Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data


Index to Consolidated Financial Statements						Page
Consolidated Balance Sheets as of December 31, 202 5 and 202 4						56
Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2025, 2024, and 2023						57
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 202 5 , 202 4 , and 2023						58
Consolidated Statements of Cash Flows for the years ended December 31, 202 5 , 202 4 , and 202 3						59
Notes to Consolidated Financial Statements						60
Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm (PCAOB ID N o . 238)						103
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 248)						106

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AXON ENTERPRISE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	December 31, 2025		December 31, 2024


ASSETS
Current assets:
Cash and cash equivalents	$	1,201,147	$	454,844
Short-term investments	505,417		333,235
Marketable securities	27,213		198,270
Accounts and notes receivable, net of allowance of $4,198 and $3,322 as of December 31, 2025 and December 31, 2024, respectively	777,486		547,572
Contract assets, net	582,630		367,929
Inventory	341,811		265,316
Prepaid expenses and other current assets	277,348		130,315
Total current assets	3,713,052		2,297,481
Property and equipment, net	330,979		247,324
Deferred tax assets, net	359,803		304,282
Intangible assets, net	196,972		175,157
Goodwill	1,370,189		756,838
Long-term notes receivable, net	6,066		3,460
Long-term contract assets, net	178,249		119,876
Strategic investments	416,833		332,550
Other long-term assets	428,170		237,620
Total assets	$	7,000,313	$	4,474,588
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	139,086	$	71,955
Accrued liabilities	510,538		279,193
Current portion of deferred revenue	714,708		612,955
Current portion of notes payable, net	80,552		680,289
Customer deposits	16,156		20,626
Other current liabilities	9,107		12,857
Total current liabilities	1,470,147		1,677,875
Deferred revenue, net of current portion	359,902		360,685
Liability for unrecognized tax benefits	24,376		25,007
Long-term deferred compensation	23,675		15,877
Long-term lease liabilities	98,942		41,383
Long-term notes payable, net	1,730,170		—
Other long-term liabilities	50,443		26,096
Total liabilities	3,757,655		2,146,923
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively	—		—
Common stock, $0.00001 par value; 200,000,000 shares authorized, 100,444,971 shares issued and 80,211,537 shares outstanding as of December 31, 2025, and 200,000,000 shares authorized, 96,839,558 shares issued and 76,619,331 shares outstanding as of December 31, 2024	1		1
Additional paid-in capital	2,475,035		1,689,781
Treasury stock at cost, 20,233,434 and 20,220,227 shares as of December 31, 2025 and December 31, 2024, respectively	(157,242)		(155,947)
Retained earnings	936,670		812,014
Accumulated other comprehensive loss	(11,806)		(18,184)
Total stockholders’ equity	3,242,658		2,327,665
Total liabilities and stockholders’ equity	$	7,000,313	$	4,474,588

The accompanying notes are an integral part of these consolidated financial statements.

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AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share data)


	For the Years Ended December 31,
	2025		2024		2023
Net sales from products	$	1,576,864	$	1,221,292	$	964,002
Net sales from services	1,202,672		861,234		596,697
Net sales	2,779,536		2,082,526		1,560,699
Cost of product sales	809,303		618,136		447,708
Cost of service sales	312,108		223,010		157,538
Cost of sales	1,121,411		841,146		605,246
Gross margin	1,658,125		1,241,380		955,453
Operating expenses:
Selling, general and administrative	1,035,893		741,247		494,884
Research and development	684,308		441,593		303,719
Total operating expenses	1,720,201		1,182,840		798,603
Income (loss) from operations	(62,076)		58,540		156,850
Interest income	75,431		43,693		49,107
Interest expense	(94,238)		(7,098)		(6,995)
Other income (loss), net	99,857		286,369		(41,901)
Income before provision for income taxes	18,974		381,504		157,061
Provision for (benefit from) income taxes	(105,682)		4,470		(18,722)
Net income	$	124,656	$	377,034	$	175,783
Net income per common and common equivalent shares:
Basic	$	1.60	$	4.98	$	2.37
Diluted	$	1.51	$	4.80	$	2.33
Weighted average number of common and common equivalent shares outstanding:
Basic	78,081		75,748		74,195
Diluted	82,370		78,558		75,456
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income	$	124,656	$	377,034	$	175,783
Foreign currency translation adjustments	6,265		(7,874)		(4,352)
Unrealized gain on available-for-sale investments	113		369		852
Comprehensive income	$	131,034	$	369,529	$	172,283

The accompanying notes are an integral part of these consolidated financial statements.

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AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)


	Common Stock			Additional Paid-in Capital			Treasury Stock				Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount				Shares		Amount
Balance, December 31, 2022	71,474,581	$	1	$	1,174,594		20,220,227		$	(155,947)	$	259,197	$	(7,179)	$	1,270,666
Issuance of common stock	467,594	—		94,705			—		—		—		—		94,705
Issuance of common stock under employee plans, net	1,441,279	—		(107,894)			—		—		—		—		(107,894)
Stock options exercised	1,907,026	—		54,503			—		—		—		—		54,503
Stock-based compensation	—	—		131,358			—		—		—		—		131,358
Issuance of common stock for business combination contingent consideration and related tax effects	10,944	—		144			—		—		—		—		144
Net income	—	—		—			—		—		175,783		—		175,783
Other comprehensive loss, net	—	—		—			—		—		—		(3,500)		(3,500)
Balance, December 31, 2023	75,301,424	$	1	$	1,347,410		20,220,227		$	(155,947)	$	434,980	$	(10,679)	$	1,615,765
Issuance of common stock under employee plans, net	804,780	—		(58,178)			—		—		—		—		(58,178)
Stock options exercised	510,000	—		14,576			—		—		—		—		14,576
Stock-based compensation	—	—		382,604			—		—		—		—		382,604
Issuance of common stock for business combination contingent consideration and related tax effects	3,127	—		498			—		—		—		—		498
Issuance of replacement awards in connection with business combinations	—	—		2,871			—		—		—		—		2,871
Net income	—	—		—			—		—		377,034		—		377,034
Other comprehensive loss, net	—	—		—			—		—		—		(7,505)		(7,505)
Balance, December 31, 2024	76,619,331	$	1	$	1,689,781		20,220,227		$	(155,947)	$	812,014	$	(18,184)	$	2,327,665
Issuance of common stock	702,536	—		489,430			—		—		—		—		489,430
Issuance of common stock under employee plans, net	1,324,442	—		(351,939)			—		—		—		—		(351,939)
Stock-based compensation	—	—		634,231			—		—		—		—		634,231
Issuance of replacement awards in connection with acquisitions	—	—		5,295			—		—		—		—		5,295
Induced conversion of convertible debt	1,565,061	—		28,365			—		—		—		—		28,365
Tax effect of partial repurchase and induced conversions of convertible debt	—	—		(21,386)			—		—		—		—		(21,386)
Conversion of convertible debt and shares received from convertible note hedge, net	167	—		1,258			13,207		(1,295)		—		—		(37)
Net income	—	—		—			—		—		124,656		—		124,656
Other comprehensive income, net	—	—		—			—		—		—		6,378		6,378
Balance, December 31, 2025	80,211,537	$	1	$	2,475,035		20,233,434		$	(157,242)	$	936,670	$	(11,806)	$	3,242,658

The accompanying notes are an integral part of these consolidated financial statements.

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AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	For the Years Ended December 31,
	2025		2024		2023
Cash flows from operating activities:
Net income	$	124,656	$	377,034	$	175,783
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation	634,231		382,604		131,358
(Gain) loss on strategic investments and marketable securities, net	(139,969)		(283,217)		41,785
Debt inducement expense	38,868		—		—
Depreciation and amortization	83,161		48,425		19,315
Provision for bad debts and inventory	11,348		20,073		5,484
Deferred income taxes	(82,679)		(85,096)		(72,497)
Other noncash items	23,467		21,177		12,853
Change in assets and liabilities:
Receivables and contract assets	(505,560)		(245,842)		(178,989)
Inventory	(81,951)		607		(77,626)
Deferred revenue	83,476		155,641		146,819
Accounts payable, accrued and other liabilities	286,885		54,519		65,329
Prepaid expenses and other assets	(264,594)		(37,613)		(80,351)
Net cash provided by operating activities	211,339		408,312		189,263
Cash flows from investing activities:
Purchases of investments	(2,076,304)		(793,419)		(563,680)
Business combinations, net of cash acquired	(646,875)		(621,817)		(21,090)
Proceeds from call, maturity, and sale of investments	2,134,556		1,003,394		657,418
Purchases of property and equipment	(136,258)		(78,785)		(59,635)
Other, net	(49)		54		(537)
Net cash provided by (used in) investing activities	(724,930)		(490,573)		12,476
Cash flows from financing activities:
Net proceeds from equity offering	489,554		—		94,705
Proceeds from issuance of notes	1,750,000		—		—
Proceeds from options exercised	—		14,576		54,503
Principal payments for conversion of convertible debt	(608,890)		—		—
Payments to third parties for debt issuance, amendment and repurchase activity	(26,994)		—		—
Income and payroll tax payments for net-settled stock awards	(350,981)		(58,178)		(107,894)
Other, net	(224)		(1,835)		—
Net cash provided by (used in) financing activities	1,252,465		(45,437)		41,314
Effect of exchange rate changes on cash and cash equivalents	7,756		(6,209)		2,065
Net increase (decrease) in cash and cash equivalents	746,630		(133,907)		245,118
Cash and cash equivalents and restricted cash, beginning of period	466,763		600,670		355,552
Cash and cash equivalents and restricted cash, end of period	$	1,213,393	$	466,763	$	600,670

Supplemental disclosures:
Cash and cash equivalents	$	1,201,147	$	454,844	$	598,545
Restricted cash (Note 1)	12,246		11,919		2,125
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	1,213,393	$	466,763	$	600,670

Cash paid for interest	$	57,173	$	3,450	$	3,508
Cash paid for income taxes, net of refunds	51,121		67,845		64,492

Non-cash transactions:
Leased assets obtained in exchange for new operating lease liabilities	$	62,844	$	14,292	$	5,927
Expense for induced conversion of convertible debt, debt offering and revolver modification	43,546		—		—
Property and equipment purchases in accounts payable and accrued liabilities	7,290		5,157		238

The accompanying notes are an integral part of these consolidated financial statements.

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Note 1 - Organization and Summary of Significant Accounting Policies

Axon Enterprise, Inc. (“Axon”, the “Company”, “we” or “us”) is a provider of public safety technology solutions. Our mission is to protect life in service of promoting peace, justice and strong institutions.

The accompanying consolidated financial statements include the accounts of Axon Enterprise, Inc. and our subsidiaries. All intercompany accounts, transactions and profits have been eliminated.

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform to current period presentation. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions in these consolidated financial statements include:

revenue recognition,
stock-based compensation,
business combinations,
inventory valuation and related reserves,
valuation of goodwill, intangible and long-lived assets,
valuation of strategic investments,
recognition, measurement and valuation of current and deferred income taxes, and
recognition and measurement of contingencies.

We believe the estimates used in the preparation of these consolidated financial statements are reasonable; however, actual results could differ materially from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist of accounts and notes receivable, contract assets and cash. Historically, we have experienced an immaterial level of write-offs related to uncollectible accounts.

We hold the majority of our cash and cash equivalents accounts at three depository institutions. As of December 31, 2025, the aggregate balances in such accounts were $1.1 billion. Our balances with these and other institutions regularly exceed Federal Deposit Insurance Corporation insured limits for domestic deposits and various deposit insurance programs in Australia, Canada, Germany, and the United Kingdom, among others. To manage the related credit exposure, management continually monitors the creditworthiness of the financial institutions where we have deposits.

Major Customers and Suppliers

No customer represented more than 10% of total net sales for the years ended December 31, 2025, 2024 or 2023. At December 31, 2025 and 2024, no customer represented more than 10% of the aggregate balance of accounts and notes receivable and contract assets. For additional details, refer to Note 2.

We currently purchase both off-the-shelf and custom components, including finished circuit boards, injection-molded plastic components, small machined parts, custom cartridge components, electronic components and sub-assemblies from suppliers located in the United States, Taiwan, Mexico, China, Germany and Vietnam, among others. We acquire most of our components on a purchase order basis and do not currently have significant long-term purchase contracts with most component suppliers.

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Segment Information

Effective January 1, 2025, we realigned our business into two reportable segments, Connected Devices and Software and Services (the “Segment Realignment”). Prior to the Segment Realignment, our two reportable segments were TASER and Software and Sensors. As a result of the Segment Realignment, we have recast our segment and other relevant disclosures for the years ended December 31, 2024 and 2023 to conform to the new presentation.

Reportable segments are determined based on discrete financial information provided to our Chief Executive Officer who is our chief operating decision maker (“CODM”). In deciding how to allocate resources and assess performance, the CODM reviews adjusted gross margin by segment to evaluate segment profitability, identify cost trends and make operational decisions to support our segments. Accordingly, the segment measure of profit and loss used by the CODM is adjusted gross margin, defined as gross margin before stock-based compensation expense, amortization of acquired intangible assets, inventory step-up amortization related to acquisitions, payroll taxes related to the Axon Enterprise, Inc. Employee eXponential Stock Plan vesting (the “Employee XSP”), and non-recurring severance costs. For additional details, refer to Note 18.

In addition, the CODM reviews consolidated financials and revenue by major geography and product and service lines. Consolidated financials provide a holistic view of our overall financial health to guide capital allocation and entity-wide decisions. Disaggregated views of revenue by major geography and product line support the evaluation of specific market and product performance to understand customer trends. There are no operating segments that are aggregated, and there are no inter-segment sales. Assets and other expense items, such as research and development and selling, general, and administrative expenses, are not provided to the CODM by segment, as our CODM does not evaluate our operating segments using this discrete information. As such, these items are not relevant to adjusted gross margin leveraged by the CODM to assess segment performance. As a result, they are not disclosed by segment. We perform an analysis of our reportable segments at least annually.

Geographic Information

Sales to international customers are often transacted in foreign currencies and are attributed to each country based on the shipping address of the distributor or customer. For the years ended December 31, 2025, 2024 and 2023, no individual country outside the United States represented more than 10% of total net sales. For additional details, refer to Note 2.

Most of our long-lived assets, including property, plant and equipment and right-of-use lease assets are located within the United States. International long-lived assets are immaterial. Additionally, the majority of our revenues are generated within the United States.

Cash, Cash Equivalents and Investments

We have cash, as well as cash equivalents and investments, which at December 31, 2025 comprise money market funds, U.S. Treasury bills, marketable securities, agency bonds, term deposits, corporate bonds, commercial paper, and certificates of deposit. We place our cash and cash equivalents with high quality financial institutions. Although we deposit our cash with multiple financial institutions, our deposits regularly exceed federally insured limits. Cash and cash equivalents include funds on-hand and highly liquid investments purchased with initial maturity of three months or less. Short-term investments include securities with an expected maturity date within one year of the balance sheet date that do not meet the definition of a cash equivalent, and long-term investments are securities with an expected maturity date greater than one year and less than three years in accordance with our investment policy.

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We report available-for-sale debt investments at fair value as of each balance sheet date and record any unrealized gains or losses within accumulated other comprehensive loss as a component of stockholders’ equity. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (loss), net within the consolidated statements of operations and comprehensive income. Income tax effects are released from accumulated other comprehensive loss for unrealized gains or losses when the gains or losses are realized and are taxed at the statutory rate based on jurisdiction of the underlying transaction. When the fair value is below the amortized cost of an available-for-sale investment, an estimate of expected credit losses is made. Credit losses are recognized through the use of an allowance for credit losses account in the consolidated balance sheets and subsequent improvements in expected credit losses are recognized as a reversal of an amount in the allowance account. If we have the intent to sell the security or it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis, then the allowance for the credit loss is written-off and the excess of the amortized cost basis of the asset over its fair value is recorded in the consolidated statements of operations and comprehensive income. We do not intend to sell these investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases. There were no credit losses recorded on our investment portfolio during the years ended December 31, 2025, 2024 and 2023.

We have an investment in marketable equity securities, which is reported at fair value as of each balance sheet date. Changes in fair value are recorded as unrealized gain or loss on marketable securities in other income (loss), net in the consolidated statements of operations and comprehensive income.

Restricted Cash

Restricted cash balances were $12.2 million and $11.9 million as of December 31, 2025 and December 31, 2024, respectively. The restricted cash balance at December 31, 2025 includes a $9.7 million payment held in escrow related to the planned construction of our headquarters building in Scottsdale, Arizona. Restricted cash also includes funds held in international bank accounts for various operating and financing activities. Restricted cash is included in prepaid expenses and other current assets on the consolidated balance sheets.

Inventory

Inventories are stated at the lower of cost or net realizable value, using a standard cost method which approximates the first-in, first-out method. Additional provisions are made to reduce excess, obsolete or slow-moving inventories to their net realizable value. These provisions are based on our best estimate after considering historical demand, projected future demand, inventory purchase commitments, industry and market trends, among other factors. We evaluate for abnormal costs due to excess production capacity and treat such costs as period costs.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Additions and improvements are capitalized, while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is calculated using the straight-line method over the estimated economic life.

Software Development Costs

We expense software development costs, including costs to develop software products or the software component of products and services to be marketed to external users, before technological feasibility of such products is reached.

Software development costs also include costs to develop software programs to be used solely to meet our internal needs and applications. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the intended function. Additionally, we capitalize qualifying costs incurred for upgrades and enhancements to existing software that result in additional functionality. Costs related to preliminary project planning activities, post-implementation activities, maintenance and minor modifications are expensed as incurred. Internal-use software development costs are amortized on a straight-line basis over the estimated useful life of the software.

We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

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Leases

We determine if a contract contains a lease at inception. At commencement, lease contracts are evaluated for classification as an operating or finance lease. Operating lease right-of-use (“ROU”) assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, we use the portfolio approach in determining the discount rate used to present value lease payments. We give consideration to our notes payable, line of credit, macroeconomic factors, as well as publicly available data for instruments with similar characteristics when estimating our incremental borrowing rates. The operating lease ROU asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives.

We have operating leases for office space, manufacturing and logistical functions. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. We do not have any material variable lease costs associated with our operating leases. For leases beginning on or after January 1, 2019, we account for lease components separately from non-lease components for all asset classes.

Our operating leases have remaining terms of less than one to approximately 12 years, some of which include one or more options to renew for up to 20 years, and some of which include options to terminate the leases within one year. The exercise of lease renewal options is at our sole discretion and such options are included in ROU assets and liabilities for renewal periods that are reasonably certain of exercise. Certain of these lease agreements include stated rental payment escalations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

We enter into sales-type finance leases as an alternative means to realize value for our body cameras and related accessories. For sales-type finance leases where we are the lessor, we recognize our selling profit on a gross basis at lease commencement within net sales from products and cost of product sales, respectively. Interest income is recognized over the lease term within interest income. The current and long-term portions of our investment in sales-type leases are included in prepaid expenses and other current assets and other long-term assets, respectively. Given the immateriality of our finance lease activity as of December 31, 2025 and December 31, 2024, respectively, no further disclosure considerations related to finance leases are necessary.

Valuation of Goodwill, Intangible and Long-lived Assets

We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets and identifiable intangible assets, excluding goodwill and intangible assets with indefinite useful lives, may warrant revision or that the remaining balance of these assets may not be recoverable. Such events and circumstances could include a change in the product mix, a change in the way products are created, produced or delivered, or a significant change in the way products are branded and marketed. In performing the review for recoverability, we estimate the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The amount of impairment loss, if impairment exists, is calculated based on the excess of the carrying amounts of the assets over their estimated fair values computed using discounted cash flows.

Finite-lived intangible assets and other long-lived assets are amortized using the straight-line method over the estimated useful life. We do not amortize goodwill and intangible assets with indefinite useful lives; rather such assets are tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. We test goodwill and intangible assets for impairment on an annual basis on December 31, 2025 and on an interim basis when certain events and circumstances exist.

During the years ended December 31, 2025, 2024 and 2023, long-lived asset impairment charges were immaterial.

No impairment charges were recognized related to goodwill or intangible assets during the years ended December 31, 2025, 2024 or 2023.

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Customer Deposits

We require deposits in advance of shipment for certain customer sales orders. Additionally, customers may elect to make deposits with us related to contracts for our products and services that were not executed as of the end of a reporting period. Customer deposits are included in other current liabilities in the consolidated balance sheets.

Revenue Recognition

We derive revenue from two primary sources: (1) SaaS offerings which include digital evidence management, productivity solutions, and real-time operations capabilities, and (2) the sale of devices, accessories, and related extended warranties across our product portfolio, which includes TASER, personal sensors, and platform solutions. To a lesser extent, we also recognize revenue from training, professional services and other services ancillary to our core offerings.We offer to sell our products and services on a standalone basis, but our customers often prefer to bundle our integrated hardware products and services together in a single transaction that allows them to make payments over a multi-year period. We apply the five-step model outlined in ASC 606. For additional discussion, refer to Note 2.

We enter into contracts that can include various combinations of products and services, each of which is generally distinct and accounted for as a separate performance obligation. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using our estimate of the SSP of each distinct good or service in the contract. Revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Performance obligations to deliver hardware products are generally satisfied at the point in time we ship the product, as this is when the customer obtains control of the asset under our standard terms and conditions. In certain contracts with non-standard terms and conditions, these performance obligations may not be satisfied until delivery or formal customer acceptance occurs. Cost of product sales is recognized when control of hardware products or accessories has transferred to the customer. Performance obligations to fulfill service-type extended warranties and provide our SaaS offerings, including Axon Evidence and other cloud services, are generally satisfied over time as the customer receives and consumes the benefits of these services over the stated service period. Additionally, we offer customers the ability to purchase CED cartridges and certain services on an unlimited as-requested basis over the contractual term, which represents a stand-ready obligation satisfied over time. Payment terms and conditions vary by contract type and geography, but our standard terms are that payments are due within 30 days from the date of invoice.

When partners or vendors are involved in providing goods and services to our customers; we apply the principal versus agent guidance in ASC 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent. We also consider if distributors obtain control of specified goods or services prior to passing them on to end customers. If they do, then we account for the distributor as our customer for ASC 606 purposes.

Our contracts with certain municipal government customers may also be subject to budget appropriation, other contract cancellation clauses or optional renewal periods. In contracts where the customer’s performance is subject to budget appropriation clauses, consistent with historical experience we generally consider the likelihood of non-appropriation to be remote when determining the contract term and transaction price.

Contract Assets and Liabilities

Because of the nature of our multi-year subscription programs with various product and service performance obligations and multi-year payment plans, the timing of revenue recognition may differ from the timing of invoicing to customers. We generally have an unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing.

Contract assets generally result from our subscription programs where we satisfy a hardware performance obligation upon shipment to the customer, and the right to payment of the portion of the transaction price allocated to that hardware performance obligation is conditional on our future performance of other services under the contract. Contract asset amounts that will be invoiced during the 12-month period from the balance sheet date are classified as current assets and the remaining portion is recorded within other long-term assets on our consolidated balance sheets.

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Contract liabilities generally consist of deferred revenue on our subscription programs where we generally invoice customers at the beginning of each annual contract period and record a receivable at the time of invoicing when there is an unconditional right to consideration. Deferred revenue is composed mainly of unearned revenue related to our SaaS offerings, service-type extended warranties, stand-ready obligations to provide CED cartridges, rights to future CED, and rights to future hardware shipments in our subscription programs. Deferred revenue that is expected to be recognized as revenue during the 12-month period from the balance sheet date is recorded as current deferred revenue and the remaining portion is recorded as long-term deferred revenue.

Areas of Judgment

The contractual term of our revenue arrangements is based on the period in which there are presently enforceable rights and obligations, which could be shorter than the stated contractual term if our customers can terminate the contracts for convenience without having to pay a substantive termination penalty. In contracts with no substantive termination penalty, we also consider if the option for our customer to purchase additional goods or services represents an additional performance obligation in the form of a material right. Determining the revenue recognition for these types of contracts may require significant judgment to determine the contract term including the existence of substantive termination penalties, determining the transaction price, and identifying performance obligations.

At times, customers may request changes that either amend, replace or cancel existing contracts. Judgment is required to determine whether the specific facts and circumstances within the contracts require the changes to be accounted for as a separate contract or as a modification. Generally, contract modifications containing additional goods and services that are determined to be distinct and sold at their SSP are accounted for as a separate contract. For contract modifications where both criteria are not met, the original contract is updated and the required adjustments to revenue and contract assets, liabilities and other accounts are made accordingly.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require judgment. We typically consider hardware products such as CEDs, cameras, sensors and related accessories to be separately identifiable from each other as well as from extended warranties on these products and the subscriptions to our SaaS offerings.

Judgment is required to determine the SSP for each distinct performance obligation. We analyze stand-alone sales of our products and services as a basis for estimating the SSP of our products and services and then use that SSP as the basis for allocating the transaction price when our products and services are sold together in a contract with multiple performance obligations. In instances where the SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information including cost plus margin, market comparisons and other observable inputs.

Practical Expedients and Elections

We recognize shipping costs as an expense in cost of product sales when the control of hardware products or accessories has transferred to the customer.

Sales tax collected on sales is netted against government remittances and, thus, recorded on a net basis.

In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we assess whether there is any implied financing within the transaction, and if so, recognize related interest income, or expense, on the transaction. We do not adjust the transaction price for the effects of a significant financing component when the period is one year or less. The amount of imputed interest is immaterial for the years ended December 31, 2025, 2024, and 2023.

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Reserve for Expected Credit Losses

Sales are typically made on credit, and we generally do not require collateral. We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for accounts and notes receivable and contract assets is developed using historical collection experience, published or estimated credit default rates for entities that represent our customer base, current and future economic and market conditions and a review of the current status of customers’ trade accounts receivables. We review receivables for U.S. and international customers separately to better reflect different published credit default rates and economic and market conditions. Additionally, specific reserve amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include account reconciliation, dispute resolution, payment confirmation, consideration of customers’ financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. This reserve represents our best estimate and application of judgment considering a number of factors, including those listed above. In the event that actual uncollectible amounts differ from our estimates, additional expense could be necessary. The expected credit losses, which totaled $7.8 million, $5.6 million and $4.0 million as of December 31, 2025, 2024 and 2023 respectively, are deducted from the amortized cost basis of accounts and notes receivable and contract assets to present the net amount expected to be collected. Reserve activity during the years ended December 31, 2025, 2024 and 2023 was immaterial.

Deferred Commissions

We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of sales commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the expected recognition timing of the revenue for the underlying performance obligations.

For contract costs related to performance obligations with an amortization period of one year or less, we apply the practical expedient to expense these sales commissions when incurred. These costs are recognized as incurred within SG&A expenses in the consolidated statements of operations and comprehensive income. For additional discussion, refer to Note 2.

Cost of Product and Service Sales

Cost of product sales represents manufacturing costs consisting of materials, labor and overhead related to finished goods and components. Shipping costs incurred related to product delivery are also included in cost of products sold. Cost of service sales includes third party cloud services, software maintenance and support costs – including personnel costs, associated with supporting Evidence.com and other software related services.

Warranty Reserves

We warranty our conducted energy devices (“CEDs”), Axon cameras and other hardware on a limited basis for a period of primarily one year after purchase. We estimate and record a liability for standard warranty at the time products are sold. The estimates are based on historical experience and reflect our best estimates of costs to be incurred over the warranty period. Adjustments may be required when actual or projected costs differ. Variations in component failure rates, repair costs and the point of failure within the product life cycle are key drivers that impact our periodic re-assessment of the warranty liability.

Revenue related to separately priced extended warranties is initially recorded as deferred revenue at its allocated amount and subsequently recognized as net sales on a straight-line basis over the warranty service period. Costs related to extended warranties are charged to cost of product sales when the costs become probable and can be reasonably estimated.

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Changes in our estimated warranty reserve were as follows (in thousands):


	Year Ended December 31,
	2025		2024		2023
Balance, beginning of period	$	8,284	$	7,374	$	811
Utilization of reserve	(9,054)		(5,992)		(1,499)
Adjustment to reserve due to business combinations	—		1,311		—
Warranty expense	11,628		5,591		8,062
Balance, end of period	$	10,858	$	8,284	$	7,374

Research and Development Expenses

R&D costs that do not meet the qualifications to be capitalized are expensed as incurred. R&D costs include payroll costs and stock-based compensation for the personnel involved in R&D functions, as well as indirect manufacturing costs and supplies, consulting services and internal infrastructure costs incurred in connection with product research and development. We incurred R&D expense of $684.3 million, $441.6 million and $303.7 million in the years ended December 31, 2025, 2024 and 2023, respectively.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement amounts of assets and liabilities and their respective tax bases, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced through the establishment of a valuation allowance if, based upon available evidence, it is determined that it is more likely than not that the deferred tax assets will not be realized. We use factors to assess the likelihood of realization of deferred tax assets such as the forecast of future taxable income and available tax planning that could be implemented to realize the deferred tax assets.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We also assess whether uncertain tax positions, as filed, could result in the recognition of a liability for possible interest and penalties. We recognize interest and penalties related to unrecognized tax benefits within the provision (benefit) for income tax expense line in the consolidated statements of operations and comprehensive income. For additional details, refer to Note 12.

Fair Value Measurements and Financial Instruments

We use the fair value framework that prioritizes the inputs to valuation techniques for measuring financial assets and liabilities measured on a recurring basis and for non-financial assets and liabilities when these items are re-measured. Fair value is considered to be the exchange price in an orderly transaction between market participants, to sell an asset or transfer a liability at the measurement date. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.
Level 2 – Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices from markets that are not active for assets or liabilities that are identical or similar to the assets or liabilities being measured. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

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Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about inputs that market participants would use in pricing an asset or liability.

Changes in fair value of our investment in marketable securities are recorded in other income (loss), net in the consolidated statements of operations and comprehensive income. Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. For additional details regarding our cash equivalents and investments, refer to Note 3.

We have corporate-owned life insurance policies which are used to fund our deferred compensation plan. The balances of these policies were $9.9 million and $8.4 million as of December 31, 2025 and 2024, respectively, and are included in other long-term assets in the consolidated balance sheets. We determine the fair values of our insurance contracts by obtaining the cash surrender value of the contracts from the issuer, a Level 2 valuation technique.

We have strategic equity investments in various non-public companies as of December 31, 2025 and 2024. The estimated fair value of the equity investments is determined based on Level 3 inputs, utilizing available observable data as discussed further in Note 7.

The fair value of our notes payable is determined based on the closing trading price of the respective notes payable as of the last day of trading for each period. We consider the fair value to be a Level 2 measurement, as the fair value is primarily affected by the trading price of our common stock and market interest rates. For additional details regarding our notes payable, refer to Note 10.

Our financial instruments also include accounts and notes receivable, accounts payable and accrued liabilities. Due to the short-term nature of these instruments, their fair values approximate their carrying values on the consolidated balance sheets.

Strategic Investments

Strategic investments include equity investments in various non-public technology-driven companies. We generally account for strategic equity investments under the ASC 321 measurement alternative for equity securities without readily determinable fair values. The equity investments are measured at cost less impairment, adjusted for observable price changes and are assessed for impairment whenever events or changes in circumstances indicate that the fair value may be less than its carrying value. Adjustments are recorded within other income (loss), net in the consolidated statements of operations and comprehensive income.

Certain strategic equity investments in unconsolidated investees are accounted for under the equity method of accounting if we have the ability to exercise significant influence over the operating and financial policies of the investee. These investments are initially measured at cost and are adjusted by our share of equity in the reported net income or losses of the investee.

We evaluate our investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If we conclude that an investee is a VIE, we evaluate our power to direct the activities of the investee, our obligation to absorb the expected losses of the investee and our right to receive the expected residual returns of the investee to determine whether we are the primary beneficiary of the investee. If we are the primary beneficiary of a VIE, we will consolidate such entity and reflect the non-controlling interest of other beneficiaries of that entity.

We determine whether we are the primary beneficiary of a VIE by performing an analysis that principally considers:

The VIE’s purpose, design, and risks the VIE was designed to create and pass through to its variable interest holders;
The VIE’s capital structure;
The terms between the VIE and its variable interest holders and other parties involved with the VIE; and
Related party affiliations.

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The primary purpose of our unconsolidated VIE investments is to create strategic partnerships with market-leading providers of public safety technology solutions. We present all variable interests in unconsolidated VIEs within strategic investments on the consolidated balance sheets. We have also provided financial support to the unconsolidated VIEs in exchange for investments in debt and equity investments. Financial support provided to the unconsolidated VIEs is used to continue to finance their operations.

Stock-Based Compensation

We utilize stock-based compensation for key employees and non-employee directors as a means of attracting and retaining talented personnel. We recognize compensation expense for our stock-based compensation program, which includes grants of RSUs, PSUs, XSUs and stock options. Our stock-based compensation awards are classified as equity and are measured at the fair market value of the underlying common stock at the grant date. When determining the grant date fair value of stock-based awards, we consider whether an adjustment is required to the observable market price or volatility of our common stock used in the valuation as a result of material non-public information. Payments for employees’ tax obligations are reflected as a financing activity within the consolidated statements of cash flows. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

RSUs

Stock-based compensation expense for RSUs is measured based on the closing fair market value of our common stock on the date of grant. We recognize stock-based compensation expense over the award’s requisite service period using the straight-line attribution method for service-based RSUs. Service-based grants generally have a vesting period of one to three years and a contractual maturity of ten years. We account for forfeitures as they occur as a reduction to stock-based compensation expense and additional paid-in-capital.

PSUs - inclusive of XSUs

Stock-based compensation expense for standard PSUs is measured based on the closing fair market value of our common stock on the date of grant. We recognize stock-based compensation expense over the award's requisite service period, which is defined as the longest explicit, implicit or derived service period based on our estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date. The vesting of our PSUs is generally contingent upon the achievement of certain performance criteria related to our operating performance, as well as successful and timely development and market acceptance of future product introductions. For PSUs containing only performance conditions, compensation cost is recognized using the graded attribution model over the explicit or implicit service period. In addition, certain of the PSUs have further service requirements subsequent to achievement of the performance criteria.

Our performance-based restricted stock units include XSUs granted under the Employee XSP and the CEO Performance Award. On May 10, 2024, our shareholders approved the Employee XSP. The Employee XSP includes an approved pool of shares of common stock reserved for grants of awards of XSUs to employees. The grants of XSUs are grants of performance-based RSUs. The program includes seven substantially equal tranches that will vest upon certification by the Compensation Committee of the Board of Directors (the “Compensation Committee”) upon achievement of three independent vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service conditions.

Additionally, on May 10, 2024, shareholders approved a grant of XSUs to our CEO, Patrick Smith (the “CEO Performance Award”). The stock price goals and operational goals applicable to the CEO Performance Award are identical to those under the Employee XSP, but Mr. Smith is subject to a longer minimum required service period.

Stock-based compensation expense associated with the XSUs is recognized over the requisite service period, which is considered the longest explicit, implicit or derived service period for each respective tranche. We utilized Monte Carlo simulations to evaluate a range of possible future stock price goals over the term of the awards at each of the respective grant dates. The median of all iterations of the simulation was used as the basis for the derived service period for each tranche. The requisite service period for each tranche is subject to review on a quarterly basis, and changes to the requisite service period are made if it is probable that performance conditions will be achieved within a different time period. Accordingly, any unrecognized compensation cost is recognized prospectively over the remaining requisite service period.

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We measured the grant date fair value of each tranche using a Monte Carlo simulation with the following assumptions: risk-free interest rate of 3.6% – 4.5%, expected volatility of 41.0% – 51.8%, expected term of 7.0 – 8.6 years, and dividend yield of 0.0%. We utilized a blended volatility assumption, equally weighting both historical volatility and implied volatility, resulting in a weighted-average expected volatility of 41.9%. An illiquidity discount is considered in our estimate of the fair value of shares during post-vesting holding periods. The mandatory post-vesting holding periods for XSUs will lapse on the earlier of (i) December 31, 2030, or (ii) the date that a subsequent tranche vests and settles. Therefore, the illiquidity discount is dependent upon projected tranche vesting dates, determined via the Monte Carlo simulation. This simulation is based on a subjective assessment of our forward-looking financial projections, taking into consideration statistical analysis.

Even though no tranche with respect to either XSUs granted under the Employee XSP or the CEO Performance Award vests unless the applicable stock price goal, operational goal and corresponding minimum service condition are achieved, stock-based compensation expense is recognized when an operational goal is considered probable of attainment regardless of the achievement of the stock price and minimum service conditions. As of December 31, 2025, we consider some of the tranches probable and will recognize the expense ratably over their respective expected vesting periods. This may result in volatility and higher upfront expense recognition and is subject to change based on periodic probability assessments. Tranches 1 and 2 vested and settled in June 2025 and December 2025, respectively. As of December 31, 2025, for certain grantees, the shares acquired upon vesting and settlement of Tranche 2 are subject to a holding period requirement under the plan, which will expire on the earlier of (i) December 31, 2030 and (ii) the date on which the subsequent tranche vests and settles. Refer to Note 14 for further discussion.

Performance-based grants generally have vesting periods ranging from one to eight years and a contractual maturity of ten years. We account for forfeitures as they occur as a reduction to stock-based compensation expense and additional paid-in-capital.

Stock Options

On May 24, 2018, our shareholders approved the Board of Directors’ grant of 6.4 million performance-based stock options to our CEO, Patrick Smith, (the “2018 CEO Performance Award”). The 2018 CEO Performance Award consisted of twelve substantially equal tranches with a vesting schedule based entirely on the attainment of both operational goals (performance conditions) and market capitalization goals (market conditions), assuming continued employment either as the Chief Executive Officer or as both Executive Chairman and Chief Product Officer and service through each vesting date. For performance-based stock options with a vesting schedule based entirely on the attainment of both performance and market conditions, stock-based compensation expense was recognized for each pair of performance and market conditions over the longer of the expected achievement period of the performance and market conditions, beginning at the point in time that the relevant performance condition is considered probable of achievement. The fair value of such awards was estimated on the grant date using Monte Carlo simulations. The 2018 CEO Performance Award was fully vested as of June 30, 2023.

Business Combinations

In business combinations achieved in stages, our previously held equity interests are remeasured to fair value at the respective acquisition date using Level 3 valuation techniques. Gains or losses associated with such remeasurement are recorded in other income (loss), net, in our consolidated statements of operations and comprehensive income. Transaction costs for our business combinations are expensed as incurred in our consolidated statements of operations and comprehensive income.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The goodwill generated from our business combinations is primarily attributable to synergies that are expected to be achieved from the integration of the acquired businesses.

During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations and comprehensive income. For additional details, refer to Note 19.

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Income per Common Share

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods presented. Diluted income per share reflects the potential dilution from outstanding stock-based awards, our 2027 Notes, and warrants to acquire shares of our common stock (the “Warrants” or “2027 Warrants”). The effects of outstanding stock-based awards, our 2027 Notes, and our 2027 Warrants are excluded from the computation of diluted net income per share in periods in which the effect would be antidilutive. For additional information regarding our 2027 Notes and 2027 Warrants, refer to Note 10.

The calculation of the weighted average number of shares outstanding and earnings per share is as follows (in thousands except per share data):


	For the Year Ended December 31,
	2025		2024		2023
Numerator for basic and diluted earnings per share:
Net income	$	124,656	$	377,034	$	175,783

Denominator:
Weighted average shares outstanding	78,081		75,748		74,195
Dilutive effect of stock-based awards	1,826		1,435		1,261
Dilutive effect of 2027 Notes (1)	990		1,139		—
Dilutive effect of 2027 Warrants	1,473		236		—
Diluted weighted average shares outstanding	82,370		78,558		75,456

Net income per common share:
Basic	$	1.60	$	4.98	$	2.37
Diluted	$	1.51	$	4.80	$	2.33

(1)For the year ended December 31, 2025, the impacts of early repurchases of portions of the 2027 Notes are weighted based upon the number of days in each corresponding period of time for (a) the period between January 1, 2025 and the closing date of each of the respective repurchases, which include the total amount of shares issuable upon a conversion of all of the 2027 Notes; and (b) subsequent to the closing date of each of the respective repurchases through December 31, 2025, which include the amount of shares issuable upon a conversion of the 2027 Notes that remain outstanding after the respective early repurchases. Refer to Note 10 for additional details.

Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so would be antidilutive are as follows (in thousands):


	For the Year Ended December 31,
	2025	2024	2023
Stock-based awards	3,140	4,132	1,014
2027 Notes	141	1,877	3,017
2027 Warrants	1,544	2,781	3,017
Total potentially dilutive securities	4,825	8,790	7,048

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Accounting Guidance and Disclosure Rules - Recently Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring (1) consistent categories and additional disaggregation of information in the effective tax rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. The provisions of ASU 2023-09 are effective for our Annual Report on Form 10-K for the year ending December 31, 2025. Axon has adopted ASU 2023-09 prospectively for the year ending December 31, 2025; prior periods have not been recast. Refer to Note 12 for additional details.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2024-04, Debt (Topic 470): Debt with Conversion and Other Options. ASU 2024-04 clarifies the assessment of whether certain transactions should be accounted for as an induced conversion or debt extinguishment. The provisions of ASU 2024-04 are effective for annual reporting periods beginning after December 15, 2025, with early adoption permitted. We elected to early adopt ASU 2024-04 in the first quarter of 2025 and applied the standard when assessing the accounting treatment for our convertible debt repurchase. Refer to Note 10 for additional details.

Accounting Guidance and Disclosure Rules - Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures. ASU 2024-03 is intended to enhance the level of detail disclosed related to expense categories and provide additional disclosure of expenses by nature. The provisions of ASU 2024-03 are effective for annual periods beginning after December 15, 2026, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

In July 2025, the FASB issued ASU 2025‑05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025‑05 is intended to provide a practical expedient for estimating expected credit losses on current trade receivables and current contract assets. The provisions of ASU 2025‑05 are effective for annual periods beginning after December 15, 2025, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In September 2025, the FASB issued ASU 2025‑06, Intangibles - Goodwill and Other - Internal‑Use Software (Sub-topic 350-40): Targeted Improvements to the Accounting for Internal‑Use Software. ASU 2025‑06 is intended to modernize the internal‑use software model primarily by removing software development stages and introducing a “probable-to-complete recognition threshold.” The provisions of ASU 2025‑06 are effective for annual periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. ASU 2025-10 is intended to established guidance on the recognition, measurement and presentation of government grants received by business entities. The provisions of ASU 2025-10 are effective for annual periods beginning after December 15, 2028, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 is intended to improve the navigability and clarify guidance of required interim disclosures. The provisions of ASU 2025-11 are effective for annual periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

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Note 2 - Revenues

Nature of Products and Services

The following tables present our revenues by primary product and service offering and reportable segment (in thousands). All periods presented reflect the impact of the Segment Realignment discussed in Note 1.


	Year Ended December 31, 2025						Year Ended December 31, 2024
	Connected Devices		Software and Services		Total		Connected Devices		Software and Services		Total
TASER (1)	$	913,883	$	—	$	913,883	$	750,141	$	—	$	750,141
Personal Sensors (2)	397,035		—		397,035		316,938		—		316,938
Platform Solutions (3)	265,946		—		265,946		154,213		—		154,213
Software and Services	—		1,202,672		1,202,672		—		861,234		861,234
Total	$	1,576,864	$	1,202,672	$	2,779,536	$	1,221,292	$	861,234	$	2,082,526


	Year Ended December 31, 2023
	Connected Devices		Software and Services		Total
TASER (1)	$	573,158	$	—	$	573,158
Personal Sensors (2)	242,625		—		242,625
Platform Solutions (3)	148,219		—		148,219
Software and Services	—		596,697		596,697
Total	$	964,002	$	596,697	$	1,560,699

(1)'TASER' includes TASER handles, cartridges, and related extended warranties.

(2)'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.

(3)'Platform Solutions' primarily includes fleet in-car video, interview room, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.

The following table presents our revenues disaggregated by geography (in thousands):


	Year Ended December 31,
	2025				2024				2023
United States	$	2,305,012	83	%	$	1,775,194	85	%	$	1,335,516	86	%
Other countries	474,524		17		307,332		15		225,183		14
Total	$	2,779,536	100	%	$	2,082,526	100	%	$	1,560,699	100	%

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Contract Balances

As of December 31, 2025 and December 31, 2024, our contract assets, net were $760.9 million and $487.8 million, respectively. During the year ended December 31, 2025, our contract assets balance increased by $273.1 million, or 56.0%, primarily due to increased sales under subscription plans. As of December 31, 2025 and December 31, 2024, our contract liabilities (deferred revenue) were $1,074.6 million and $973.6 million, respectively. During the year ended December 31, 2025, our contract liabilities balance increased by $101.0 million, or 10.4%, primarily due to increased subscription invoicing in advance of fulfilling performance obligations to customers.

During the years ended December 31, 2025 and 2024, and 2023, we recognized revenue of $682.4 million, $499.7 million, and $358.0 million, respectively, from the beginning contract liabilities balance as of December 31, 2024, 2023 and 2022 respectively.

Remaining Performance Obligations

As of December 31, 2025, we had approximately $9.9 billion of remaining performance obligations, which included both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under ASC 606 as of December 31, 2025. We currently expect to recognize approximately 20% - 25% of this balance over the next 12 months, and expect the remainder to be substantially recognized over the following ten years, subject to risks related to delayed deployments, budget appropriation or other contract cancellation clauses.

Costs to Obtain a Contract

We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of sales commissions. As of December 31, 2025 and 2024, our assets for costs to obtain contracts were as follows (in thousands):


	December 31, 2025		December 31, 2024
Current deferred commissions (1)	$	86,614	$	59,025
Deferred commissions, net of current portion (2)	245,900		154,894
	$	332,514	$	213,919

(1)Current deferred commissions are included within prepaid expenses and other current assets on the consolidated balance sheets.

(2)Deferred commissions, net of current portion, are included in other long-term assets on the consolidated balance sheets.

During the years ended December 31, 2025, 2024, and 2023, we recognized $65.9 million, $50.8 million, and $34.1 million, respectively, of amortization related to deferred commissions. These costs are recorded within SG&A expenses in the consolidated statements of operations and comprehensive income.

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Note 3 - Cash, Cash Equivalents and Investments

The following table summarizes our cash, cash equivalents, marketable securities and available-for-sale debt investments at December 31, 2025 (in thousands):


	As of December 31, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities		Short-Term Investments
Cash	$	168,294	$	—	$	—	$	168,294	$	168,294	$	—	$	—

Level 1:
Money market funds	821,711		—		—		821,711		821,711		—		—
U.S. Treasury bills	231,766		69		—		231,835		200,200		—		31,635
Marketable securities	15,093		12,120		—		27,213		—		27,213		—
Agency bonds	6,456		3		—		6,459		—		—		6,459

Subtotal	1,075,026		12,192		—		1,087,218		1,021,911		27,213		38,094
Level 2:
Term deposits	385,942		—		—		385,942		10,942		—		375,000
Corporate bonds	72,322		42		(3)		72,361		—		—		72,361
Commercial paper	18,462		—		—		18,462		—		—		18,462
Certificates of deposit	1,500		—		—		1,500		—		—		1,500

Subtotal	478,226		42		(3)		478,265		10,942		—		467,323
Total	$	1,721,546	$	12,234	$	(3)	$	1,733,777	$	1,201,147	$	27,213	$	505,417

During the year ended December 31, 2025, proceeds from the sale of available-for-sale securities were $24.0 million. As of December 31, 2025, we had $9.7 million of available-for-sale debt investments with unrealized losses, of which none have been in a continuous unrealized loss position for 12 months or longer.

During the year ended December 31, 2025, net proceeds from the sales of marketable securities were $124.6 million, representing a $49.7 million net realized gain from the time of purchase. During the year ended December 31, 2025, net losses of $40.4 million were recognized for securities sold in the period within other income (loss), net in the consolidated statements of operations and comprehensive income. During the year ended December 31, 2025, we recorded an unrealized loss of $6.0 million on marketable securities still held as of the reporting date.

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The following table summarizes our cash, cash equivalents and available-for-sale investments at December 31, 2024 (in thousands):


	As of December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Cash and Cash Equivalents		Marketable Securities		Short-Term Investments
Cash	$	94,919	$	—	$	—	$	94,919	$	94,919	$	—	$	—

Level 1:
Money market funds	322,874		—		—		322,874		322,874		—		—
Marketable securities	90,000		108,270		—		198,270		—		198,270		—
U.S. Government bonds	75,994		7		(5)		75,996		—		—		75,996
U.S. Treasury bills	14,431		25		—		14,456		—		—		14,456
Agency bonds	996		—		—		996		—		—		996
Subtotal	504,295		108,302		(5)		612,592		322,874		198,270		91,448
Level 2:
Term deposits	136,480		—		—		136,480		11,480		—		125,000
Corporate bonds	122,018		10		(63)		121,965		24,075		—		97,890
Commercial paper	20,393		—		—		20,393		1,496		—		18,897
Subtotal	278,891		10		(63)		278,838		37,051		—		241,787
Total	$	878,105	$	108,312	$	(68)	$	986,349	$	454,844	$	198,270	$	333,235

As of December 31, 2024, we had $136.7 million of available-for-sale investments with unrealized losses, of which none have been in a continuous unrealized loss position for 12 months or longer. During the years ended December 31, 2024 and 2023, we recorded unrealized gains on marketable securities of $120.3 million and $38.7 million, respectively.

Note 4 - Inventory

Inventory consisted of the following at December 31, 2025 and December 31, 2024 (in thousands):


	December 31, 2025		December 31, 2024
Raw materials	$	152,680	$	86,840
Work-in-process	8,866		6,230
Finished goods	180,265		172,246
Total inventory	$	341,811	$	265,316

During the years ended December 31, 2025, 2024, and 2023, we recorded provisions to reduce inventories to their lower of cost or net realizable value of approximately $4.1 million, $17.8 million and $5.4 million, respectively.

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Note 5 - Property and Equipment

Property and equipment consisted of the following at December 31, 2025 and December 31, 2024 (in thousands):


	Estimated Useful Life	December 31, 2025		December 31, 2024
Land	N/A	$	51,612	$	51,612
Building and leasehold improvements	3 - 39 years	62,373		52,065
Production equipment	1 - 5 years	228,877		148,922
Computers, equipment and software	3 - 5 years	35,225		34,429
Furniture and office equipment	3 - 5 years	12,226		10,058
Vehicles	5 years	7,568		8,139
Capitalized internal software development costs	3 - 5 years	16,765		15,906
Construction-in-process	N/A	97,574		62,178
Total cost		512,220		383,309
Less: Accumulated depreciation		(181,241)		(135,985)
Property and equipment, net		$	330,979	$	247,324

Construction-in-process included $33.6 million related to the development of our headquarters facility in Scottsdale, Arizona as of both December 31, 2025 and December 31, 2024.

Depreciation and amortization expense related to property and equipment was $57.0 million, $39.4 million and $28.1 million for the years ended December 31, 2025, 2024, and 2023, respectively, of which $33.6 million, $21.4 million and $13.6 million was included in cost of sales for the respective years.

Note 6 - Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2025 and December 31, 2024 were as follows (in thousands):


	TASER		Software and Sensors		Connected Devices		Software and Services		Total
Balance at December 31, 2023	$	2,984	$	54,961	$	—	$	—	$	57,945
Goodwill acquired	—		701,695		—		—		701,695
Purchase accounting adjustments	—		(479)		—		—		(479)
Foreign currency translation adjustments	(131)		(2,192)		—		—		(2,323)
Balance at December 31, 2024	2,853		753,985		—		—		756,838
Reallocation of goodwill from Segment Realignment (1)	(2,853)		(753,985)		46,674		710,164		—
Goodwill acquired	—		—		4,733		612,295		617,028
Purchase accounting adjustments	—		—		(446)		(7,082)		(7,528)
Foreign currency translation adjustments	—		—		288		3,563		3,851
Balance at December 31, 2025	$	—	$	—	$	51,249	$	1,318,940	$	1,370,189

(1)Due to the Segment Realignment, the goodwill balances as of December 31, 2024 have been recast to conform to the new segment presentation. Refer to Note 1 for additional details.

There were no accumulated impairment losses as of December 31, 2025 and 2024.

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Intangible assets (other than goodwill) consisted of the following at December 31, 2025 and December 31, 2024 (in thousands):


		December 31, 2025						December 31, 2024
	Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable (definite-lived) intangible assets:
Developed technology	3 ‑ 8 years	$	183,122	$	(44,399)	$	138,723	$	118,322	$	(21,337)	$	96,985
Customer relationships	5 ‑ 10 years	41,329		(8,960)		32,369		33,223		(4,716)		28,507
Issued trademarks	3 ‑ 23 years	9,900		(3,856)		6,044		6,706		(1,784)		4,922
Issued patents	8 ‑ 26 years	3,017		(1,602)		1,415		2,931		(1,470)		1,461
Domain names	5 ‑ 10 years	3,043		(2,738)		305		3,043		(2,433)		610
Total amortizable		240,411		(61,555)		178,856		164,225		(31,740)		132,485
Non-amortizable (indefinite-lived) intangible assets:
In-process research and development (1)		16,600		—		16,600		41,000		—		41,000
Trademarks		1,068		—		1,068		1,068		—		1,068
Patents and trademarks pending		448		—		448		604		—		604
Total non-amortizable		18,116		—		18,116		42,672		—		42,672
Total intangible assets		$	258,527	$	(61,555)	$	196,972	$	206,897	$	(31,740)	$	175,157

(1) During the year ended December 31, 2025, $24.4 million of in-process research and development costs were placed into service.

Amortization expense of intangible assets was $29.8 million, $17.4 million and $4.5 million for the years ended December 31, 2025, 2024, and 2023, respectively. Estimated amortization for intangible assets with definite lives for the next five years ended December 31, and thereafter, is as follows (in thousands):


2026	$	39,510
2027	38,278
2028	36,046
2029	33,698
2030	22,181
Thereafter	9,143
Total	$	178,856

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Note 7 – Strategic Investments

During the year ended December 31, 2025, we closed a series of transactions to acquire additional equity interests in an existing strategic investee for an aggregate amount of $235.1 million.

During the first quarter of 2025, we recognized a gain of $167.4 million related to an observable price change of a separate existing strategic investee. Furthermore, we entered into a series of transactions to sell certain interests and recognized proceeds from the sales of $340.7 million for the year ended December 31, 2025. Previously unrealized gains of $320.8 million were realized from the collective sales, net of $1.3 million of transaction costs.

During the year ended December 31, 2025, a strategic investee completed a change-of-control transaction resulting in liquidation of the entity and distribution of consideration to its shareholders. In connection with the transaction, we received consideration of $37.2 million. We recognized a gain of $14.8 million from the sale to date, net of $0.1 million of transaction costs. Previously unrealized gains of $2.6 million were realized as a result of this sale.

The following tables provide details on the balance of strategic investments (in thousands):


	December 31, 2025		December 31, 2024
Equity securities:
Non-marketable equity securities	$	416,236	$	323,966
Debt securities:
Non-marketable debt securities	597		8,584
Total strategic investments	$	416,833	$	332,550

The life to date cumulative upward and downward adjustments to the carrying value of our strategic equity investments accounted for under the ASC 321 measurement alternative and still held as of the year ended December 31, 2025 were $15.7 million and $15.4 million, respectively.

As of the years ended December 31, 2025 and 2024, the carrying value of our variable interest assets in unconsolidated non-public VIEs was $9.4 million and $25.2 million, respectively. These balances reflect the maximum exposure to loss, which is limited to the carrying value of the interest.

The following tables summarize the gains and losses associated with our strategic investments during the years ended December 31, 2025, 2024, and 2023 (in thousands):


	Year Ended December 31,
	2025		2024		2023
Realized gains (losses) recognized on strategic investments during the period, net (1)	$	337,501	$	90,760	$	—
Reversal of prior period cumulative unrealized (gains) losses, net, for securities sold during the period (1)	(160,928)		390		—
Unrealized gains on strategic investments still held at the reporting date (2)	11,867		76,723		—
Unrealized losses, including impairments, on strategic investments still held at the reporting date	(2,048)		(4,986)		(82,525)
Gains (losses) on strategic investments, net	$	186,392	$	162,887	$	(82,525)

(1)Includes realized gains and reversal of prior unrealized gains of $2.6 million and $1.1 million, respectively, for a debt security strategic investment instrument due to a liquidation event for the year ended December 31, 2025.

(2)Includes unrealized gains of $0.1 million and $1.1 million related to debt security strategic investments for the years ended December 31, 2025 and 2024.

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Note 8 - Other Long-Term Assets

Other long-term assets consisted of the following at December 31, 2025 and December 31, 2024 (in thousands):


	December 31, 2025		December 31, 2024
Deferred commissions	$	245,900	$	154,894
Operating lease assets	99,513		44,567
Deferred cost of goods sold	29,085		14,123
Prepaid expenses and deposits	28,066		6,944
Cash surrender value of corporate-owned life insurance policies	9,914		8,398
Other	15,692		8,694
Total other long-term assets	$	428,170	$	237,620

Note 9 - Accrued Liabilities

Accrued liabilities consisted of the following at December 31, 2025 and December 31, 2024 (in thousands):


	December 31, 2025		December 31, 2024
Accrued commissions	$	150,811	$	88,237
Accrued bonus	78,403		59,780
Accrued third party product costs	73,497		6,728
Accrued salaries and benefits	35,251		25,233
Accrued interest	31,855		134
Accrued income and other taxes	27,339		27,863
Accrued inventory in transit	15,728		13,101
Accrued cloud hosting fees	14,049		10,673
Accrued warranty expense	10,858		8,284
Accrued consulting and IT fees	7,521		7,846
Other accrued expenses	65,226		31,314
Total accrued liabilities	$	510,538	$	279,193

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Note 10 – Notes Payable, Net

Notes payable, net, consisted of the following (in thousands):


	December 31, 2025		December 31, 2024
2030 Notes	$	1,000,000	$	—
2033 Notes	750,000		—
2027 Notes	81,110		690,000
Total principal	1,831,110		690,000
Unamortized debt issuance costs	(20,388)		(9,711)
Total carrying amount of notes payable, net	1,810,722		680,289
Less: current portion (1)	(80,552)		(680,289)
Long-term notes payable, net	$	1,730,170	$	—

(1)Pursuant to the terms of the 2027 Notes, as of December 31, 2025 and December 31, 2024, the last reported sale price per share of our common stock exceeded 130% of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Therefore, the 2027 Notes, net of unamortized debt issuance costs, were convertible and accordingly classified as current liabilities within the consolidated balance sheets as of December 31, 2025 and December 31, 2024. Furthermore, subsequent to the year ended December 31, 2025, we redeemed and converted all of the outstanding 2027 Notes on February 10, 2026, and February 11, 2026, respectively. As a result, we have no 2027 Notes outstanding following settlement of the aforementioned redemption.

2030 and 2033 Notes

In March 2025, we issued $1.0 billion aggregate principal amount of Senior Notes due 2030 (the “2030 Notes”) and $750.0 million aggregate principal amount of Senior Notes due 2033 (the “2033 Notes” and, together with the 2030 Notes, the “Senior Notes”) in a private offering. The 2030 Notes will mature on March 15, 2030 unless earlier redeemed or repurchased. Interest on the 2030 Notes accrues from March 11, 2025 and is payable semiannually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025, at a rate of 6.125% per year. The 2033 Notes will mature on March 15, 2033 unless earlier redeemed or repurchased. Interest on the 2033 Notes accrues from March 11, 2025 and is payable semiannually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025, at a rate of 6.250% per year. The total combined gross proceeds from the issuance of the Senior Notes was $1.75 billion, and after deducting initial purchasers’ discounts and commissions and other debt issuance costs of approximately $22.4 million, the total combined net proceeds were approximately $1.73 billion. The effective interest rate for the 2030 Notes and 2033 Notes was 6.42% and 6.45%, respectively, including interest payable and amortization of debt issuance costs.

Each of the series of Senior Notes was issued pursuant to an indenture. Such indentures contain certain restrictions on liens, mergers, consolidations and transfers of all or substantially all of the Company’s assets. Additionally, upon the occurrence of specified change of control triggering events, we will be required to offer to repurchase the Senior Notes at 101% of the principal amount, plus accrued and unpaid interest to the purchase date. The indentures set forth certain events of default after which the Senior Notes may be declared immediately due and payable, as well as certain types of bankruptcy or insolvency events of default after which the Senior Notes become automatically due and payable.

Prior to March 15, 2027, we may redeem the 2030 Notes at our option, in whole or in part at any time, at a redemption price equal to 100% of the principal amount of the 2030 Notes redeemed, plus a “make whole” premium and accrued and unpaid interest, if any. In addition, we may redeem up to 40% of the aggregate principal amount of the 2030 Notes at any time before March 15, 2027, with the net cash proceeds from certain equity offerings at a redemption price equal to 106.125% of the principal amount of the 2030 Notes, plus accrued and unpaid interest, if any. On or after March 15, 2027, we may redeem the 2030 Notes at our option, in whole or in part at any time, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any:

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Year	Percentage
2027	103.063	%
2028	101.531	%
2029 and thereafter	100.000	%

Prior to March 15, 2028, we may redeem the 2033 Notes at our option, in whole or in part at any time, at a redemption price equal to 100% of the principal amount of the 2033 Notes redeemed, plus a “make whole” premium and accrued and unpaid interest, if any. In addition, we may redeem up to 40% of the aggregate principal amount of the 2033 Notes at any time before March 15, 2028, with the net cash proceeds from certain equity offerings at a redemption price equal to 106.250% of the principal amount of the 2033 Notes, plus accrued and unpaid interest, if any. On or after March 15, 2028, we may redeem the 2033 Notes at our option, in whole or in part at any time, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any:


Year	Percentage
2028	103.125	%
2029	101.563	%
2030 and thereafter	100.000	%

Interest expense related to the Senior Notes was as follows (in thousands):


	Year Ended December 31, 2025
Contractual interest expense	$	87,101
Amortization of debt issuance costs	2,545
Total interest expense	$	89,646

2027 Notes

In December 2022, we issued $690.0 million aggregate principal amount of our Convertible Senior Notes due 2027 (the “2027 Notes”) in a private offering, of which the aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $90.0 million principal amount. The 2027 Notes mature on December 15, 2027 and bear interest at a fixed rate of 0.50% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. The total combined gross proceeds from the issuance of the 2027 Notes were $690.0 million, and after deducting initial purchasers’ discounts and commissions and other debt issuance costs of $16.2 million, the total combined net proceeds were approximately $673.8 million. The effective interest rate for the 2027 Notes was 0.99% and included interest payable and amortization of debt issuance costs.


			Maturity Date						Initial Conversion Price per Share						Initial Conversion Rate per $1,000 Par Value						Initial Number of Shares (Prior to Repurchase)
2027 Notes			December 15, 2027						$228.73						4.3720 shares						3,016,680

The terms of the 2027 Notes require conversion into cash up to the principal amount, with conversion into common stock, cash, or a combination of cash and common stock, at our option, for any amount in excess of the principal. Any shares issued upon conversion are recorded in stockholders' equity. The 2027 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding September 15, 2027 only under the following circumstances:

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during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during such fiscal quarter), if the last reported sale price per common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
any time preceding September 15, 2027, when during the five consecutive business days immediately after any 10 consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of 2027 Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;
upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the indenture governing the 2027 Notes;
if we call the 2027 Notes for redemption; or any time from, and including, September 15, 2027 until the close of business on the second scheduled trading day immediately before the maturity date

If we undergo a fundamental change (as defined in the indenture governing the 2027 Notes), holders may require us to repurchase for cash all or any portion of their 2027 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid interest, if any, up to but excluding the fundamental change repurchase date. In addition, following certain corporate events or if we issue a notice of redemption, it may increase the conversion rate for holders who elect to convert their 2027 Notes in connection with such corporate event or during the relevant redemption period. On or after December 22, 2025, we may redeem for cash all or any portion of the 2027 Notes in accordance with the optional redemption terms of the convertible debt agreement.

During the year ended December 31, 2025, we entered into and closed separate, privately negotiated exchange agreements with certain holders (the “Holders”) of the 2027 Notes to exchange approximately $604.3 million aggregate principal amount of the 2027 Notes for consideration consisting of cash and shares of our common stock determined based on the exchange agreements (the “Exchange Transactions”). The consideration transferred to the Holders aggregated to $604.8 million in cash and 1,565,061 shares of our common stock. The Exchange Transactions were accounted for as induced conversions, and we recognized an aggregate expense of $35.6 million calculated as of the date the inducement offers were accepted, representing the excess of the equity consideration transferred in the Exchange Transactions over the fair value of securities and other consideration issuable pursuant to the original conversion terms defined in the indenture governing the 2027 Notes. We also recognized approximately $3.3 million of third party transaction costs which were expensed as a cost of inducement. As a result, we recorded an aggregate $38.9 million of induced conversion expense within other income (loss), net in the consolidated statements of operations and comprehensive income. As a result of the Exchange Transactions, we recorded $35.6 million in additional paid-in capital and we reclassified $7.2 million of unamortized debt issuance costs into equity as part of the derecognition of the associated net carrying amount of the portion of the 2027 Notes which were exchanged, resulting in a net impact of $28.4 million to equity related to the Exchange Transactions.

Following the closing of the Exchange Transactions, we had approximately $81.1 million aggregate principal amount of 2027 Notes outstanding as of December 31, 2025. Subsequent to December 31, 2025, we redeemed and converted all of the outstanding 2027 Notes on February 10, 2026, and February 11, 2026, respectively, and in each case, pursuant to a notice of redemption delivered on December 18, 2025, and the terms of the indenture governing the 2027 Notes. Refer to Note 20 for additional details.

The effective interest rate for the outstanding 2027 Notes after the Exchange Transactions is 6.89%. This rate reflects the expected remaining life of the 2027 Notes considering the redemption transaction discussed in Note 20 and includes interest payable and amortization of debt issuance costs. The Exchange Transactions did not impact the Note Hedge or Warrants, which remain outstanding and are discussed in further detail below.

Interest expense related to the 2027 Notes was as follows (in thousands):


	Year Ended December 31,
	2025		2024		2023
Contractual interest expense	$	1,793	$	3,451	$	3,450
Amortization of debt issuance costs	1,898		3,176		3,126
Total interest expense	$	3,691	$	6,627	$	6,576

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The estimated fair value of our outstanding notes payable at December 31, 2025 and December 31, 2024 is as follows (in thousands):


	December 31, 2025		December 31, 2024
2027 Notes	$	203,956	$	1,798,526
2030 Notes	1,036,830		—
2033 Notes	779,768		—

Convertible Note Hedge

To reduce the impact of potential economic dilution upon conversion of the 2027 Notes, in December 2022, we entered into a convertible note hedge transaction (the “Note Hedge” or “2027 Note Hedge”) with certain investment banks, with respect to our common stock, concurrently with the issuance of the 2027 Notes.


			Purchase Price (in thousands)						Shares Purchased
2027 Note Hedge			$	194,994					3,016,680

The Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial conversion price of the respective 2027 Notes, subject to adjustment, and is exercisable upon conversion of the 2027 Notes. If exercised, we may elect to receive cash, shares of our common stock, or a combination of cash and shares. Any shares received upon exercise of the options underlying the 2027 Notes are considered treasury stock. We have accounted for the aggregate amount of purchase price for the Note Hedge as a reduction to additional paid-in capital. The Note Hedge will expire on December 15, 2027, unless earlier terminated. The Note Hedge is intended to reduce the potential economic dilution upon conversion of the 2027 Notes in the event that the market value per share of our common stock at the time of exercise is greater than the conversion price of the 2027 Notes. The Note Hedge is a separate transaction and is not part of the terms of the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Note Hedge. The Note Hedge does not impact earnings per share, as it was entered into to offset any dilution from the 2027 Notes. Considering the impact of conversions and concurrent hedge option exercises as of December 31, 2025, 2,996,643 shares remain subject to the Note Hedge. Subsequent to December 31, 2025, we received shares from option counterparties in connection with the exercises of the 2027 Note Hedges entered into in connection with the issuance of the 2027 Notes. Refer to Note 20 for additional details.

Convertible Note Warrants


			Proceeds (in thousands)						Shares						Strike Price						First Expiration
2027 Warrants			$	124,269					3,016,680						$	338.86					March 15, 2028

Separately, in December 2022, we entered into warrant transactions with certain investment banks, whereby we sold Warrants to acquire, subject to adjustment, the number of shares of our common stock shown in the table above. If the average market value per share of our common stock exceeds the strike price of the Warrants, such Warrants can have a dilutive effect on our earnings per share to the extent we report net income. According to the terms of the Warrants, the Warrants will be automatically exercised over a 60-trading day period beginning on the first expiration date as set forth above.

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Future Maturities of Notes Payable

Maturities of principal amounts of notes payable are as follows for each respective year (in thousands). These maturities do not reflect the impact of any put, redemption or conversion provisions associated with certain debt instruments:


2026	$	—
2027 (1)	81,110
2028	—
2029	—
2030	1,000,000
After 2030	750,000
Total principal	$	1,831,110

(1)The 2027 Notes are contractually due in fiscal year 2027. However, as of December 31, 2025 and December 31, 2024, the 2027 Notes were convertible at the option of the holders into cash up to the principal amount, with conversion into common stock, cash, or a combination of cash and common stock, at our option, for any amount in excess of the principal. Therefore, the Notes were classified as current liabilities within our consolidated balance sheets as of December 31, 2025 and December 31, 2024. Subsequent to the year ended December 31, 2025, we redeemed and converted all of our outstanding 2027 Notes on February 10, 2026, and February 11, 2026, respectively, and in each case, pursuant to a notice of redemption delivered on December 18, 2025, and the terms of the indenture governing the 2027 Notes. Refer to Note 20 for additional details.

Note 11 - Commitments and Contingencies

Cloud Service Commitments

In June 2022, we entered into a purchase agreement for cloud hosting with a six year term beginning July 1, 2022. The purchase agreement includes a total commitment of $425.0 million. Storage fees under this agreement were $110.6 million for the year ended December 31, 2025. The remaining purchase commitment at December 31, 2025 was $154.9 million.

Purchase Commitments

We routinely enter into cancelable and non-cancelable purchase orders with many of our key vendors. Based on the strategic relationships with many of these vendors, our ability to cancel these purchase orders and maintain a favorable relationship would be limited. As of December 31, 2025, we had approximately $1.2 billion of open purchase orders and $156.7 million of other purchase obligations, inclusive of the data storage commitment noted above.

Product Litigation

As a manufacturer of weapons and other law enforcement tools used in high-risk field environments, we are often the subject of product liability litigation concerning the use of our products. We are currently named as a defendant in three such lawsuits in which the plaintiffs allege either wrongful death or personal injury in situations in which a TASER CED was used by law enforcement officers in connection with arrests or training. While the facts vary from case to case, these product liability claims typically allege defective product design, manufacturing, and/or failure to warn. They seek compensatory and sometimes punitive damages, often in unspecified amounts.

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We continue to aggressively defend all product litigation. As a general rule, it is our policy not to settle suspect injury or death cases. Exceptions are sometimes made where the settlement is strategically beneficial to us. Due to the confidential nature of our litigation strategy and the confidentiality agreements that are executed in the event of a settlement, we do not identify or comment on specific settlements by case or amount. Based on current information, we do not believe that the outcome of any such legal proceeding will have a material effect on our financial position, results of operations or cash flows. We are self-insured for the first $5.0 million of any product claim made after 2014. No judgment or settlement has ever exceeded this amount in any products liability case. We continue to maintain product liability insurance coverage, including an insurance policy fronting arrangement, above our self-insured retention with various limits depending on the policy period.

Other Matters

Despite the Federal Trade Commission’s (“FTC”) dismissal of its administrative enforcement complaint against us without consent decree or other condition in October 2023, other parties continue to allege that our May 2018 acquisition of an insolvent body camera competitor, Vievu LLC, was anticompetitive. Pending in the District of New Jersey (Case No. 3:23-cv-7182) is a purported antitrust class action brought by three municipalities based largely on the FTC’s unproven allegations. We deny all allegations of anticompetitive or other misconduct and are vigorously defending the case.

Pending in the Eastern District of Virginia (Case No. 1:24-CV-01625) is a patent infringement suit filed by Airspace Systems, Inc. (“Airspace”) against Dedrone involving certain drone technology. After we acquired Dedrone on October 1, 2024, Airspace amended its complaint and added us as a defendant. Airspace seeks injunctive relief and treble damages in an unspecified amount. We and Dedrone deny infringement and further contend that the three asserted patents are invalid and/or contain patent ineligible subject matter. To that end, we have simultaneously challenged all three patents in the United States Patent and Trademark Office and the court has stayed the litigation. On October 8, 2025, the Patent Trial and Appeal Board granted our petitions and instituted review on all claims of all three asserted patents. By statute, a decision is required within one year or October 8, 2026. It is expected that the district court litigation will remain stayed during this time.

General

From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.

Based on our assessment of outstanding litigation and claims as of December 31, 2025, we have determined that it is not reasonably possible that these losses, if any, from lawsuits will individually, or in the aggregate, materially affect our results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.

Off-Balance Sheet Arrangements

Under certain circumstances, we use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the installation and integration of Axon cameras and related technologies. Certain of our letters of credit and surety bonds have stated expiration dates with others being released as the contractual performance terms are completed. At December 31, 2025, we had outstanding letters of credit issued under our credit facility of $8.9 million that are expected to expire through 2027. We also had outstanding letters of credit of $0.2 million that do not draw against our credit facility. Additionally, we had $8.1 million of outstanding surety bonds as of December 31, 2025, with expiration dates ranging through 2029.

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Note 12 - Income Taxes

Income before provision (benefit) for income taxes included the following components for the years ended December 31, (in thousands):


	2025		2024		2023
United States	$	(8,227)	$	357,484	$	134,509
Foreign	27,201		24,020		22,552
Total	$	18,974	$	381,504	$	157,061

Significant components of the provision (benefit) for income taxes were as follows for the years ended December 31, (in thousands):


	2025		2024		2023
Current:
Federal	$	(34,249)	$	67,944	$	35,831
State	5,402		18,234		12,400
Foreign	5,844		3,388		5,544
Total current	(23,003)		89,566		53,775
Deferred:
Federal	(63,999)		(63,603)		(60,674)
State	(15,600)		(19,678)		(9,172)
Foreign	(3,080)		(1,815)		(2,651)
Total deferred	(82,679)		(85,096)		(72,497)
Provision for (benefit from) income taxes	$	(105,682)	$	4,470	$	(18,722)

The table below provides the updated requirements of ASU 2023-09 for the year ended December 31, 2025. Refer to Note 1 for additional details regarding the adoption of ASU 2023-09.

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The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in thousands, except percentages):


	Year Ended December 31, 2025
	$		%
U.S. federal statutory tax rate	$	3,985	21.0	%
State and local income taxes, net of federal benefit (1)	(11,735)		(61.8)
Foreign tax effects
United Kingdom
Excess stock-based compensation benefit	(4,282)		(22.6)
Other	(626)		(3.3)
Other foreign jurisdictions	1,960		10.3
Effect of cross-border tax laws	4,180		22.0
Tax credits
R&D credits	(49,380)		(260.2)
Valuation allowances	540		2.8
Non-taxable or non-deductible items
Excess stock-based compensation benefit	(124,081)		(653.9)
Executive compensation limitation	48,781		257.1
Other permanent differences	5,711		30.1
Unrecognized tax benefits	19,556		103.1
Other adjustments	(291)		(1.6)
Total tax benefit and effective tax rate	$	(105,682)	(557.0)	%

(1) State taxes in Arizona, Massachusetts, Illinois, New York, Florida and Pennsylvania comprise greater than 50 percent of the tax effect in this category

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A reconciliation of our effective income tax rate to the federal statutory rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09 and as previously disclosed, is as follows (in thousands):


	2024			2023
Federal income tax at the statutory rate	$	80,120		$	32,983
Excess stock-based compensation benefit	(83,748)			(106,522)
Executive compensation limitation	51,858			77,350
R&D credits	(36,571)			(26,204)
Nontaxable gain on investments	(19,727)			—
Change in unrecognized tax benefits	7,356			4,351
Other permanent differences	5,176			1,201
Global intangible low-taxed income	3,081			1,890
Foreign derived intangible income deduction	(2,558)			(961)
Foreign tax credit	(1,914)			(1,922)
State income taxes, net of federal benefit	1,713			3,730
Change in valuation allowance	(903)			(4,695)
Tax effects of intercompany transactions	(222)			(2,033)
Difference between statutory and foreign tax rates	801			1,013
Other	8			1,097
Provision for (benefit from) income taxes	$	4,470		$	(18,722)
Effective tax rate	1.2		%	(11.9)		%

Cash payments of U.S. federal, state and foreign income taxes, net of refunds, were as follows (in thousands):


	Year Ended December 31, 2025
Federal	$	31,720
State	12,650
Foreign	6,751
Total	$	51,121

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Significant components of our deferred income tax assets and liabilities are as follows at December 31, 2025 and December 31, 2024 (in thousands):


	2025		2024
Deferred income tax assets:
R&D capitalization, net	$	162,715	$	193,265
Deferred revenue	82,760		66,948
Stock-based compensation	69,703		51,088
Net operating loss carryforward	54,614		17,824
Reserves and accruals	43,289		33,523
R&D tax credit carryforward	27,105		19,100
Lease liabilities	25,695		11,966
Other	22,635		10,027
Convertible debt, net	2,601		31,603
Total deferred income tax assets	491,117		435,344
Valuation allowance	(32,594)		(23,054)
Total deferred income tax assets, net of valuation allowance	458,523		412,290
Deferred income tax liabilities:
Amortization	(40,502)		(36,185)
Depreciation	(28,249)		(16,739)
Right-of-use assets	(25,250)		(10,639)
Other	(5,847)		(4,557)
Strategic investments	(515)		(42,260)
Total deferred income tax liabilities	(100,363)		(110,380)
Net deferred income tax assets	358,160		301,910

Deferred taxes are reflected in the consolidated balance sheet as follows:
Non-current tax assets (included in deferred tax asset, net)	359,803		304,282
Non-current tax liabilities (included in other long-term liabilities)	(1,643)		(2,372)
Total	$	358,160	$	301,910

The following table presents the valuation allowance activity for the years ended December 31, 2025, 2024, and 2023 (in thousands):


	2025		2024		2023
Balance, beginning of period	$	23,054	$	21,600	$	26,368
Tax provision (benefit)	8,726		(576)		(4,262)
Deductions charged to tax provision / benefit	(411)		(327)		(505)
Additions (reversals) to other accounts	1,225		2,357		(1)
Balance, end of period	$	32,594	$	23,054	$	21,600

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As of December 31, 2025, we have recorded a net tax benefit totaling $58.4 million for U.S. federal, state, and foreign net operating loss carryforwards (“NOLs”). As of December 31, 2025, $53.9 million of NOLs may be carried forward indefinitely while the remaining $4.5 million will begin to expire at various times from 2029 through 2055. As of December 31, 2025, we have a total of $54.6 million U.S. federal and state (net of federal benefit) R&D credit carryforwards available to offset future income taxes. A total of $24.4 million of the R&D credits may be carried forward indefinitely while the remaining $30.2 million will begin to expire at various times from 2026 through 2045.

As of December 31, 2025, we anticipate sufficient future pre-tax book income to realize a significant portion of our deferred tax assets. However, as we have various state R&D tax credits expiring unutilized each year, operating losses and unrealized investment losses for which realization is uncertain, and specific identified intangibles with an indefinite life, we have recorded a $32.6 million valuation allowance against these specific deferred tax assets as of December 31, 2025.

The net change in total valuation allowance for the years ended December 31, 2025 and 2024 was an increase of $9.5 million and $1.5 million, respectively. The valuation allowance changes are driven primarily by certain state R&D tax credits for which realization is uncertain, acquired state NOLs, and movement in deferred tax assets associated with unrealized investment losses and transaction costs incurred in connection with certain investments that are not more likely than not to be realized. Of the net change in the valuation allowance for the years ended December 31, 2025 and 2024, an increase of $8.3 million and decrease of $0.9 million, respectively, was recorded to tax expense and an increase of $1.2 million and $2.4 million, respectively, was recorded through the consolidated balance sheets.

We consider the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestment of those subsidiary earnings. We project that our foreign earnings will be utilized offshore for working capital and future foreign growth and we have not made a provision for U.S. or additional foreign withholding taxes of the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the tax effects of a remittance of such earnings. If we decide to repatriate the undistributed foreign earnings, we will recognize the income tax effects in the period we change our assertion on indefinite reinvestment.

We complete R&D tax credit studies for each year that an R&D tax credit is claimed for federal and state income tax purposes. We have made the determination that it is not more likely than not that the full benefit of the R&D tax credit will be sustained on examination. As such, we recorded a liability for unrecognized tax benefits of $56.2 million as of December 31, 2025. Should the unrecognized benefit of $56.2 million be recognized, our effective tax rate would be favorably impacted.

The following table presents a roll-forward of our liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31, (in thousands):


	2025		2024		2023
Balance, beginning of year	$	32,726	$	25,754	$	21,492
Increase (decrease) in previous year tax positions	237		501		(215)
Increase in current year tax positions	23,293		7,313		6,963
Decrease due to lapse of statute of limitations	(49)		(842)		(2,486)
Balance, end of year	$	56,207	$	32,726	$	25,754

Federal income tax returns for 2022 through 2024 remain open to examination by the U.S. Internal Revenue Service, while state and local income tax returns for 2021 through 2024 also generally remain open to examination by state taxing authorities. The foreign tax returns for 2020 through 2024 also generally remain open to examination, although some foreign jurisdictions can audit returns up to ten years.

We have recognized expense, before federal tax impact, related to interest of $1.4 million, $1.2 million, and $0.3 million for the years ended December 31, 2025, 2024 and 2023 respectively. As of December 31, 2025 and December 31, 2024, we had accrued interest of $3.3 million and $1.8 million, respectively.

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As part of the OECD global minimum tax framework, certain jurisdictions in which we operate have enacted or are in the process of implementing top-up tax provisions under Pillar Two. We have assessed the impact of these regulations on our tax position and included an immaterial adjustment in our income tax provision as of December 31, 2025. We continue to monitor legislative developments and will assess potential future impacts as additional guidance and implementation details become available.

Note 13 - Line of Credit

In December 2022, we entered into a credit agreement that provides for a senior unsecured multi-currency revolving credit facility (the “Credit Agreement”) in an aggregate principal amount of up to $200.0 million, $30.0 million of which is available for the issuance of letters of credit. The Credit Agreement originally matured on the earlier of December 15, 2027 or the date that is six months prior to the stated maturity date of the 2027 Notes unless the 2027 Notes had been redeemed, repurchased, converted or defeased in full. Additionally, the Credit Agreement had an accordion feature which allowed for an increase in the total line of credit up to $300.0 million, in each lender’s sole discretion.

In March 2025, immediately prior to the consummation of the closing of the 2030 and 2033 Notes offering, we entered into an amendment (the “Amendment”) to the Credit Agreement. The Amendment increased the existing revolving credit facility by $100.0 million to a total aggregate principal amount of $300.0 million (with an accordion feature which allows for an increase in the total line of credit up to $400.0 million), increased availability for the issuance of letters of credit by $20.0 million to $50.0 million, extended the maturity date of the Credit Agreement from December 15, 2027 to March 11, 2030 (or, in each case, the date that is six months prior to the stated maturity date of the 2027 Notes unless the 2027 Notes have been redeemed, repurchased, converted or defeased in full), permitted the 2030 and 2033 Notes offering, and provided for other updates to the covenants and terms of the Credit Agreement.

As of December 31, 2025, no amounts were drawn under the Credit Agreement. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of December 31, 2025, we had letters of credit outstanding of approximately $8.9 million under the facility and available borrowing of $291.1 million, excluding amounts available under the accordion feature. Advances under the line of credit bear interest at Term SOFR plus 1.25 to 1.75% per year determined in accordance with a pricing grid based on our net leverage ratio and consolidated interest coverage ratio discussed further below. “SOFR” is defined as a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York or a successor administrator of the secured overnight financing rate.

We are required to comply with a net leverage ratio, defined as consolidated total indebtedness to EBITDA, of no greater than 3.50 to 1.00 based upon a trailing four fiscal quarter period. At December 31, 2025, our net leverage ratio was 0.15 to 1.00. Additionally, we must comply with a consolidated interest coverage ratio, defined as EBITDA to consolidated interest expense, of no less than 3.50 to 1.00 based upon a trailing four fiscal quarter end. At December 31, 2025, our consolidated interest coverage ratio was 8.93 to 1.00.

Note 14 - Stockholders’ Equity

Common Stock and Preferred Stock

We have authorized the issuance of two classes of stock designated as “common stock” and “preferred stock,” each having a par value of $0.00001 per share. We are authorized to issue 200 million shares of common stock and 25 million shares of preferred stock.

eXponential Stock Units

The Employee XSP includes an approved pool of approximately 4.5 million shares of common stock reserved for grants of XSUs to employees, of which approximately 1.1 million XSUs remain available to grant to employees under this program as of December 31, 2025. A total of approximately 0.2 million XSUs were granted during the year ended December 31, 2025. Additionally, on May 10, 2024, shareholders approved a grant of 679,102 XSUs for the CEO Performance Award.

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The three independent vesting conditions are described in the following table:


	Operational Goals(1) (in millions)				Stock Price Goal			Minimum Service Requirement
Tranche(2)	Revenue		Adj. EBITDA(3)				Employee XSP		CEO Performance Award		Goal Expiration
1	$1,834	or	$382	and	$247.40	and		June 2025		December 2028		December 31, 2026
2	2,293	or	497	and	309.25	and		December 2025		December 2028		December 31, 2027
3	2,866	or	611	and	386.56	and		June 2026		December 2029		December 31, 2028
4	3,583	or	801	and	483.20	and		December 2026		December 2029		December 31, 2029
5	4,479	or	1,044	and	604.00	and		June 2027		December 2030		December 31, 2030
6	5,599	or	1,356	and	755.00	and		December 2027		December 2030		December 31, 2031
7	6,999	or	1,706	and	943.75	and		June 2028		December 2030		December 31, 2032

(1) Operational goals are measured, as of any date, for the previous four consecutive fiscal quarters, beginning with the Company's first full fiscal quarter ending after the fiscal quarter in which the grant date occurred.

(2) Tranches 1 and 2 vested and settled in June 2025 and December 2025 respectively. As of December 31, 2025, for certain grantees, the shares acquired upon vesting and settlement of Tranche 2 remain subject to a holding period requirement under the plan, which will expire on the earlier of (i) December 31, 2030 and (ii) the date on which the subsequent tranche vests and settles.

(3) In connection with certain acquisitions which were completed during fiscal year 2024, the adjusted EBITDA goals were adjusted as required by the terms of the Employee XSP and CEO Performance Award during fiscal year 2025.

Restricted Stock Units

The following table summarizes RSU activity for the years ended December 31, 2025, 2024 and 2023 (number of units and aggregate intrinsic value in thousands):


	2025				2024				2023
	Number of Units		Weighted Average Grant-Date Fair Value		Number of Units		Weighted Average Grant-Date Fair Value		Number of Units		Weighted Average Grant-Date Fair Value
Units outstanding, beginning of year	1,684		$	356.31	1,615		$	193.09	1,565		$	145.48
Granted	639		627.27		1,131		440.76		915		227.62
Released	(786)		281.06		(909)		196.35		(740)		140.81
Forfeited	(135)		501.16		(153)		208.12		(125)		157.95
Units outstanding, end of year	1,402		508.09		1,684		356.31		1,615		193.09
Aggregate intrinsic value at year end	$	795,982			$	1,000,769			$	417,240

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $567.93 per share, multiplied by the number of RSUs outstanding. The fair value as of the respective vesting dates of RSUs that vested during the year was $497.7 million, $426.3 million, and $161.7 million for the years ended December 31, 2025, 2024, and 2023, respectively.

As of December 31, 2025, we had $566.6 million of total unrecognized stock-based compensation expense related to RSUs under our stock plans for shares that are expected to vest. We expect to recognize the cost related to the RSUs over a weighted average period of 2.50 years. Shares underlying RSUs are generally released when vesting requirements are met.

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Certain RSUs that vested in the year ended December 31, 2025 were net-share settled, such that we withheld shares to cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Related to these RSU vests, we withheld a total of 0.1 million shares. The value of these shares withheld was $58.5 million, which reflects the closing stock price on the respective vesting dates.

Performance Stock Units

The following table summarizes PSU activity, inclusive of XSUs, for the years ended December 31, 2025, 2024 and 2023 (number of units and aggregate intrinsic value in thousands):


	2025				2024				2023
	Number of Units		Weighted Average Grant-Date Fair Value		Number of Units		Weighted Average Grant-Date Fair Value		Number of Units		Weighted Average Grant-Date Fair Value
Units outstanding, beginning of year	4,865		$	261.18	394		$	201.61	1,369		$	43.43
Granted	216		573.26		4,888		263.13		319		218.04
Released	(1,072)		291.25		(23)		140.90		(1,238)		37.98
Forfeited	(359)		309.92		(394)		232.94		(56)		48.40
Units outstanding, end of year	3,650		265.99		4,865		261.18		394		201.61
Aggregate intrinsic value at year end	$	2,072,713			$	2,891,142			$	101,751

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $567.93 per share, multiplied by the number of PSUs outstanding. The fair value as of the respective vesting dates of PSUs that vested during the year was $691.7 million, $8.4 million, and $256.5 million for the years ended December 31, 2025, 2024, and 2023, respectively.

As of December 31, 2025, there was $609.2 million in unrecognized stock-based compensation expense related to PSUs under our stock plans for shares that are expected to vest. We expect to recognize the cost related to the PSUs over a weighted average period of 4.01 years. Shares underlying PSUs are released when vesting requirements are met.

Certain PSUs that vested in the year ended December 31, 2025 were net-share settled such that we withheld shares to cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Related to these PSU vests, we withheld a total of 0.5 million shares. The value of these shares withheld was $293.4 million, which reflects the closing stock price on the respective vesting dates.

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Stock Option Activity

The following table summarizes stock option activity for the years ended December 31, 2025, 2024 and 2023 (number of options and aggregate intrinsic value in thousands):


	2025					2024					2023
	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Options outstanding, beginning of year	21		$	28.58		531		$	28.58		2,438		$	28.58
Granted	—		—			—		—			—		—
Exercised	—		—			(510)		28.58			(1,907)		28.58
Expired / terminated	—		—			—		—			—		—
Options outstanding and exercisable, end of year	21		28.58		2.15	21		28.58		3.15	531		28.58		4.16
Aggregate intrinsic value at year end	$	11,289				$	11,842				$	121,981

No options were exercised for the year ended December 31, 2025. The total intrinsic value of options exercised was $178.1 million and $323.0 million for the years ended December 2024, and 2023, respectively. The intrinsic value for options exercised was calculated as the difference between the exercise price of the underlying stock option awards and the market price of our common stock on the date of exercise. As of December 31, 2025, all outstanding stock options were fully vested and exercisable. The aggregate intrinsic value represents the difference between the exercise price of the underlying stock option awards and the closing market price of our common stock of $567.93 on the last trading day for the period ending December 31, 2025.

Stock-based Compensation Expense

The following table summarizes the composition of stock-based compensation expense for the years ended December 31, 2025, 2024 and 2023 (in thousands):


	2025		2024		2023
Cost of product and service sales	$	54,057	$	60,089	$	6,595
Selling, general and administrative expenses	342,362		190,561		58,533
Research and development expenses	237,812		131,954		66,230
Total stock-based compensation expense (1)	$	634,231	$	382,604	$	131,358
Income tax benefit	$	130,968	$	79,275	$	13,509

(1)For the year ended December 31, 2025, stock-based compensation expense included $24.1 million in non-recurring severance costs. Total non-recurring severance costs for the year-ended December 31, 2025 of $31.8 million also include $7.7 million of severance payments and employee benefits. The majority of these costs were recorded in selling, general and administrative expenses.

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Stock Incentive Plans

In May 2024, our shareholders approved the Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan (the “Amended 2022 Plan”) authorizing an additional 2.2 million shares, plus remaining available shares under prior plans, for issuance under the Amended 2022 Plan. Combined with the shares of our common stock remaining available under our legacy stock incentive plans, there are 2.8 million shares of our common stock available for grant under the Amended 2022 Plan as of December 31, 2025.

At-the-Market Equity Offering

We participate in an “at-the-market” equity offering program (the “ATM”), pursuant to which we are authorized to sell up to a total of approximately 2.0 million shares of our common stock.

During the year ended December 31, 2025, we sold approximately 0.7 million shares of our common stock under our ATM. We generated approximately $494.7 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $489.4 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $5.3 million. As of the year ended December 31, 2025, approximately $0.1 million of these costs were not yet paid.

As of the year ended December 31, 2025, there were approximately 1.3 million shares remaining. We utilize the net proceeds from this offering program for general corporate purposes, which may include providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock compensation awards granted to our employees under our stock plans and funding ongoing strategic investments and acquisitions as we continue to expand our product ecosystem.

Stock Repurchase Plan

In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of our outstanding common stock subject to stock market conditions and corporate considerations. There were no shares repurchased under the program during the years ended December 31, 2025, 2024, and 2023. As of December 31, 2025 and 2024, $16.3 million remained available under the plan for future purchases.

Note 15 – Accumulated Other Comprehensive Loss

The following table reflects the changes in accumulated other comprehensive loss, net of tax (in thousands):


	Unrealized (Losses) Gains on Available-for-Sale Investments (1)		Foreign Currency Translation		Total
Balance, December 31, 2022	$	(1,251)	$	(5,928)	$	(7,179)
Other comprehensive income (loss)	852		(4,352)		(3,500)
Balance, December 31, 2023	(399)		(10,280)		(10,679)
Other comprehensive income (loss)	369		(7,874)		(7,505)
Balance, December 31, 2024	(30)		(18,154)		(18,184)
Other comprehensive income	113		6,265		6,378
Balance, December 31, 2025	$	83	$	(11,889)	$	(11,806)

(1)Amounts are net of immaterial tax impacts.

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Note 16 - Leases

We have operating leases for office space, manufacturing and logistical functions. Operating lease assets and liabilities consisted of the following at December 31, 2025 and December 31, 2024 (in thousands):


Leases (in thousands)	Classification	December 31, 2025		December 31, 2024
Assets
Operating lease assets	Other assets	$	99,513	$	44,567
Liabilities
Current
Operating	Other current liabilities	$	6,990	$	9,453
Noncurrent
Operating	Long-term lease liabilities	$	98,942	$	41,383
Total lease liabilities		$	105,932	$	50,836

The components of operating lease expenses were as follows for the years ended December 31, 2025, 2024 and 2023 (in thousands):


			2025						2024						2023
Total operating lease expense (1)			$	20,584					$	14,568					$	10,025

(1)Includes short-term leases, which are immaterial

Supplemental cash flow information related to operating leases were as follows for the years ended December 31, 2025, 2024 and 2023 (in thousands):


	2025		2024		2023
Cash paid for amounts included in the measurement of operating lease liabilities — operating cash flows	$	15,053	$	12,284	$	8,846
Right-of-use assets obtained in exchange for operating lease liabilities	62,844		14,292		5,927

Weighted-average remaining lease term and discount rate related to operating leases at December 31, 2025 and December 31, 2024 were as follows:


	December 31, 2025		December 31, 2024
Weighted average remaining lease term	9.2 years		7.7 years
Weighted average discount rate	6.78	%	7.60	%

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Future minimum operating lease payments under non-cancellable leases as of December 31, 2025 were as follows (in thousands):


	Operating
2026	$	15,094
2027	14,406
2028	15,613
2029	15,797
2030	14,833
Thereafter	76,637
Total minimum lease payments	152,380
Less: Amount representing interest	(46,448)
Present value of lease payments	$	105,932

Note 17 - Employee Benefit Plans

We have a defined contribution profit sharing 401(k) plan for eligible employees, which is qualified under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. Employees are entitled to make tax-deferred contributions of their eligible compensation up to the maximum allowed by law. We also sponsor defined contribution plans in certain of our international subsidiaries.

Our matching contributions for all defined contribution plans for the years ended December 31, 2025, 2024, and 2023, were approximately $21.9 million, $17.2 million and $14.5 million, respectively.

Note 18 - Segment Data

Segment information for the years ended December 31, 2024, and 2023 has been recast to reflect the Segment Realignment. Refer to Note 1 for additional details. Information relative to our reportable segments was as follows (in thousands):


	Year Ended December 31, 2025
	Connected Devices		Software and Services		Total
Net sales	$	1,576,864	$	1,202,672	$	2,779,536
Cost of sales	809,303		312,108		1,121,411
Other segment items (1)	40,005		40,963		80,968
Adjusted gross margin	$	807,566	$	931,527	$	1,739,093
Other segment items (1)					(80,968)
Selling, general and administrative					(1,035,893)
Research and development					(684,308)
Interest income					75,431
Interest expense					(94,238)
Other income, net					99,857
Income before provision for income taxes					$	18,974

(1) Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of acquired intangible assets, inventory step-up amortization related to acquisitions, payroll taxes related to Employee XSP vesting and non-recurring severance costs to arrive at the profit measure used by the CODM.

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	Year Ended December 31, 2024
	Connected Devices		Software and Services		Total
Net sales	$	1,221,292	$	861,234	$	2,082,526
Cost of sales	618,136		223,010		841,146
Other segment items (1)	50,880		23,187		74,067
Adjusted gross margin	$	654,036	$	661,411	$	1,315,447
Other segment items (1)					(74,067)
Selling, general and administrative					(741,247)
Research and development					(441,593)
Interest income					43,693
Interest expense					(7,098)
Other income, net					286,369
Income before provision for income taxes					$	381,504

(1) Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of acquired intangible assets, and inventory step-up amortization related to acquisitions to arrive at the profit measure used by the CODM.


	Year Ended December 31, 2023
	Connected Devices		Software and Services		Total
Net sales	$	964,002	$	596,697	$	1,560,699
Cost of sales	447,708		157,538		605,246
Other segment items (1)	3,253		6,486		9,739
Adjusted gross margin	$	519,547	$	445,645	$	965,192
Other segment items (1)					(9,739)
Selling, general and administrative					(494,884)
Research and development					(303,719)
Interest income					49,107
Interest expense					(6,995)
Other income (loss), net					(41,901)
Income before provision for income taxes					$	157,061

(1) Other segment items includes the adjustment for noncash stock-based compensation expense and amortization of acquired intangible assets to arrive at the profit measure used by the CODM.

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The following table presents supplemental information included within the measure of profit or loss, adjusted gross margin, reviewed by our CODM (in thousands). There are no other material items presented to our CODM by segment or included within adjusted gross margin for supplemental disclosure.


	Year Ended December 31, 2025						Year Ended December 31, 2024						Year Ended December 31, 2023
	Connected Devices		Software and Services		Total		Connected Devices		Software and Services		Total		Connected Devices		Software and Services		Total
Depreciation and amortization	$	38,188	$	19,111	$	57,299	$	23,142	$	12,239	$	35,381	$	14,115	$	3,454	$	17,569
Significant noncash items:
Stock-based compensation expense	31,298		21,919		53,217		47,953		12,136		60,089		2,576		4,019		6,595
Provisions for inventory	4,077		—		4,077		16,599		—		16,599		4,394		—		4,394
Warranty reserve expense	11,628		—		11,628		5,592		—		5,592		8,062		—		8,062

Note 19 – Business Combinations

The consolidated financial statements include the operating results of each acquisition from the date of acquisition noted below. Supplemental pro forma information has not been presented as the effects of the business combinations during the years ended December 31, 2025 and 2024 were not material to our consolidated financial statements.

2025 Business Combinations

Prepared

On October 1, 2025, we acquired the remaining 99.2% interest in Invictus Apps, Inc. (“Prepared”), a leading provider of AI-powered emergency communications software. Net of cash acquired and equity consideration attributable to pre-combination service, total cash paid in the business combination was approximately $624.1 million. Incremental consideration transferred was approximately $728.2 million, subject to customary purchase price adjustments. The acquisition aligns with our mission and positions us to accelerate next-generation public safety communications and emergency response solutions. We recorded acquisition-related transaction and integration costs of $5.8 million for the year ended December 31, 2025. Our existing interest of approximately 0.8% had a fair value at the acquisition date of $6.2 million, which resulted in a non-taxable gain of $2.2 million.

The purchase price allocation is subject to revision during the measurement period for normal closing activities, such as income tax filings and settlement of escrow balances, which is expected to be completed by the third quarter of 2026. Based on the initial purchase price allocation, we recorded $596.8 million of goodwill, $98.9 million of acquired cash, $47.5 million of identifiable intangible assets, and assumed $1.1 million of other net liabilities, excluding deferred taxes. We also recorded a net deferred tax liability of $7.6 million.

The identifiable intangible assets included $37.0 million of developed technology, $7.3 million of customer relationships, and $3.2 million of trademarks. The fair values of the intangible assets were calculated using the relief-from-royalty method for the developed technology, the multi-period excess earnings method for customer relationships, and the relief-from-royalty method for the trademarks. The significant assumptions used to estimate the fair value of the developed technology included projected revenues, the selected royalty rate, the estimated economic life of five years, and an appropriate discount rate. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 5 years.

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The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Prepared are included in our Software and Services reportable segment following the business combination.

Other Business Combinations

During the year ended December 31, 2025, we completed certain business combinations for total purchase consideration of approximately $24.0 million primarily to enhance our end-to-end public safety ecosystem. The business combinations were not material to our consolidated statements of operations, either individually or in the aggregate.

2024 Business Combinations

Fusus

On January 31, 2024, we acquired the remaining 79.7% equity interests in Fusus, LLC (“Fusus”) for incremental consideration transferred of approximately $241.3 million. Our existing interest of 20.3% had a fair value at the acquisition date of $63.3 million, which resulted in a non-taxable gain of $42.3 million. The acquisition expanded our ability to aggregate live video, data and sensor feeds, which enhances situational awareness and investigative capabilities for our customers in public safety, education and enterprise. We recorded acquisition-related transaction and integration costs of $0.1 million and $4.7 million for the years ended December 31, 2025 and 2024, respectively.

Based on the final purchase price allocation, we recorded $249.9 million of goodwill, $72.9 million of identifiable intangible assets, and assumed $7.8 million of other net liabilities, excluding deferred taxes. We also recorded a net deferred tax liability of $10.4 million. As of the acquisition date, the identifiable intangible assets recognized in the business combination included $56.6 million of developed technology, $14.4 million of customer relationships, and $1.9 million of trademarks. The fair values of the intangible assets were calculated using the multi-period excess earnings method for developed technology, the with-and-without method for customer relationships, and the relief-from-royalty method for trademarks. Valuation inputs included projected revenues, EBITDA margins, technology obsolescence factor, and the discount rate. The weighted-average amortization period of the acquired intangible assets was 7.5 years.

The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. As a result of the Segment Realignment, the goodwill recognized in the business combination has been reallocated between our two reportable segments and reporting units, Connected Devices and Software and Services.

Dedrone

On October 1, 2024, we acquired the remaining 79.8% equity interests in Dedrone, a global leader in air space security, for incremental consideration transferred of approximately $391.1 million. Our existing interest of 20.2% had a fair value at the acquisition date of $112.2 million, which resulted in a non-taxable gain of $51.6 million. We recorded acquisition-related transaction and integration costs of $2.0 million and $13.0 million for the years ended December 31, 2025 and 2024, respectively.

The purchase price allocation was subject to revision during the measurement period through September 30, 2025. During the year ended December 31, 2025, we recorded various measurement period adjustments primarily consisting of adjustments to working capital resulting in a $7.5 million decrease to goodwill. These measurement period adjustments also include $3.3 million indemnification assets related to certain pre-acquisition contingencies.

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Based on the final purchase price allocation, including measurement period adjustments, we have recorded $443.6 million of goodwill, $100.5 million of identifiable intangible assets, and assumed $43.9 million of other net liabilities, excluding deferred taxes. We have also recorded a net deferred tax asset of $3.1 million. As of the acquisition date, the identifiable intangible assets recognized in the business combination included $41.0 million of developed technology, $41.0 million of in-process research and development, $15.0 million of customer relationships, and $3.5 million of trademarks. The fair values of the intangible assets were calculated using the cost approach for developed technology and IPR&D, the with-and-without method for customer relationships, and the relief-from-royalty method for trademarks. The valuation of the developed technology and IPR&D was also supported by an income approach. Valuation inputs included direct development cost build-ups. The weighted-average amortization period of the finite-lived intangible assets was 5.5 years.

The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. As a result of the Segment Realignment, the goodwill recognized in the business combination has been reallocated between our two reportable segments and reporting units, Connected Devices and Software and Services.

Note 20 – Subsequent Events

Carbyne

In February 2026, we acquired Carbyne Ltd. (“Carbyne”), a leading cloud-native emergency communications and response platform for a base purchase price of $625.0 million, subject to customary purchase price adjustments. Prior to closing this transaction, we held an approximately 11% ownership interest in Carbyne. This transaction is considered a “step acquisition” under GAAP whereby our ownership interest held before the acquisition is required to be remeasured to fair value at the date of the acquisition. Due to the proximity of the closing date of the acquisition to the date of this filing, the initial accounting for the acquisition is not yet complete.

Convertible Notes Redemption

In December 2025, we delivered a notice of redemption to redeem all of our outstanding 2027 Notes in February 2026 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, together with accrued and unpaid interest. Holders of the 2027 Notes were able to convert their notes prior to the redemption date for cash up to the principal amount of any notes being converted and shares of our common stock for any conversion obligation in excess of the principal amount. We redeemed $0.8 million aggregate principal amount of the 2027 Notes on February 10, 2026, and we settled conversions in respect of $80.3 million aggregate principal amount of the 2027 Notes on February 11, 2026, with $80.3 million in cash and 211,870 shares of our common stock. We received 41,139 shares from option counterparties in connection with the exercises of the 2027 Note Hedges entered into in connection with the issuance of the 2027 Notes. As a result, we have no 2027 Notes outstanding following settlement of the aforementioned redemption.

Strategic Investment Activities

In January and February 2026, we closed a series of transactions to acquire additional equity interests in new and existing strategic investees for an aggregate amount of $234.3 million.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Axon Enterprise, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Axon Enterprise, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive income, of stockholders’ equity and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date as the Company did not design and maintain effective controls related to revenue recognition for its customer contracts.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition for Certain Contracts with Customers for Products and Services

As described in Note 1 to the consolidated financial statements, the Company’s net sales were $2.8 billion for the year ended December 31, 2025, a significant portion of which relates to certain contracts with customers for products and services. The Company derives revenue from two primary sources: software-as-a-service (SaaS) offerings and the sale of devices, accessories, and related extended warranties across the Company’s product portfolio. To a lesser extent, the Company also recognizes revenue from training, professional services and other services ancillary to the Company’s core offerings. In general, the Company sells its integrated hardware products and services together in a single transaction. Such contracts can include various combinations of products and services, each of which is generally distinct and accounted for as a separate performance obligation. The contractual term of the Company’s revenue arrangements is based on the period in which there are presently enforceable rights and obligations, which could be shorter than the stated contractual term if the Company’s customers can terminate the contracts for convenience without having to pay a substantive termination penalty. In contracts with no substantive termination penalty, management also considers if the option for the Company’s customer to purchase additional goods or services represents an additional performance obligation in the form of a material right. Determining the revenue recognition for these types of contracts may require significant judgment to determine the contract term, including the existence of substantive termination penalties, determining the transaction price and identifying the performance obligations. Revenues are recognized upon transfer of control of promised products or services to customers.

The principal considerations for our determination that performing procedures relating to revenue recognition for certain contracts with customers for products and services is a critical audit matter are (i) the significant judgment by management when determining the revenue recognition for certain contracts with customers and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s determination of the contract term, including the existence of substantive termination penalties, determining the transaction price and identifying the performance obligations. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting” section, a material weakness was identified related to this matter.

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Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over contract reviews related to management’s determination of revenue recognition for contracts with customers. These procedures also included, among others, for a sample of revenue transactions, (i) evaluating the reasonableness of management’s judgments related to determining the contract term, including evaluating whether termination penalties are substantive, the determination of the transaction price and the identification of the performance obligations; and (ii) testing the amount and timing of revenue recognized by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, evidence of transfer of control, and cash receipts. These procedures also included confirming a sample of outstanding customer invoice balances as of December 31, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as contracts, purchase orders, invoices, evidence of transfer of control, and subsequent cash receipts.

/s/ PricewaterhouseCoopers LLP

Phoenix, Arizona

February 24, 2026

We have served as the Company’s auditor since 2024.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Axon Enterprise, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows of Axon Enterprise, Inc. (a Delaware corporation) and subsidiaries (the “Company”) for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We served as the Company’s auditor from 2005 to 2024

Phoenix, Arizona

February 27, 2024 (except for Note 18, as to which the date is February 28, 2025)

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