Will Axon Enterprise Shock Investors When It Reports Q4 Earnings?

Axon Enterprise ( AXON ) will report its fourth-quarter 2025 earnings on February 24 amid growing investor concern over its high valuation. The company, a leader in public safety technology, has seen its shares stumble earlier this year, reflecting broader market uneasiness about high-growth technology companies that trade at premium multiples.

Despite this, Axon continues to expand its AI capabilities, highlighted by its November deal to acquire Carbyne for $625 million. This move integrates cloud-native 911 technology into Axon’s ecosystem, bringing together devices, real-time communications and digital evidence management to improve emergency response.

As AI integration deepens, questions linger: Will Q4 results validate the hype or provide a reality check on the valuation? With shares down year-to-date (YTD), earnings could reignite momentum or amplify doubts.

Based in Scottsdale, Arizona, Axon Enterprise develops technology and weapons for law enforcement, military and civilian use. Its products include body cameras, in-car cameras, TASER energy devices, cloud software for evidence management, and emerging AI-powered solutions such as drones and real-time operations tools. The company operates in two segments: TASER and Software and Sensors, with the majority of revenue coming from the latter, focusing on hardware and cloud-based systems for digital testing.

In 2026, AXON shares are down 14% over the past year, lagging the S&P 500 ($SPX)’s 1.3% gain. That follows a nearly 10% drop on Jan. 28 after heavy trading volume of more than 1.3 million shares and a 7% drop on Jan. 29 after volume of 1.5 million shares. The stock fell 4% in 2025, snapping a nine-year streak of positive annual returns and marking its first year of losses since 2015. AXON underperformed the S&P 500’s roughly 16% advance that year.

Valuation metrics show that Axon trades at a price-to-earnings (P/E) ratio of 395, a forward P/E of 430, and a PEG ratio of 17.3. Its forward price-sales ratio (P/S) is 16.3. Compared to the aerospace and defense industry averages, Axon’s multiples are significantly higher, indicating stretched valuations relative to its peers.

Historically, Axon’s P/S has risen from 4 a decade ago to 16 today, reflecting multiple expansion amid rapid growth. P/E measures price per dollar of earnings, while PEG adjusts for growth. High numbers suggest overvaluation, especially with recent earnings misses. Overall, AXON stock looks overvalued, though its AI pivot could justify premiums if it executes.

As Axon approaches its fourth-quarter earnings report, analysts are focusing on key metrics to gauge the company’s trajectory amid valuation pressures and AI expansion. Consensus estimates set loss at $0.18 per share, while revenue is expected to be $755.29 million, higher than the high end of guidance of $750-755 million, implying 31% year-over-year growth. This follows full-year 2025 revenue projections of $2.74 billion, up 31% from 2024.

Over the past four quarters, Axon’s performance compared to estimates has been volatile, underscoring the scrutiny ahead. In the third quarter, actual earnings from a loss of $0.23 missed the estimate of $0.08. The second quarter beat 0.85 reais vs. an expected 0.08, while the first quarter reported a loss of $0.12 vs. an expected loss of $0.04 per share.

Investors should keep an eye on guidance on AI integration, as the Carbyne deal aims to bolster cloud-native 911 technology by pairing Axon’s devices with real-time response tools. However, concerns are growing about insider sales, with executives offloading shares regularly over the past year and just one purchase by a director.

CEO Patrick Smith sold about $6.2 million earlier this month through a pre-established 10b5-1 plan, reducing his stake but retaining more than 3.1 million shares valued at about $1.5 billion. While such sales are usually routine for liquidity or diversification, the pattern — 11 Smith sales in 18 months totaling more than 580,000 shares — raises eyebrows as the stock has been steadily declining.

Defenders argue that Smith’s substantial ownership indicates that his interests are still aligned with the company. That said, the lingering selloff could fuel bearish sentiment if the fourth quarter disappoints.

Sentiment on Axon remains positive, with a consensus rating of “Strong Buy” based on coverage from 20 analysts. The breakdown includes 14 “Strong Buy” recommendations, four “Moderate Buy” ratings and two “Hold” ratings. No downsides have been seen, but volatility in AXON shares has prompted caution amid multiple highs. Consensus has held steady in recent months, boosted by Axon’s AI momentum despite 2025’s underperformance.

The average target price is $811.22, well above the current share price of $485, representing a potential upside of 67% from here. This reflects optimism about long-term growth from acquisitions such as Carbyne and the expansion of public safety technology, although realization depends on fourth-quarter execution and market conditions.

As of the date of publication, Rich Duprey had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com

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