Key facts
- Axon Enterprise's second-quarter gross margin declined due to a greater emphasis on professional services and new product scaling.
- The software and services segment's adjusted gross margin decreased by 3.8 percentage points to 75.1%.
- Overall gross margin fell 40 basis points to 62.9%.
- The company exceeded analyst expectations with adjusted earnings per share of $1.88 and revenue of $904 million.
- Axon manufactures TASER energy weapons, body cameras, drones, and surveillance systems for law enforcement.
Axon Enterprise, known for its TASER energy weapons and law enforcement technology, reported a decline in its second-quarter gross margin. The company cited a shift towards a higher mix of less profitable professional services and increased investments in scaling new product offerings as the primary reasons for the margin compression.
Specifically, the adjusted gross margin for Axon's software and services segment fell by 3.8 percentage points year-over-year to 75.1%, impacted by its services business which includes implementation and ongoing workflow integration. The software-only portion of this segment, however, maintained a gross margin exceeding 80%.
Overall, Axon's gross margin decreased by 40 basis points to 62.9%. This impact was partially mitigated by strong performance within the company's connected devices segment. Despite the margin pressure, Axon surpassed financial expectations, reporting adjusted earnings per share of $1.88, which was above the average analyst estimate of $1.85. Quarterly revenue also exceeded projections, coming in at $904 million against an expected $877 million.
Following the release of these results, shares of the Scottsdale, Arizona-based company experienced a decline of more than 6% in aftermarket trading.