My thoughts on $AXON Q1 2026

This was a strong quarter. Revenue growth came in at +33.7% YoY, while Software & Services revenue grew +34.9%. ARR growth reached +35.2%, and Total Company Future Contracted Revenue grew +44.4%, accelerating over the past two quarters and both outpacing Software & Services revenue growth. Net New ARR added was $146M, a record for the company.

Guidance for 2026 was raised by 1.4%.

Retention remains at a high level of 125%.

SBC/revenue improved to 17%, down 9.6 percentage points QoQ, but high shareholder dilution remains a concern. Basic shares increased 4.2% YoY, although management targets average annual dilution below 2.5%.

Enterprise is becoming a larger growth engine for Axon, with the enterprise business growing 50% YoY in Q1. Another positive is that international revenue grew more than 100% YoY and now represents 20% of total revenue. International expansion is an important opportunity for Axon.

Management is very optimistic about 911 and compared the 911 opportunity to Axon’s early cloud software push.

It can confidently be said that the company’s moat is expanding. The strengthening software side of the business reinforces the hardware segment, making products such as TASER 10, Axon Body 4, Dedrone, and Axon Outpost even more valuable, while the hardware solutions themselves make the company more AI-resilient.

AI is a tailwind for Axon. AI bookings increased 140% YoY, while AI product revenue grew more than 700% YoY, although still from a small base. Axon’s AI products now include Axon Assistant, Draft One, Brief One, Form One, Axon Vision, Axon Guardian, and Axon Gravity. Axon Assistant has surpassed 1 million uses.

The relatively new Dedrone segment scaled sharply, with bookings up 500% YoY and revenue up 300%+ YoY across hardware and software. Demand is exceeding Axon’s production capacity, but Dedrone hardware carries lower margins, which is putting pressure on profitability.

On the negative side, there was a decline in gross margin.

Connected Devices gross margin fell to 48.7%, down 1.3 percentage points YoY.

Platform Solutions and Dedrone hardware are lower-margin than mature device categories. Dedrone also includes software revenue, which is also contributing to lower software gross margins.

Margin pressure also comes from tariffs and memory costs (memory costs affect camera products most directly).

Software & Services gross margin continues to decline and came in at 72.4%, down 1.3 percentage points YoY.

FCF margin was -6.8%, pressured by inventory build, bonus payments, commissions, and interest payments.

Overall, growth was broad across hardware, software, U.S. public safety, international, and enterprise. This was a strong quarter for Axon.