A Member of Pat McKeough’s Inner Circle recently asked for his advice on Axon Enterprise, a leading global provider of integrated public safety technology solutions to law enforcement, federal agencies, and commercial security markets.
Pat likes the firm’s consistent double-digit revenue growth, high-margin recurring revenue streams, and strategic market expansion into federal, international, and enterprise sectors. However, Pat notes the company’s very high valuation makes the stock vulnerable.
AXON ENTERPRISE INC. (Symbol AXON on Nasdaq; www.axon.com) is best known for its Taser line of non-lethal weapons for law enforcement and consumers. The law enforcement technology company also sells body cameras, in-car cameras, software and drones.
Axon has two operating segments:
Taser (38% of revenue): Through this segment, Axon is the market leader in the development, manufacture and sale of Conducted Energy Devices (CEDs). It sells those devices under its brand name, Taser. CEDs are tools that provide an electric shock aimed at temporarily disrupting muscle functions and/or inflicting pain.
Software & Sensors (62%): Axon develops, manufactures and sells fully integrated hardware and cloud-based software solutions that let law enforcement capture, securely store, share and analyze video and other digital evidence. The software unit includes a cloud-based digital evidence management platform. Most notably, it works with Axon body camera footage.
Note: In the first quarter of 2025, Axon realigned its two segments into two new ones: Connected Devices and Software & Services.
Axon’s customers include first responders at the international, federal, state and local law enforcement level, fire departments, correctional facilities and the justice sector, in addition to commercial clients.
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In October 2024, the company completed the acquisition of Dedrone, a provider of airspace security technology. Dedrone’s drones are used for security purposes by federal governments, utilities and critical infrastructure, event venues, airports, correctional facilities, and other enterprises.
Dedrone’s primary product, Dedrone Tracker, provided security for the 2022 FIFA World Cup in Qatar, protecting 900 square kilometers of airspace and 44 key sites. It has also worked with Formula One Grand Prix. The tracker can detect some 200 drone models from 65 manufacturers, trigger alarms, and analyze data from incidents to create forensic reports.
The company’s technology is in place in 40 U.S. cities, 30 airports, 50 stadiums, and 50 correctional facilities. Its products are used in 36 countries outside the U.S., as well as in the Ukraine war with Russia and by nine U.S. federal agencies. More than 35 law enforcement agencies also use them.
Washington, D.C.-based Dedrone started up in 2014. Since its founding, it has received $127 million in startup venture-capital funding, including from Axon, which co-led a round of financing with venture capital firms in July 2022, and has had a seat on the Dedrone board. The purchase price was not disclosed.
Axon: Revenues and earnings rise sharply but the valuation remains very high
In the three months ended March 31, 2025, Axon’s revenue increased by 31.3%, to $603.6 million from $459.9 million a year earlier. Revenue in both operating segments was higher. The company finished the quarter with annual recurring revenue of $1.0 billion, up 36.6% from $732 million. It was Axon’s 13th consecutive year of 25%+ revenue growth.
Excluding one-time items, the company earned $114.9 million, or $1.41 a share, in the latest quarter. That was up 29.2% from $89.0 million, or $1.15.
Dedron should be a good fit for Axon. It adds a growing base of customers—governments, law enforcement, first responders and critical infrastructure operators around the globe.
Meanwhile, Axon began incorporating AI-enabled technology into its products in 2017, and the technology now powers its transcription, video redaction and automated licence-plate-recognition products.
The company’s shares have increased 161.9% over the last year and now trade at a very high 121.8 times the 2025 forecast earnings of $6.11 a share, which adds risk.
Recommendation in Pat’s Inner Circle: Axon Enterprise is okay to hold, but only for aggressive investors.
