Axon grew Q2 2026 revenue 35.3% to $904.4M on TASER 10, counter-drone and software demand; net income fell to $29.4M only because Q2 2025 carried a $75M tax benefit, while operating income swung to a $46.8M profit.
Revenue
$904M
+35.3% YoY
Net income
$29M
-18.5% YoY
Diluted EPS
$0.36
-18.2% YoY
Operating margin
5.2%
Overview
Axon, the company behind TASER devices, police body cameras and the Evidence.com cloud software, grew Q2 2026 revenue 35.3% to $904.4 million, its 10th straight quarter of growth above 30%. Both of its segments grew at about the same pace: Connected Devices (hardware: TASER, body cameras, drones and counter-drone gear) rose 34.6%, and Software and Services (cloud subscriptions and services) rose 36.2%.
Profit went the other way on paper. Net income fell 18.5% to $29.4 million and diluted EPS fell from $0.44 to $0.36. That drop is not an operating problem. Last year's Q2 was lifted by a $75.0 million income-tax benefit, which turned a $38.9 million pre-tax loss into a profit. This year pre-tax income was a positive $32.7 million, and operating income swung from a $1.0 million loss to a $46.8 million profit.
Key metrics
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$904.4M
$668.5M
+35.3%
Gross margin
60.4%
60.4%
flat
Operating income (loss)
$46.8M
-$1.0M
swing to profit
Operating margin
5.2%
-0.2%
+5.4 pts
Read 0 community reports on Axon Enterprise, or write your own.Write a report
Adjusted EBITDA (a company-defined profit measure that strips out stock pay, depreciation, investment gains and other items) was $242.0 million, a 26.8% margin, up from $171.6 million. Non-GAAP diluted EPS was $1.88 vs. $2.18; the company attributes that decline to the same prior-year tax benefit.
TASER grew $45.1 million on "higher TASER 10 handle and cartridge volume". Axon says the quarter included the largest single TASER order in its history, from a major U.S. city.
Platform Solutions more than doubled. The filing attributes the $82.5 million increase "primarily" to "higher volume for counter-drone equipment", meaning Dedrone, which Axon says passed $100 million in quarterly revenue. This line, not TASER, was the biggest single source of hardware growth.
Body cameras barely grew (+2.8%). The filing cites continued adoption of the Axon Body 4 camera and higher warranty revenue.
Software and Services grew $105.7 million, mostly from "the aggregate number of users and growing adoption of our premium solutions by existing customers". The shareholder letter names Axon Fusus, the AI Era Plan (whose revenue it says grew nearly 700%) and Axon 911. Part of the software growth is bought, not organic: Axon acquired Prepared (AI emergency-call software) on October 1, 2025, and Carbyne (cloud 911 platform) on February 18, 2026. The 10-Q doesn't separate out how much revenue each one added.
International revenue rose 23.6% to $162.1 million, "primarily driven by increased sales in our EMEA region". The U.S. still made up 82% of the total.
Margins: stable overall, but the two segments moved in opposite directions
Gross margin is the share of revenue left after the direct cost of making the product or delivering the service. For the whole company it was unchanged at 60.4%, but that flat number hides two opposite moves:
Connected Devices gross margin rose to 51.9% from 48.6%, "primarily driven by tariff refunds, partially offset by increased mix to counter-drone equipment". In February 2026 the Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act were unauthorized. Axon received $47.4 million in refunds in Q2. Of that, $18.1 million covered costs it had already expensed in 2025, so it is a one-time recovery that makes this quarter's margin look better than the ongoing business. The rest mostly relates to inventory and equipment.
Software and Services gross margin fell to 71.3% from 75.6%, "primarily driven by a higher mix of professional services revenue and scaling new product offerings". Professional services, such as installation and deployment work, earn less than pure software subscriptions. For a company whose long-term margin story depends on software, this is the number to watch.
Operating expenses grew 23.4% to $499.7 million, slower than revenue. That is why the operating margin (the share of revenue left after running the business, before interest and tax) went from slightly negative to 5.2%. R&D rose 28.4% to $208.7 million and SG&A rose 20.1% to $291.0 million, reflecting more staff plus higher AI-related technology licence costs ($4.4 million in SG&A and $5.1 million in R&D).
Stock-based pay is the main reason GAAP profit is thin
Axon pays a large part of employee compensation in stock. The accounting value of that stock is an expense even though no cash leaves the company. In Q2, stock-based compensation was $144.0 million, about 15.9% of revenue and about three times the quarter's $46.8 million operating income. It was spread across cost of sales ($11.3 million), SG&A ($71.0 million) and R&D ($61.7 million). Without it, operating income would have been roughly $190.8 million. That gap explains how Axon can report a 26.8% adjusted EBITDA margin and a 3.3% net income margin in the same quarter. Management expects $590-620 million of stock compensation for full-year 2026, including about $280 million tied to its broad employee stock plan and the CEO performance award.
Below the operating line, interest income fell to $6.8 million from $23.3 million because Axon spent much of its cash: cash and short-term investments dropped from $1.71 billion at year-end to $673.4 million. In the first half it paid $551.6 million for acquisitions, "substantially all related to the Carbyne acquisition", and $302.1 million for strategic investments. Interest expense on $1.75 billion of senior notes was $28.1 million, so net interest was a $21.3 million cost. The effective tax rate was 10.0%.
Takeaway: This quarter's decline in net income is a quirk of comparing against last year's $75 million tax benefit. The underlying business improved: operating income went from a small loss to $46.8 million on 35% revenue growth. Still, about $18 million of that improvement came from a one-time tariff refund, and software gross margin slipped more than 4 points. The recurring-revenue engine (ARR +39%, 126% net revenue retention) is strong, but it is not yet more profitable per dollar.
Recurring revenue and backlog
Annual recurring revenue (ARR), the yearly value of Axon's ongoing subscription contracts, rose 39% to $1.64 billion from $1.18 billion. It grew faster than reported revenue.
Net revenue retention was 126%, up from 124%. That means existing agency customers spent 26% more on subscriptions than a year earlier, after accounting for any who left. Axon describes customer losses as "de minimis".
Future contracted bookings, the value of signed orders not yet delivered, rose 41% to $15.1 billion. The narrower accounting measure, remaining performance obligations (contracts without cancellation clauses), was $9.8 billion. Axon expects to recognize 20-25% of that within 12 months and most of the rest over the following ten years. Both figures cover long government contracts that are subject to budget appropriation, so this revenue is contracted but not guaranteed.
Year to date (six months)
Metric
H1 2026
H1 2025
YoY Change
Revenue
$1,711.7M
$1,272.2M
+34.6%
Operating income (loss)
$76.0M
-$9.8M
swing to profit
Net income
$198.7M
$124.1M
+60.1%
Diluted EPS
$2.41
$1.52
+58.6%
Operating cash flow
-$11.4M
-$65.9M
improved
The half-year net income figure mostly reflects investment gains rather than operations. It includes $202.3 million of realized and unrealized gains on strategic investments, which the filing says came "primarily" from "an observable price change for one of our investees". Operating income was only $76.0 million. Cash flow is weaker than profit: operating cash flow was negative $11.4 million for the half, although Q2 alone was positive at $20.1 million. Receivables and contract assets rose $256.9 million, and Axon bought raw materials in advance for TASER 10 and counter-drone equipment.
Outlook
Management raised its 2026 revenue growth outlook to 32-34% from 30-32% and kept its adjusted EBITDA margin target at about 25.5%. That is below the 26.8% reached this quarter, which was helped by the tariff refunds. It expects capital expenditure of $160-190 million.
Our read: the revenue guidance looks well supported by $15.1 billion of contracted bookings and a 39% increase in ARR. The profit side is less clear. The strong hardware margin this quarter was partly a one-off, counter-drone sales carry lower margins and are growing fastest, and software margins are being diluted by services work and new products. Watch in Q3 whether Connected Devices gross margin holds near 52% without new tariff refunds, and whether Software and Services gross margin recovers toward the mid-70s. Those two numbers will show whether operating margin can keep rising while stock-based pay stays near $150 million a quarter.
Source: Axon Enterprise Form 10-Q for the quarter ended June 30, 2026 (filed August 6, 2026); ARR, net revenue retention, future contracted bookings, non-GAAP EPS and guidance figures are from the company's Q2 2026 shareholder letter (Form 8-K Exhibit 99.1, August 5, 2026).