Q3 Earnings Miss Driven by Tariff-Related Cost Pressures
Axon Enterprise, Inc. (NASDAQ: AXON) experienced a dramatic decline in its stock price, plummeting approximately 20% in extended trading on November 4, 2025, after the company reported third-quarter earnings that missed analysts’ profit expectations. The Taser and body camera manufacturer cited elevated costs stemming from tariff implementation as a primary factor pressuring margins.
Despite beating revenue estimates with $710.6 million in quarterly sales, the company’s adjusted earnings of $1.17 per share fell significantly short of the $1.54 per share that analysts had anticipated, representing a 24.1% miss.
Axon Enterprise’s third-quarter financial results revealed the mounting impact of tariff-related costs on the company’s bottom line. While the Arizona-based public safety technology provider achieved strong revenue growth of 30.6% year-over-year, reaching $710.6 million and surpassing analyst estimates of $705.2 million, profitability took a substantial hit. The company’s adjusted earnings per share of $1.17 dramatically underperformed Wall Street’s consensus estimate of $1.54, marking a significant 24.1% shortfall that sent shockwaves through the market.
Chief Financial Officer Brittany Bagley had previously indicated in August that the impact of tariffs would become more pronounced in the second half of 2025. This forecast proved accurate as the company grappled with higher costs from imported components and supply chain disruptions. Earlier in the year, Axon had flagged concerns that the ongoing tariff situation could hinder procurement of critical imported components for its products and potentially limit exports to international markets. The company also signaled it might need to implement price increases to offset tariff-driven cost pressures from suppliers.
The earnings miss resulted in Axon’s operating margin contracting to -0.3% for the quarter, down from 4.4% in the same period last year, demonstrating how rapidly escalating costs outpaced the company’s revenue expansion. Additionally, the free cash flow margin declined to 4.7% from 12.5% year-over-year, further highlighting the financial strain. Despite these profitability challenges, Axon raised its full-year 2025 revenue guidance to approximately $2.74 billion, up from the previous range of $2.65 billion to $2.73 billion, and provided fourth-quarter revenue guidance of $752.5 million at the midpoint, exceeding analyst expectations.
Axon’s Long-Term Growth Story Remains Intact Despite Short-Term Volatility
As of 10:03 AM EST on November 5, 2025, Axon stock was trading at $577.49, reflecting an 18.22% decline or a loss of $128.64 from its previous close of $706.13. The dramatic overnight selloff in extended trading saw shares initially plunge approximately 20%, with the stock opening at $563.84 the following day. The company’s market capitalization contracted to approximately $45.5 billion, down from over $56 billion just days earlier. The stock’s 52-week range spans from $433.97 to $885.92, with the current price representing a significant retreat from recent highs.
Despite the quarterly disappointment, Axon’s longer-term performance metrics remain strong. The company has delivered a remarkable five-year return of 434.56%, vastly outperforming the S&P 500’s 92.75% gain over the same period. Year-to-date, however, the stock is down 2.41%, contrasting sharply with the S&P 500’s 15.04% advance. Analyst sentiment remains cautiously optimistic, with a consensus price target of $859.67, suggesting potential upside of approximately 49% from current levels. The company maintains 18 analyst recommendations, with the majority rating it as a “Strong Buy” or “Buy,” and price targets ranging from a low of $702 to a high of $1,000.
Looking ahead, Wall Street analysts project Axon’s revenue will grow 24.8% over the next 12 months, representing a deceleration from recent growth rates but still indicating healthy expansion. The company announced plans to acquire emergency communications platform Carbyne in a $625 million deal expected to close in the first quarter of 2026, signaling continued strategic expansion despite near-term profitability pressures. Axon’s core business providing body cameras, conducted energy devices under the TASER brand, and cloud-based software solutions for law enforcement continues to benefit from strong secular demand for police accountability and public safety technology.