14B increase in short-term investments from the March 2025 bond issuance. Cash and cash equivalents stood at $615.5M, up $160.7M. The company held $1.47B in short-term investments, $144.0M in marketable securities (including $54M unrealized gain on equity securities), and $403.5M in strategic investments.
Total liabilities increased to $3.48B from $2.15B, mainly due to the $1.75B senior notes. Current portion of notes payable decreased to $279.2M (the remaining 2027 convertible notes) from $680.3M, while long-term notes payable increased to $1.73B from zero. The company also had $300M undrawn revolving credit facility.
Stockholders' equity grew to $2.73B from $2.33B, aided by $183.6M net proceeds from an ATM equity offering and $279.5M in stock-based compensation, partially offset by $192.8M in tax payments for net-settled stock awards.
Operating cash flow for the six months ended June 30, 2025 was -$65.9M, compared to +$66.8M in the prior period. The decline was driven by a $378.5M increase in working capital, particularly receivables and contract assets (+$212.8M) and deferred revenue decline (-$51.1M). Net income was $124.1M, but non-cash items (stock-based comp $279.5M, deferred taxes $70.1M, gains on investments $111.8M) and working capital swings explain the negative conversion.
Capital expenditures were $47.8M (3.8% of six-month revenue), up from $27.5M. Free cash flow for the six months was -$113.7M, versus +$39.3M in the prior period. The company financed $1.75B in debt and raised $184M in equity, resulting in a net cash increase of $160.7M.
Management highlighted the segment realignment to Connected Devices and Software and Services, which provides better visibility into the shift toward recurring revenue. The adjusted gross margin (excl. stock-based comp and intangibles) improved to 63.3% in Q2 from 63.1% a year ago, driven by higher software mix.
Remaining performance obligations reached $7.8B, providing strong visibility. However, the lengthy sales cycle, budget dependencies, and potential cancellations remain risks. The company also noted the tax benefit from stock-based comp is variable and depends on stock price.
No specific quantitative guidance was provided for the remainder of the fiscal year. The focus remains on scaling the public safety operating system, international expansion, and innovation (e.g., AI, drone).