[Music] What the heck's happening to the stock of Axon Enterprise, the maker of tasers, police body cameras, whole suite of evidence management software. When Axon reported last night, we got kind of a messy third quarter and the stock got hammered down roughly 9%. There's a lot to unpack here, so let's get right to it with Brick Smith, the founder and CEO of Axon, learn more about what's going on.Mr. . Smith, welcome back to Mad Money. >> Hey, it's good to be here, Jim.All right. So, Rick, you know, we've ...

Core Viewpoint - Axon Enterprise reported a mixed third quarter, leading to a stock decline of approximately 9%, despite maintaining strong operational performance and growth in adjusted EBITDA [1][4]. Financial Performance - The company achieved a 25% adjusted EBITDA, aligning with previous guidance of a $2 billion year, which is now projected to be $2.7 billion [4]. - There was confusion regarding GAAP EPS due to stock compensation tied to stock performance, which affected perceptions of profitability [3][5]. Supply Chain and Tariffs - Tariffs impacted margins but did not significantly affect earnings, as the company was able to meet its operating numbers despite these challenges [6]. Acquisitions and Technology - Axon acquired Prepared 911 to modernize the 911 call technology stack, which currently relies on outdated systems [7][8]. - The new technology allows for AI integration to assist operators, improving efficiency and handling non-critical calls, which resulted in a 33% drop in operator workload during peak call times [11][12]. Market Competition - Axon faces competition from Motorola Solutions, which claims to have developed competing products. However, Axon emphasizes its focus on customer satisfaction and technological superiority [13][14][15].

Group 1 - The company has made two acquisitions in the 911 technology space to modernize the outdated technology stack used for emergency calls, which has not evolved since the 1970s [2][4] - The first acquisition, Prepared 911, provides a modern technology stack capable of handling 911 calls, including features for video and location feeds [2] - The second acquisition enhances the capabilities by integrating AI tools that assist human operators with real-time translation and summaries, and can potentially replace traditional call centers by operating from the cloud [3][4] Group 2 - In the previous year, there were 240 million phone calls made to 911, highlighting the volume of calls that the new technology will need to manage [1] - The integration of AI technology aims to improve response times and operational efficiency, allowing for immediate dispatch of resources like drones [3][4] - The overall goal of these acquisitions is to transition the emergency response system to a more modern and efficient technological framework [4]

Core Insights - Axon Enterprise Inc (NASDAQ:AXON) triggered a significant Power Inflow alert, indicating strong bullish sentiment among traders, particularly in institutional and retail order flow data [2][3]. Group 1: Power Inflow Signal - The Power Inflow signal was triggered at a price of $584.93 on November 5 at 10:28 AM EST, following a slight pullback in stock price earlier in the day [3]. - After the Power Inflow signal, AXON's stock price surged to an intraday high of $656.67, representing a 12.26% increase [6]. - The Power Inflow alert is a proprietary signal from TradePulse, highlighting significant shifts in order flow that suggest a high probability of bullish price movement for the remainder of the trading day [4]. Group 2: Order Flow Analytics - Order flow analytics provide insights into real-time buying and selling trends by examining volume, timing, and order size across both retail and institutional traders, enhancing understanding of price behavior and market sentiment [5]. - The Power Inflow signal serves as a strategic entry point for active traders, particularly during periods of stagnant or weakening stock prices, allowing for potential significant intraday gains [6].

Group 1 - Axon Enterprise reported third-quarter earnings per share that fell short of analyst estimates due to margin impacts from tariffs and investments in new products [1] - Despite the earnings miss, Axon indicated that Q4 is expected to be significant for bookings, suggesting potential recovery [1] - Axon stock was among the top losers in the S&P 500 following the earnings report, reflecting market reaction to the disappointing results [1] Group 2 - Axon has been recognized for its expanding product line, which is driving strong profit and sales growth, indicating a positive long-term outlook [3] - The stock has recently achieved a record high and secured a position on multiple best growth stock lists, showcasing its strong market performance [3] - Analysts have noted improving technical performance for Axon, suggesting potential for continued strength in the stock [3]

Core Insights - Axon Enterprise, Inc. reported third-quarter 2025 adjusted earnings of $1.17 per share, missing the Zacks Consensus Estimate of $1.63, with a year-over-year decrease of 19.3% due to rising operating costs and expenses [1][6] Revenue Performance - Total revenues reached $710.6 million, exceeding the consensus estimate of $700 million, and reflecting a 31% year-over-year increase driven by strong demand for TASER 10, Axon Body 4, and counter-drone equipment, along with growing adoption of premium software solutions [2] Business Segment Performance - **Connected Devices**: Revenues increased by 23.6% year over year to $405.4 million, driven by demand for TASER 10 devices and Axon Body 4, although adjusted gross margin decreased to 52.1% from 54.5% [4] - **Software & Services**: Revenues surged 41.1% year over year to $305.2 million, supported by an increase in users and premium software adoption, with adjusted gross margin improving to 76.8% from 76.3% [5] Margin Profile - Cost of sales rose 32.7% year over year to $283.3 million, while total operating expenses climbed 40% to $429.5 million, leading to a decrease in adjusted gross margin to 62.7% from 63.2% [6] Balance Sheet & Cash Flow - At the end of Q3 2025, cash and cash equivalents stood at $1.42 billion, a significant increase from $454.8 million at the end of 2024. However, net cash used from operating activities was $5.9 million compared to $158.1 million generated in the previous year [7] - Adjusted free cash flow was negative $71.4 million in the first nine months of 2025, down from $117.5 million in the prior-year period [8] Outlook - For Q4 2025, Axon anticipates revenues between $750 million and $755 million, indicating a 31% increase at the midpoint, with projected adjusted EBITDA of $178-$182 million [9] - For the full year 2025, revenues are expected to be around $2.74 billion, reflecting approximately 31% year-over-year growth, with an adjusted EBITDA margin of about 25% [11] Major Developments - Axon signed a definitive agreement to acquire Carbyne for $625 million, expected to close in Q1 2026, pending customary closing conditions [13]

Core Viewpoint - Axon Enterprise's stock experienced a significant decline following its Q3 earnings report, with a notable drop of 12.1% during trading, and a peak decline of 20.7% at market open, primarily due to earnings missing analyst expectations despite revenue exceeding forecasts [1][3]. Financial Performance - Axon reported non-GAAP adjusted earnings per share of $1.17 on revenue of $710.64 million, surpassing Wall Street's revenue target by approximately $5.8 million, but falling short of earnings expectations by $0.37 [3]. - The company achieved a year-over-year revenue growth of 30.6% in Q3, although weaker-than-expected margins have led to a sell-off in the stock [3][6]. Future Guidance - For Q4, Axon is projecting revenue between $750 million and $755 million, which would lead to an estimated full-year revenue of approximately $2.74 billion, exceeding the average Wall Street analyst target of $2.72 billion [4]. - However, the guidance for adjusted EBITDA between $178 million and $182 million has not met investor expectations, contributing to the stock's decline [4]. Acquisition Announcement - Axon announced its intention to acquire Carbyne, a public-safety technology specialist, for $625 million, with the deal expected to close in the first quarter of the following year [5].

Core Insights - Axon Enterprise's stock dropped 17% after missing third-quarter profit expectations due to tariff constraints [1] - Adjusted earnings were $1.17 per share, below the forecast of $1.52 per share [1] - Adjusted gross margins decreased by 50 basis points year-over-year to 62.7%, attributed to tariff impacts [1] Financial Performance - The connected devices business, including TASER and counter-drone equipment, generated over $405 million in revenues, a 24% year-over-year increase [2] - Software and services revenues rose 41% year-over-year to $305 million [2] Management Commentary - The finance chief indicated that the tariff impacts are considered a one-time adjustment and are now reflected in gross margins [2] - There is an expectation that growth in the software business will eventually offset margin losses in the long term [2]

Core Points - The author has a background in finance and computer science, with ten years of experience writing for Seeking Alpha [1] - The author emphasizes the importance of community engagement and diverse opinions within the Seeking Alpha platform [1] Group 1 - The author has passed all three levels of the CFA exam and currently works in fintech as a data engineer [1] - The author encourages readers to engage with their articles and share thoughts, highlighting the value of community feedback [1] Group 2 - The articles and comments made by the author are not considered financial or investment advice, but rather personal opinions [2] - The author has no current stock or derivative positions in the companies mentioned but may consider initiating a short position in AXON within the next 72 hours [1]

Core Insights - The article emphasizes the importance of community engagement and diverse opinions within the Seeking Alpha platform, highlighting the author's background in finance and computer science as a foundation for investment analysis [1]. Group 1 - The author has a double degree in finance and computer science and has passed all three levels of the CFA exam, indicating a strong educational background in investment analysis [1]. - The author currently works in fintech as a data engineer, suggesting a blend of financial and technical expertise that may enhance analytical capabilities [1]. - The Seeking Alpha community is noted for its diversity of opinion and sophisticated user base, which can provide valuable insights for investors [1]. Group 2 - The author expresses a willingness to engage with readers through comments and direct messages, fostering a collaborative environment for discussion and analysis [1]. - There is a disclosure regarding the author's potential to initiate a short position in AXON, indicating a proactive approach to investment opportunities [1].