Axon Enterprise 10-Q 2025-06-30

Filed 2025-08-05. 8 sections, 349K characters. Original on sec.gov · Markdown · JSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to __________

Commission File Number: 001-16391


			Axon Enterprise, Inc.
			(Exact name of registrant as specified in its charter)


Delaware			86-0741227
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

17800 North 85th Street
Scottsdale, Arizona			85255
(Address of principal executive offices)			(Zip Code)

(480) 991-0797

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $0.00001 Par Value			AXON			The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o

Non-accelerated Filer	o	Smaller reporting company	o

		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant’s common stock outstanding as of July 31, 2025 was 78,504,440.

AXON ENTERPRISE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025


			Page
Special Note Regarding Forward-Looking Statements			ii

PART I - FINANCIAL INFORMATION			1
	Item 1. Financial Statements (unaudited)		1
		Consolidated Balance Sheets	2
		Consolidated Statements of Operations and Comprehensive Income	3
		Consolidated Statements of Stockholders’ Equity	4
		Consolidated Statements of Cash Flows	5
		Condensed Notes to Consolidated Financial Statements	6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		47
	Item 4. Controls and Procedures		47
PART II - OTHER INFORMATION			48
	Item 1. Legal Proceedings		48
	Item 1A. Risk Factors		48
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		72
	Item 3. Defaults Upon Senior Securities		73
	Item 4. Mine Safety Disclosures		73
	Item 5. Other Information		73
	Item 6. Exhibits		73
	SIGNATURES		75

Special Note Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q that are not historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, beliefs, intentions and strategies regarding the future. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Words such as “may,” “will,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. However, not all forward-looking statements contain these identifying words.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Many events beyond our control may determine whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. This Quarterly Report on Form 10-Q lists various important factors that could cause actual results to differ materially from historical and expected results, which are set forth more fully in Part II, Item 1A. These factors are intended as cautionary statements for investors within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Readers can find them under the heading “Risk Factors” in this Quarterly Report on Form 10-Q, and investors should refer to them. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 8-K, 10-Q and 10-K reports to the Securities and Exchange Commission (“SEC”). Our filings with the SEC may be accessed at the SEC’s web site at www.sec.gov.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AXON ENTERPRISE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	June 30, 2025		December 31, 2024
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	615,496	$	454,844
Short-term investments	1,471,304		333,235
Marketable securities	144,000		198,270
Accounts and notes receivable, net of allowance of $3,479 and $3,322 as of June 30, 2025 and December 31, 2024, respectively	627,961		547,572
Contract assets, net	463,371		367,929
Inventory	308,492		265,316
Prepaid expenses and other current assets	197,738		130,315
Total current assets	3,828,362		2,297,481
Property and equipment, net	271,240		247,324
Deferred tax assets, net	357,417		304,282
Intangible assets, net	162,588		175,157
Goodwill	762,245		756,838
Long-term notes receivable, net	1,631		3,460
Long-term contract assets, net	161,905		119,876
Strategic investments	403,500		332,550
Other long-term assets	266,368		237,620
Total assets	$	6,215,256	$	4,474,588
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	118,110	$	71,955
Accrued liabilities	265,832		279,193
Current portion of deferred revenue	603,417		612,955
Current portion of notes payable, net	279,247		680,289
Customer deposits	19,412		20,626
Other current liabilities	11,053		12,857
Total current liabilities	1,297,071		1,677,875
Deferred revenue, net of current portion	329,045		360,685
Liability for unrecognized tax benefits	32,112		25,007
Long-term deferred compensation	20,512		15,877
Long-term lease liabilities	43,638		41,383
Long-term notes payable, net	1,728,575		—
Other long-term liabilities	31,903		26,096
Total liabilities	3,482,856		2,146,923
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively	—		—
Common stock, $0.00001 par value; 200,000,000 shares authorized, 98,723,268 shares issued and 78,503,041 shares outstanding as of June 30, 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	1,964,953		1,689,781
Treasury stock at cost, 20,220,227 shares as of June 30, 2025 and December 31, 2024	(155,947)		(155,947)
Retained earnings	936,111		812,014
Accumulated other comprehensive loss	(12,718)		(18,184)
Total stockholders’ equity	2,732,400		2,327,665
Total liabilities and stockholders’ equity	$	6,215,256	$	4,474,588

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

AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Net sales from products	$	376,360	$	292,763	$	717,256	$	563,187
Net sales from services	292,178		210,473		554,915		399,920
Net sales	668,538		503,236		1,272,171		963,107
Cost of product sales	193,507		142,627		363,688		294,787
Cost of service sales	71,288		54,453		139,001		103,536
Cost of sales	264,795		197,080		502,689		398,323
Gross margin	403,743		306,156		769,482		564,784
Operating expenses:
Selling, general and administrative	242,212		170,964		465,721		322,039
Research and development	162,567		101,434		313,590		192,531
Total operating expenses	404,779		272,398		779,311		514,570
Income (loss) from operations	(1,036)		33,758		(9,829)		50,214
Interest income	23,253		11,653		33,857		23,783
Interest expense	(28,686)		(1,871)		(36,507)		(3,627)
Other income (loss), net	(32,414)		7,934		81,987		147,000
Income (loss) before provision for income taxes	(38,883)		51,474		69,508		217,370
Provision for (benefit from) income taxes	(75,000)		10,001		(54,589)		42,545
Net income	$	36,117	$	41,473	$	124,097	$	174,825
Net income per common and common equivalent shares:
Basic	$	0.46	$	0.55	$	1.60	$	2.32
Diluted	$	0.44	$	0.53	$	1.52	$	2.26
Weighted average number of common and common equivalent shares outstanding:
Basic	77,999		75,511		77,448		75,433
Diluted	82,062		77,550		81,782		77,346
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition as of June 30, 2025, and results of operations for the three and six months ended June 30, 2025 and 2024, should be read in conjunction with the unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes in our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on May 7, 2025. The discussion includes references to non-GAAP financial measures, such as adjusted gross margin, which supplement our GAAP results by providing additional insight into our financial and operational performance. For definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, refer to “Non-GAAP Measures” within this Quarterly Report on Form 10-Q. This discussion also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to those described under “Part II, Item 1A. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements” on page ii of this Quarterly Report on Form 10-Q.

Overview

Axon is a technology leader in global public safety. Our moonshot goal is to cut gun-related deaths between police and the public in the United States in half by 2033. Axon is building the public safety operating system of the future by integrating a suite of hardware devices and cloud software solutions that not only revolutionize modern policing but also cater to federal agencies, corrections, justice and enterprise-level security needs. Axon’s suite includes cloud-hosted digital evidence management solutions, productivity and real-time operations software, body cameras, in-car cameras, TASER energy devices, drone and robotic security, and training solutions. Our financial results are reported in two reportable segments, Connected Devices and Software and Services.

Our revenues for the three months ended June 30, 2025 were $668.5 million, an increase of $165.3 million, or 32.8%, from the three months ended June 30, 2024. We had loss from operations of $1.0 million, compared to income from operations of $33.8 million for the same period in the prior year. Gross margin dollars increased $97.6 million and decreased as a percentage of revenue to 60.4% from 60.8% compared to the three months ended June 30, 2024. The decrease was primarily driven by higher stock-based compensation expense in the current period. Excluding the impacts of stock-based compensation expense, acquired intangibles amortization in cost of goods sold, and payroll taxes related to 2024 Employee XSP vesting, adjusted gross margin increased to 63.3% for the three months ended June 30, 2025 compared to 63.1% for the three months ended June 30, 2024. Operating expenses increased by $132.4 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $36.1 million included a $75.0 million tax benefit, partially offset by a noncash unrealized loss of $30.9 million related to our marketable securities. Net income of $41.5 million for the three months ended June 30, 2024 included a noncash unrealized gain of $7.8 million on our investment in marketable securities.

Our revenues for the six months ended June 30, 2025 were $1.3 billion, an increase of $309.1 million, or 32.1%, from the six months ended June 30, 2024. We had loss from operations of $9.8 million, compared to income from operations of $50.2 million for the same period in the prior year. Gross margin dollars increased $204.7 million and increased as a percentage of revenue to 60.5% from 58.6% compared to the six months ended June 30, 2024. Excluding the impacts of stock-based compensation expense, acquired intangibles amortization in cost of goods sold, and payroll taxes related to 2024 Employee XSP vesting, adjusted gross margin increased to 63.4% for the six months ended June 30, 2025 compared to 63.1% for the same period in the prior year, primarily due to higher software revenue mix. Operating expenses increased by $264.7 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $124.1 million included net realized and unrealized gains of $166.0 million related to our strategic investments and a $54.6 million tax benefit, partially offset by a noncash unrealized loss of $54.3 million related to our marketable securities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes, as discussed further within Note 10. Net income of $174.8 million for the six months ended June 30, 2024 included a realized gain of $42.3 million related to our acquisition in Fusus, an unrealized gain of $75.8 million related to a strategic investment, and a noncash unrealized gain of $29.6 million on our investment in marketable securities.

Certain prior period amounts previously reported on our consolidated financial statements have been revised to correct for immaterial errors, as described in Note 1 and Note 18 to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024

The following table presents data from our consolidated statements of operations and comprehensive income as well as the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (dollars in thousands):


	Three Months Ended June 30,
	2025				2024
Net sales from products	$	376,360	56.3	%	$	292,763	58.2	%
Net sales from services	292,178		43.7		210,473		41.8
Net sales	668,538		100.0		503,236		100.0
Cost of product sales	193,507		28.9		142,627		28.3
Cost of services sales	71,288		10.7		54,453		10.8
Cost of sales	264,795		39.6		197,080		39.2
Gross margin	403,743		60.4		306,156		60.8
Operating expenses:
Selling, general and administrative	242,212		36.2		170,964		34.0
Research and development	162,567		24.4		101,434		20.2
Total operating expenses	404,779		60.6		272,398		54.1
Income (loss) from operations	(1,036)		(0.2)		33,758		6.7
Interest income	23,253		3.5		11,653		2.3
Interest expense	(28,686)		(4.3)		(1,871)		(0.4)
Other income (loss), net	(32,414)		(4.8)		7,934		1.6
Income (loss) before provision for income taxes	(38,883)		(5.8)		51,474		10.2
Provision for (benefit from) income taxes	(75,000)		(11.2)		10,001		2.0
Net income	$	36,117	5.4	%	$	41,473	8.2	%

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


	Three Months Ended June 30,
	2025				2024
United States	$	537,373	80	%	$	424,638	84	%
Other countries	131,165		20		78,598		16
Total	$	668,538	100	%	$	503,236	100	%

International revenue increased compared to the prior year June 30, 2024 comparative period, primarily driven by increased sales in our Americas region.

Net Sales

Net sales by product line were as follows (dollars in thousands):


	Three Months Ended June 30,								Dollar Change		Percent Change
	2025				2024
Connected Devices segment:
TASER (1)	$	216,234	32.3	%	$	181,548	36.1	%	$	34,686	19.1	%
Personal Sensors (2)	92,819		13.9		75,113		14.9		17,706		23.6
Platform Solutions (3)	67,307		10.1		36,102		7.2		31,205		86.4
Total Connected Devices segment	376,360		56.3		292,763		58.2		83,597		28.6
Total Software and Services segment	292,178		43.7		210,473		41.8		81,705		38.8
Total net sales	$	668,538	100.0	%	$	503,236	100.0	%	$	165,302	32.8	%

(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 interview room, fleet in-car video, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.

Net sales for the Connected Devices segment increased 28.6% for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. The increase of $34.7 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $17.7 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $31.2 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment.

Net sales for the Software and Services segment increased 38.8% for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $81.7 million.

Gross Margin

As a percentage of net sales, gross margin for the Connected Devices segment decreased to 48.6% from 51.3% for the three months ended June 30, 2025 and 2024, respectively. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense, acquired intangibles amortization, and payroll taxes related to 2024 Employee XSP vesting, was 51.1% for the three months ended June 30, 2025, compared to 53.4% for the three months ended June 30, 2024. The decrease in both measures was primarily driven by an increased mix from Platform Solutions.

As a percentage of net sales, gross margin for the Software and Services segment increased to 75.6% from 74.1% for the three months ended June 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization, and payroll taxes related to 2024 Employee XSP vesting, increased to 78.9% for the three months ended June 30, 2025, compared to 76.6% for the three months ended June 30, 2024. The increase in both measures was primarily driven by higher software mix.

Selling, General and Administrative Expenses

SG&A expenses were comprised as follows (dollars in thousands):


	Three Months Ended June 30,				Dollar Change		Percent Change
	2025		2024
Total selling, general and administrative expenses	$	242,212	$	170,964	$	71,248	41.7	%
As a percentage of net sales	36.2%		34.0%

Stock-based compensation expense increased $33.6 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Salaries, benefits and bonus expense increased $22.5 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Sales and marketing expense increased $6.3 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to increased commissions and in-person events.

Research and Development Expenses

R&D expenses were comprised as follows (dollars in thousands):


	Three Months Ended June 30,						Dollar Change		Percent Change
	2025			2024
Total research and development expenses	$	162,567		$	101,434		$	61,133	60.3	%
As a percentage of net sales	24.3		%	20.2		%

Stock-based compensation expense increased $26.8 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Salaries, benefits and bonus expense increased $18.9 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Interest Income (Loss), Net

Interest income (loss), net, was as follows (in thousands):


	Three Months Ended June 30,
	2025		2024
Interest income	$	23,253	$	11,653
Interest expense (1)	(28,686)		(1,871)
Total interest income (loss), net	$	(5,433)	$	9,782

(1)Interest expense increased in comparison to the prior year June 30, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.

Other Income (Loss), Net

Other income (loss), net, was as follows (in thousands):


	Three Months Ended June 30,
	2025		2024
Realized and unrealized gain (loss) on fair value adjustments of strategic investments, net	$	(1,297)	$	158
Unrealized gain (loss) on marketable securities, net (1)	(30,870)		7,830
Loss on foreign currency transactions, net	(413)		(35)
Other, net	166		(19)
Other income (loss), net	$	(32,414)	$	7,934

(1)Reflects the unrealized loss on marketable securities during the three months ended June 30, 2025, as discussed within Note 3.

Provision for (Benefit from) Income Taxes

The effective tax rate was 192.9%, for the three months ended June 30, 2025, compared to 19.4% for the three months ended June 30, 2024. The 2025 tax benefit is driven by the favorable impact of stock-based compensation and R&D tax credits. These were partially offset by higher tax expense related to the executive compensation limitation under IRC Section 162(m) and increased unrecognized tax benefits.

Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):


	Three Months Ended June 30,
	2025			2024			Change
Income (loss) before provision for income taxes	$	(38,883)		$	51,474		$	(90,357)
Provision for (benefit from) income taxes	(75,000)			10,001			(85,001)
Effective tax rate	192.9		%	19.4		%

Net Income

We recorded net income of $36.1 million for the three months ended June 30, 2025 compared to net income of $41.5 million for the three months ended June 30, 2024. Net income per basic share was $0.46 for the three months ended June 30, 2025 compared to $0.55 net income per basic share for the three months ended June 30, 2024. Net income per diluted share was $0.44 for the three months ended June 30, 2025 compared to $0.53 net income per diluted share for the three months ended June 30, 2024.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024


	Six Months Ended June 30,
	2025				2024
Net sales from products	$	717,256	56.4	%	$	563,187	58.5	%
Net sales from services	554,915		43.6		399,920		41.5
Net sales	1,272,171		100.0		963,107		100.0
Cost of product sales	363,688		28.6		294,787		30.6
Cost of services sales	139,001		10.9		103,536		10.8
Cost of sales	502,689		39.5		398,323		41.4
Gross margin	769,482		60.5		564,784		58.6
Operating expenses:
Selling, general and administrative	465,721		36.6		322,039		33.4
Research and development	313,590		24.6		192,531		20.0
Total operating expenses	779,311		61.2		514,570		53.4
Income (loss) from operations	(9,829)		(0.7)		50,214		5.2
Interest income	33,857		2.7		23,783		2.5
Interest expense	(36,507)		(2.9)		(3,627)		(0.4)
Other income (loss), net	81,987		6.4		147,000		15.3
Income before provision for income taxes	69,508		5.5		217,370		22.6
Provision for (benefit from) income taxes	(54,589)		(4.3)		42,545		4.4
Net income	$	124,097	9.8	%	$	174,825	18.2	%

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


	Six Months Ended June 30,
	2025				2024
United States	$	1,066,756	84	%	$	816,179	85	%
Other countries	205,415		16		146,928		15
Total	$	1,272,171	100	%	$	963,107	100	%

International revenue increased compared to the prior year June 30, 2024 comparative period, primarily driven by increased sales in our Americas region.

Net Sales

As a result of the Segment Realignment, we have updated and recast our disaggregated revenue categories. Net sales by product line were as follows (dollars in thousands):


	Six Months Ended June 30,								Dollar Change		Percent Change
	2025				2024
Connected Devices segment:
TASER (1)	$	411,729	32.4	%	$	346,147	35.9	%	$	65,582	18.9	%
Personal Sensors (2)	181,224		14.2		143,113		14.9		38,111		26.6
Platform Solutions (3)	124,303		9.8		73,927		7.7		50,376		68.1
Total Connected Devices segment	717,256		56.4		563,187		58.5		154,069		27.4
Total Software and Services segment	554,915		43.6		399,920		41.5		154,995		38.8
Total net sales	$	1,272,171	100.0	%	$	963,107	100.0	%	$	309,064	32.1	%

(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 interview room, fleet in-car video, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.

Net sales for the Connected Devices segment increased 27.4% for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The increase of $65.6 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $38.1 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $50.4 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and virtual reality training.

Net sales for the Software and Services segment increased 38.8% for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $155.0 million.

Gross Margin

As a percentage of net sales, gross margin for the Connected Devices segment increased to 49.3% from 47.7% for the six months ended June 30, 2025 and 2024, respectively. The increase was primarily due to higher stock-based compensation expense for the six months ended June 30, 2024. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense, acquired intangibles amortization, and payroll taxes related to 2024 Employee XSP vesting, was 51.9% for the six months ended June 30, 2025, compared to 53.8% for the six months ended June 30, 2024. The decrease is primarily driven by increased mix from Platform Solutions.

As a percentage of net sales, gross margin for the Software and Services segment increased to 75.0% from 74.1% for the six months ended June 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization, and payroll taxes related to 2024 Employee XSP vesting, increased to 78.3% for the six months ended June 30, 2025, compared to 76.4% for the six months ended June 30, 2024. The increase was primarily driven by higher software mix.

Selling, General and Administrative Expenses

SG&A expenses were comprised as follows (dollars in thousands):


	Six Months Ended June 30,				Dollar Change		Percent Change
	2025		2024
Total selling, general and administrative expenses	$	465,721	$	322,039	$	143,682	44.6	%
As a percentage of net sales	36.6%		33.4%

Stock-based compensation expense increased $81.7 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Salaries, benefits and bonus expense increased $35.7 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Sales and marketing expense increased $9.5 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to increased commissions and in-person events.

Research and Development Expenses

R&D expenses were comprised as follows (dollars in thousands):


	Six Months Ended June 30,						Dollar Change		Percent Change
	2025			2024
Total research and development expenses	$	313,590		$	192,531		$	121,059	62.9	%
As a percentage of net sales	24.6		%	20.0		%

Stock-based compensation expense increased $60.5 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Salaries, benefits and bonus expense increased $34.7 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Interest Income (Loss), Net

Interest income (loss), net, was as follows (in thousands):


	Six Months Ended June 30,
	2025		2024
Interest income	$	33,857	$	23,783
Interest expense (1)	(36,507)		(3,627)
Total interest income (loss), net	$	(2,650)	$	20,156

Other Income, Net

Other income, net, was as follows (in thousands):


	Six Months Ended June 30,
	2025		2024
Realized and unrealized gain on fair value adjustments of strategic investments, net	$	166,024	$	118,089
Unrealized gain (loss) on marketable securities, net (1)	(54,270)		29,610
Gain (loss) on foreign currency transactions, net	(1,216)		53
Induced conversion of convertible debt (2)	(28,666)		—
Other, net	115		(752)
Other income, net	$	81,987	$	147,000

(1)Reflects the unrealized loss on marketable securities during the six months ended June 30, 2025, as discussed within Note 3.

(2)Reflects the inducement expense associated with the early repurchase of a portion of our 2027 Notes in the first quarter of 2025, as discussed further within Note 10.

Provision for (Benefit from) Income Taxes

The effective tax rate is (78.5)% for the six months ended June 30, 2025, compared to 19.6% for the six months ended June 30, 2024. The change is attributable to the favorable impact of stock-based compensation and R&D tax credits. These were partially offset by higher tax expense related to the executive compensation limitation under IRC Section 162(m), increased unrecognized tax benefits, and the absence of a prior year gain related to an investment transaction not recognized for tax. The overall change in the effective tax rate also reflects the impact of lower pre-tax book income in the current period, which magnifies the relative effect of permanent and discrete items.

Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):


	Six Months Ended June 30,
	2025			2024			Change
Income (loss) before provision for income taxes	$	69,508		$	217,370		$	(147,862)
Provision for (benefit from) income taxes	$	(54,589)		$	42,545		$	(97,134)
Effective tax rate	(78.5)		%	19.6		%

Net Income

We recorded net income of $124.1 million for the six months ended June 30, 2025 compared to net income of $174.8 million for the six months ended June 30, 2024. Net income per basic share was $1.60 for the six months ended June 30, 2025 compared to $2.32 net income per basic share for the six months ended June 30, 2024. Net income per diluted share was $1.52 for the six months ended June 30, 2025 compared to $2.26 net income per diluted share for the six months ended June 30, 2024.

Non-GAAP Measures

We utilize certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted gross margin as defined below to enhance understanding of our financial results and related measures. We have adjusted for expenses that we believe are not indicative of our core operating results, including stock-based compensation expense and amortization of acquired intangible assets. To improve comparability, prior periods have been conformed to the current period presentation. Our management uses these non-GAAP financial measures in evaluating our operating performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented below.

EBITDA (most comparable GAAP measure: Net income) - Earnings before interest expense, investment interest income, income taxes, depreciation and amortization.
Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments, marketable securities, and mark-to-market on our non-qualified deferred compensation liabilities; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; inventory step-up amortization related to acquisitions; certain litigation costs and recoveries related to (1) antitrust cases we consider to be non-recurring and outside of our core operating results and (2) litigation matters for acquired companies that were unresolved at the date of the acquisition; payroll taxes related to 2024 Employee XSP vesting; and other unusual, non-recurring pre-tax items that are not considered representative of our underlying operating performance (listed in the tables below).
Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross margin before noncash stock-based compensation expense, amortization of acquired intangible assets, inventory step-up amortization related to acquisitions, and payroll taxes related to 2024 Employee XSP vesting.

Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing our operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to our GAAP financial measures;
these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, our GAAP financial measures;
these non-GAAP financial measures should not be considered to be superior to our GAAP financial measures; and
these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q were prepared under a comprehensive set of rules or principles.

EBITDA and adjusted EBITDA reconcile to net income as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Net income	$	36,117	$	41,473	$	124,097	$	174,825
Depreciation and amortization	19,324		13,000		38,519		24,564
Interest expense	28,686		1,871		36,507		3,627
Investment interest income	(23,253)		(11,653)		(33,857)		(23,783)
Provision for (benefit from) income taxes	(75,000)		10,001		(54,589)		42,545
EBITDA	$	(14,126)	$	54,692	$	110,677	$	221,778

Non-GAAP adjustments:
Stock-based compensation expense	139,244		74,821		279,483		149,936
Unrealized and realized losses (gains) on investments and marketable securities, net	33,728		(7,967)		(110,193)		(105,386)
Realized gains on previously held minority interests acquired in business combinations, net	—		(21)		—		(42,313)
Debt inducement expense	—		—		28,666		—
Transaction costs related to strategic investments and acquisitions	2,230		4,136		4,957		10,493
Inventory step-up amortization	—		—		607		—
Litigation costs and related recoveries	774		—		2,823		224
Payroll taxes related to 2024 Employee XSP vesting	9,782		—		9,782		—
Adjusted EBITDA	$	171,632	$	125,661	$	326,802	$	234,732

As a result of the Segment Realignment, we have recast adjusted gross margin for the three and six months ended June 30, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):


	Three Months Ended June 30,
	2025									2024
	Connected Devices			Software and Services			Total			Connected Devices			Software and Services			Total
Gross margin	$	182,853		$	220,890		$	403,743		$	150,136		$	156,020		$	306,156
Stock-based compensation expense	7,583			4,978			12,561			5,883			2,634			8,517
Amortization of acquired intangible assets	1,333			3,853			5,186			351			2,639			2,990
Payroll taxes related to 2024 Employee XSP vesting	634			854			1,488			—			—			—
Adjusted gross margin	$	192,403		$	230,575		$	422,978		$	156,370		$	161,293		$	317,663
Gross margin %	48.6		%	75.6		%	60.4		%	51.3		%	74.1		%	60.8		%
Adjusted gross margin %	51.1		%	78.9		%	63.3		%	53.4		%	76.6		%	63.1		%


	Six Months Ended June 30,
	2025									2024
	Connected Devices			Software and Services			Total			Connected Devices			Software and Services			Total
Gross margin	$	353,568		$	415,914		$	769,482		$	268,400		$	296,384		$	564,784
Stock-based compensation expense	15,059			10,389			25,448			33,710			4,402			38,112
Amortization of acquired intangible assets	2,670			7,479			10,149			676			4,602			5,278
Inventory step-up amortization	607			—			607			—			—			—
Payroll taxes related to 2024 Employee XSP vesting	634			854			1,488			—			—			—
Adjusted gross margin	$	372,538		$	434,636		$	807,174		$	302,786		$	305,388		$	608,174
Gross margin %	49.3		%	75.0		%	60.5		%	47.7		%	74.1		%	58.6		%
Adjusted gross margin %	51.9		%	78.3		%	63.4		%	53.8		%	76.4		%	63.1		%

Liquidity and Capital Resources

Summary


	June 30, 2025		December 31, 2024		Dollar Change
Cash and cash equivalents	$	615,496	$	454,844	$	160,652
Available-for-sale investments	1,471,304		333,235		1,138,069
Total	$	2,086,800	$	788,079	$	1,298,721

Our most significant source of liquidity continues to be funds generated by operating activities and available cash and cash equivalents and short-term investments. As of June 30, 2025, we had $615.5 million of cash and cash equivalents, an increase of $160.7 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of June 30, 2025, we had $1.5 billion of available-for-sale investments, an increase of $1.1 billion from December 31, 2024 primarily as a result of investment activity following the issuance of the Senior Notes in March 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the issuance.

In addition, our Credit Agreement is available for additional working capital needs or investment opportunities. The Credit Agreement provides for a senior unsecured multi-currency revolving credit facility in an aggregate principal amount of up to $300.0 million, $50.0 million of which is available for the issuance of letters of credit. As of June 30, 2025, and December 31, 2024, respectively, 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 June 30, 2025, we had letters of credit outstanding of approximately $8.9 million under the facility and available borrowing of $291.1 million. Refer to Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our Credit Agreement and outstanding letters of credit.

As of June 30, 2025, we have an aggregate of $1.75 billion of Senior Notes outstanding. As of June 30, 2025, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 14% of our total revenue for the six months ended June 30, 2025, and approximately 19% and 6% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of June 30, 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our Senior Notes.

Furthermore, during the six months ended June 30, 2025, we sold 250,000 shares of our common stock under our ATM. We generated approximately $185.8 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $183.6 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $2.2 million. Refer to Note 12 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our ATM.

We believe we have access to additional financing. However, there is no assurance that such funding will be available on terms acceptable to us, or at all. We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements, including capital expenditures, working capital requirements, potential acquisitions or investments, income and payroll tax payments for net-settled stock awards, and other liquidity requirements through at least the next 12 months.

Going forward, we expect to continue to be an opportunistic issuer of debt securities and may issue new debt securities from time to time to fund our growth or refinance future debt maturities, among other things. In addition, from time to time, we may acquire our debt securities through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may from time to time determine, for cash or other consideration.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities (in thousands):


	Six Months Ended June 30,				Dollar Change
	2025		2024
Operating activities	$	(65,910)	$	66,825	$	(132,735)
Investing activities	(1,088,749)		(91,905)		(996,844)
Financing activities	1,308,861		(4,895)		1,313,756
Effect of exchange rate changes on cash and cash equivalents	6,497		(2,086)		8,583
Net increase (decrease) in cash and cash equivalents and restricted cash	$	160,699	$	(32,061)	$	192,760

Operating activities

Net cash provided by (used in) operating activities was $(65.9) million for the first six months of 2025, compared to $66.8 million for the six months ended June 30, 2024. The $(132.7) million change is due to the following (in thousands): 


	Six Months Ended June 30,				Dollar Change
	2025		2024
Net income	$	124,097	$	174,825	$	(50,728)
Stock-based compensation	279,483		149,936		129,547
Fair value adjustments on strategic investments and marketable securities, net	(111,754)		(147,699)		35,945
Deferred income taxes	(70,065)		(7,755)		(62,310)
Debt inducement expense	28,666		—		28,666
Inventory and accounts payable	(26,923)		(60,491)		33,568
Receivables and contract assets	(212,833)		(77,092)		(135,741)
Deferred revenue	(51,143)		(8,499)		(42,644)
Other, net	(25,438)		43,600		(69,038)
Net cash provided by (used in) operating activities	$	(65,910)	$	66,825	$	(132,735)

Net cash provided by operating activities for the six months ended June 30, 2025 consisted of net income of $124.1 million, a net add-back of non-cash income statement items of $188.5 million and a $378.5 million net change in operating assets and liabilities. Primary drivers of the non-cash items include stock-based compensation expense for employee equity programs, debt inducement expense related to the induced conversion for our 2027 Notes, fair value adjustments for the net realized and unrealized gains and losses on our strategic investments and marketable securities, and deferred income taxes. The realized and unrealized gains on our strategic investments and related warrants were primarily related to an observable price change and subsequent sale of one of our strategic investments. The change in receivables and contract assets was primarily due to increased sales, as well as the timing of invoicing and cash collections. The change in inventory and accounts payable was primarily due to advanced raw material purchases for Axon Body 4 and TASER 10 CEDs to support future sales. The change in deferred income taxes was primarily driven by a reduction in unrealized investment gains and the realization of previously unrealized investment gains. The change in other, net is primarily driven by supplier prepayments, receivables for income tax and interest in connection with our Senior Notes.

Investing activities

Net cash used in investing activities was $1.1 billion for the six months ended June 30, 2025 compared to $91.9 million for the six months ended June 30, 2024. The net investing cash outflow is primarily driven by $1.8 billion of investment purchases, including $1.5 billion for short-term investments and $244.3 million for strategic investments, and $47.8 million for purchases of property and equipment. The cash outflow was partially offset by $416.0 million of proceeds from calls, maturities and sales of available-for-sale investments and $340.7 million of proceeds from the sale of strategic investments. The increase in net cash outflow compared to prior period is primarily driven by greater available-for-sale and strategic investment activity in the current period, partially offset by the decrease in cash paid for business acquisitions.

Financing activities

Net cash provided by financing activities was $1.3 billion for the six months ended June 30, 2025 compared to cash used by financing activities of $4.9 million for the six months ended June 30, 2024. The financing cash inflow was partially driven by gross proceeds of $1.8 billion from the Senior Notes issuance and net proceeds of $184 million from our ATM equity offering program. The proceeds were partially offset by $407.5 million of principal payments related to the induced conversion for our 2027 Notes, $24.7 million of transaction costs related to the induced conversion, debt issuance, and revolver modifications, and payments totaling $192.8 million for income and payroll taxes on behalf of employees who net-settled stock awards during the period. The increase in income and payroll tax payments in the period is largely driven by the vesting of Tranche 1 of the 2024 Employee XSP program vesting.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operation is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. While we do not believe that a change in these estimates is reasonably likely, there can be no assurance that our actual results will not differ from these estimates.

Our critical accounting estimates are discussed in our amended 2024 Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024. There have been no significant changes to these critical accounting estimates for the six months ended June 30, 2025. Refer to Note 1 in Part I, Item 1 of this Quarterly Report on Form 10-Q for any additional details regarding our significant accounting policies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We typically invest in a limited number of financial instruments, consisting principally of investments in money market accounts, certificates of deposit, and corporate and municipal bonds with a typical long-term debt rating of “A” or better by any nationally recognized statistical rating organization, denominated in U.S. dollars. All of our cash equivalents and investments are treated as “available-for-sale”. To quantify our interest rate risk exposure, we perform a sensitivity analysis based on hypothetical changes in interest rates. Based on investment positions as of June 30, 2025, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $1.9 million decline in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.

Additionally, we have access to a $300.0 million line of credit borrowing facility which bears interest at 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. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit, which totaled $8.9 million at June 30, 2025. At June 30, 2025, there was no amount outstanding under the line of credit, and the available borrowing under the line of credit was $291.1 million. We have not borrowed any funds under the line of credit since its inception; however, should we need to do so in the future, such borrowings could be subject to adverse or favorable changes in the underlying interest rate.

Exchange Rate Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, in each case compared to the U.S. dollar, related to transactions by our foreign subsidiaries. The majority of our sales to international customers are transacted in foreign currencies and therefore are subject to exchange rate fluctuations on these transactions. The cost of our products to our customers increases when the U.S. dollar strengthens against their local currency, and we may have more sales and expenses denominated in foreign currencies in future years which could increase our foreign exchange rate risk. Additionally, intercompany sales to our non-U.S. dollar functional currency international subsidiaries are transacted in U.S. dollars which could increase our foreign exchange rate risk caused by foreign currency transaction gains and losses.

To date, we have not engaged in any currency hedging activities. However, we may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, the prohibitive economic cost of hedging particular exposures. As such, fluctuations in currency exchange rates could harm our business in the future.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer are responsible for the evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2025 due to a material weakness in our internal control over financial reporting related to revenue recognition as disclosed in Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024.

Remediation Efforts to Address the Material Weakness Related to Revenue Recognition

With respect to this material weakness, management, under the oversight of the Audit Committee, continues to execute the remediation plan as disclosed in Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A, which includes designing and implementing control activities to ensure there is the appropriate periodic assessment of its revenue accounting policies, and that updates to the polices are made to reflect changes in product offerings or terms and conditions of the arrangements with customers; and designing and implementing additional monitoring controls for its existing and new revenue streams. While we have taken steps to implement our remediation plans, the material weakness cannot be considered remediated until the necessary controls have been designed and implemented and the controls have operated for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively.

Remediation of Previously Identified Material Weakness Related to the 2027 Notes

We disclosed in Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A that we had identified a material weakness in internal control over financial reporting related to the presentation of the 2027 Notes between current and long-term liabilities.

In response to the material weakness, we designed and implemented control activities to periodically monitor the satisfaction of contingent conversion provisions within the Indenture governing the 2027 Notes, as well as other relevant provisions associated with new debt arrangements entered into, to ensure they are evaluated at each balance sheet date and that any triggered provisions are appropriately assessed to ensure they are accurately accounted for and disclosed. During the second quarter of 2025, we completed the testing of these control activities and determined they have been appropriately designed and operated effectively for a sufficient period of time to conclude that the previously identified material weakness has been remediated as of June 30, 2025.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The discussion in Note 14 to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.

Item 1A. Risk Factors

Risk Factor Summary

The following is only a summary of the principal risks that may materially adversely affect our business, financial condition, results of operations and cash flows. The following should be read in conjunction with the more complete discussion of the risks we face, which are set forth more fully below.

Strategic Risks

We substantially depend on acceptance of our products and services by law enforcement agencies throughout the world. If law enforcement agencies do not continue to purchase and use our products and services, our business prospects, operating results and financial condition will be materially adversely affected.
We substantially depend on sales of our CEDs, and if these products do not continue to be widely accepted, our business prospects, operating results and financial condition will be diminished.
If we are unable to design, introduce, sell and deploy new products or new product features successfully, our business and financial results could be adversely affected.
We face risks associated with rapid technological change and new competing products.
Our future success depends on our ability to expand sales through direct sales and distributors and our inability to increase direct sales or recruit new distributors would negatively affect our sales.
Negative publicity could adversely impact sales, which could cause our revenues or operating results to decline.
Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute shareholder value, and adversely affect our operating results.
We may not successfully manage our growth or plan for future growth.
We are highly dependent on the services of our executive officers, including Patrick Smith, our Chief Executive Officer. Our failure to retain executive officers could adversely impact our business.

Operational Risks

Unavailability of materials or higher costs could adversely affect our financial results.
Material adverse developments in domestic and global economic conditions, or the occurrence of other sufficiently disruptive world events, could materially adversely affect our revenue and results of operations.
If demand for our products increases, our future success will depend on our ability to manage our growth and to increase manufacturing production capacity.
Delays in product development schedules could adversely affect our revenues and cash flows.
We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may receive no revenue in return.
If our security measures or those of our third-party providers, including cloud storage providers, are breached, resulting in unauthorized access to our and our customers’ data, it could undermine the confidence in our network, data centers and services, leading to reduced customer use of our products and services and significant legal and financial exposure and liabilities.
Catastrophic events could materially adversely affect our business prospects, operating results and financial condition.
Uncertainty in the development, deployment, and use of artificial intelligence (“AI”) in our products and services, as well as our business more broadly, could adversely affect our business and reputation.
Defects or disruptions in our services could impact demand for our services and subject us to substantial liability.
Defects in our products could reduce demand for our products or result in product recalls and result in a loss of sales, delay in market acceptance and damage to our reputation.
Our international operations expose us to additional risks that could harm our business prospects, operating results and financial condition.
We depend on our ability to attract and retain our key management, sales and technical personnel.
Failure to comply with federal, state, or local regulations applicable to our firearm product, the TASER 10 CED, could result in governmental actions or litigation, potentially harming our business prospects, operating results, and financial condition.
Failure to maintain effective internal control over financial reporting may adversely affect our ability to report our financial condition and operating results in a timely and accurate manner, which may cause investor confidence to diminish and the value of our common stock to decline.
Our revision and our restatement of previously issued consolidated financial statements may adversely affect investor confidence and could result in regulatory actions and stockholder litigation.

Financial Risks

An increasing percentage of our revenue is derived from subscription billing arrangements that may result in delayed cash collections and may increase customer credit risk on receivables and contract assets.
Our gross margin depends on a number of factors, including our product mix, cost structure and acquisitions we may make, any of which could cause our gross margin to fluctuate.
Revenue for our Software as a Service (“SaaS”) products is recognized over multi-year contract terms, which may delay the reflection of new business in our operating results.
Most of our end-user customers are subject to budgetary and political constraints, which may delay or prevent sales, result in cancellations, or lead to the non-renewal of contracts.
The open bidding process introduces uncertainty in securing future contract awards.
We hold the majority of our cash balances, some of which are not insured, at three depository institutions.
Stock transactions may have a material, unpredictable impact on our operating results and may result in dilution to existing shareholders.
Our financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local currencies.
Unanticipated changes in our effective tax rate and additional tax liabilities could adversely affect our operating results and financial condition.
Our revenue and operating results may fluctuate unexpectedly from quarter-to-quarter, which could impact our stock price.
Our profitability could suffer from declines in fair value or impairment of our investments, including our strategic investments, and could fluctuate if the fair values of our investments increase.

Legal and Compliance Risks

We may face personal injury, wrongful death, product liability and other liability claims that harm our reputation and adversely affect our business prospects, operating results and financial condition.
Other litigation, government inquiries and regulatory actions may result in significant costs and judgments and divert management attention from our business.
We have in the past and may in the future be subject to intellectual property infringement and other claims, which could incur substantial litigation costs, result in significant damages awards, inhibit our use of certain technologies, and divert management attention from our business.
If we are unable to protect our intellectual property, the value of our brands and products may decrease and we may lose our competitive market advantage.
We may be unable to enforce patent rights internationally, which may limit our ability to prevent our product features from being used by competitors in some foreign jurisdictions.
The use of open-source software in our products, services and technologies may expose us to additional risks and harm our intellectual property rights.
A variety of new and existing laws and/or interpretations could materially and adversely affect our business.
Uncertainties with complex U.S. federal, state and local and foreign procurement laws and regulations could cause us to incur costs that could have a material adverse effect on our business, financial position, results of operations and cash flow.
We are subject to evolving corporate governance and public disclosure regulations and expectations that

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Item 5. Other Information

The table below describes the contracts, instructions or written plans for the purchase or sale of securities adopted or terminated by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended June 30, 2025, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).


Name and Title	Action	Date of Adoption or Termination	Expiration Date	Aggregate Number of Securities to be Sold
Patrick Smith, Chief Executive Officer	Termination (1)	May 12, 2025	October 20, 2028	150,000
Joshua Isner, President (2)	Adoption	August 21, 2024	December 31, 2025	33,393	(3)
Patrick Smith, Chief Executive Officer	Adoption	May 12, 2025	August 10, 2027	240,000
Brittany Bagley, Chief Operating Officer and Chief Financial Officer	Adoption	June 16, 2025	December 31, 2025	10,000	(3)

(1)Trading arrangement was originally adopted on December 15, 2024.

(2)This rule 10b5-1 trading arrangement was inadvertently omitted from Item 5 of Part II of our Quarterly Report on Form 10-Q for the period ended September 30, 2024.

(3)Reflects the maximum number of shares to be sold, excluding the effect of shares withheld for taxes.

No other Rule 10b5-1 trading arrangements or “non-Rule 10b5-1 trading arrangements” (as defined by S-K Item 408(c)) were entered into, modified, or terminated by our directors or officers during such period.

Item 6. Exhibits


3.1			Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q, filed August 9, 2022)
3.2			Bylaws, as amended and restated (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed December 21, 2023)
31.1*			Principal Executive Officer Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2*			Principal Financial Officer Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32**			Principal Executive Officer and Principal Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			Inline XBRL Taxonomy Extension Schema Document
101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, formatted in Inline XBRL

+Management contract or compensatory plan or arrangement

*Filed herewith

**Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


AXON ENTERPRISE, INC.

Date:	August 4, 2025
		By:	/s/ PATRICK SMITH
			Chief Executive Officer
			(Principal Executive Officer)

Date:	August 4, 2025	By:	/s/ BRITTANY BAGLEY
			Chief Operating Officer and Chief Financial Officer
			(Principal Financial Officer)