Axon Enterprise Q3 2026: Missed Estimates and a Guidance Cut Explained

Axon Enterprise reported third-quarter 2026 adjusted EPS of $1.72, missing expectations against a consensus estimate of roughly $1.89. Revenue came in at $908.6 million, missing expectations of $936.95 million, even as that figure represented 27.9% growth year over year.

The single biggest factor dragging both results and the full-year outlook was the delay of three Federal Dedrone deployments worth approximately $130 million in aggregate. Those contracts slipped out of the 2026 calendar entirely, which is what forced management to trim the full-year revenue growth target to roughly 30% from a prior range of 32% to 34%. The revised full-year revenue guidance now stands at approximately $3.61 billion to $3.63 billion.

Software and Services revenue grew 43% and that segment's annual recurring revenue climbed 40% to roughly $1.75 billion. Platform Solutions, led by Dedrone, grew 106%. Those figures show the underlying subscription business accelerating even as hardware-heavy federal deals introduced lumpiness into reported results.

The quarter also carried a significant strategic move: a $1.2 billion investment in drone maker Skydio that makes Axon the exclusive U.S. and Canadian public safety distributor for Skydio products. That deal added roughly $1.15 billion in notes to the balance sheet, and free cash flow turned negative at roughly negative $18.9 million, partly due to approximately $100 million of inventory investment management expects to moderate after the first quarter of 2027.

Looking to Q4 2026, Axon guided revenue of $990 million to $1.01 billion with Adjusted EBITDA of $245 million to $250 million. The EPS history over the past eight quarters shows the company has a track record of beating estimates, making the Q3 miss more notable. Investors will be watching whether the delayed Dedrone deployments materialize in Q4 or push further into 2027.