Core Insights - Axon Enterprise's stock experienced a significant decline of 9.4%, marking its worst single-day drop since mid-February, following a disappointing earnings report despite record revenue [1] - The company reported adjusted earnings per share of $1.17 for Q3 2025, missing estimates of $1.52, primarily due to tariff pressures and rising operating expenses [2] - Revenue increased by 31% to $711 million, surpassing estimates of $705 million, marking the seventh consecutive quarter of over 30% revenue growth [2] Financial Performance - The earnings miss was linked to margin compression in Axon's connected devices segment, with adjusted gross margins contracting by 50 basis points to 62.7% [4] - Axon reported an operating loss of $2.2 million in Q3, a decline from a profit of $24.1 million in the same period last year, attributed to aggressive hiring and stock-based compensation [5] - This marked the fourth consecutive quarter of operating losses despite strong revenue growth [6] Revenue Guidance and Growth Drivers - The company raised its full-year revenue guidance to $2.74 billion, while the midpoint of its adjusted EBITDA guidance for Q4 is set at $180 million, below the consensus estimate of $187 million [6] - Axon's software and services business is a key growth driver, increasing by 41% to $305 million, with annual recurring revenue reaching $1.3 billion and a net revenue retention rate of 124% [8] - Revenue from connected devices grew by 24% to $405 million, driven by the adoption of Taser 10 and body camera upgrades [9] Strategic Initiatives - Axon is expanding its offerings beyond Tasers and body cameras into a comprehensive platform that includes drones, real-time operations, and AI capabilities [7] - The AI Era Plan, launched in October 2024, has generated over $200 million in bookings this year, with expectations for AI to contribute more than 10% of U.S. state and local bookings for the full year [9]