Axon stock down 54% from 2025 peak despite strong growth

Axon Enterprise sits at the intersection of hardware and software for law enforcement, making devices like the Taser and body cameras alongside a suite of database software for records, evidence, and investigations. That combination has given it a wide economic moat, reinforced by a history of acquisitions and AI products such as Draft One, which writes first drafts of police reports from camera footage. Over the last decade the stock is up more than 1,500%, and since the end of 2019 the company has delivered 25% revenue growth or better in every quarter except one.

Despite that record, the stock has sold off sharply. Several factors are weighing on the shares: valuation, concerns about margin compression, management's decision to cut cash flow guidance as it invests in the business, and a recent convertible debt offering. Around its peak last year, its P/S ratio was around 30; it now sits at 12. In its key software and services segment, gross margin fell 430 basis points to 71.3%, which the company attributed to a higher mix of professional services revenue and scaling new product offerings, even as the segment grew 36%. The stock also sold off after the company offered a $1 billion convertible note last month.

These headwinds reflect short-termism among investors rather than underlying weakness, and such sell-offs tend to be good buying opportunities for long-term investors. Third-quarter earnings on Nov. 3 will provide more information, but Axon looks like a strong buy at the current price and it shouldn't take much for the stock to rebound.