AXON ENTERPRISE, INC. Q4 2025 earnings call

Our remarks today are meant to build upon our most recent shareholder letter and investor materials, which you can find on our investor website at investor.axon.com. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our expectations as of today and are not guarantees of future performance. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially, as discussed in our SEC filings.

We will also discuss certain non-GAAP financial measures. Descriptions and reconciliations to GAAP are included in our shareholder letter and available on our investor website. Now, as always, before we begin, we have a quick video to get us started. Let's pull it up.

On this stage, a year ago, we launched Draft One, which is our first major product of the new generative AI Era. Man, we knew we had a hit on our hands. In fact, Draft One is the fastest-growing product or service we've ever launched. We haven't stopped with Draft One. We have several new innovations, like body cameras that can answer policy questions or provide real-time translation. Solutions to make interactions safer and more successful. Evidence workflows that are more effective. Products like Brief One, which is transforming justice with technology.

This product is going to revolutionize the way that we're able to do business. We use technology to go in and be our eyes. Be my voice. To help with that conflict resolution. It's amazing how wonderful it works. Within seconds, a dispatcher is vetting it. The users of the drone are so shocked. We're there before the drone's even up. Utilizing Policy Chat is a lot easier. It's a lot more efficient, and we can shift our focus more on calls for service. It is potentially the answer to the largest pain point for any prosecutor's office. Technology is gonna evolve rapidly. Dedrone. Fusus. Prepared. Carbyne. Outpost. VR Training.

We're looking at the future of law enforcement. I would predict the advancement to be in three years, what it was in the last 30 years. Success is already apparent. It's making us more efficient. We're able to see where that suspect was. We would not have caught this guy just a few years before. He's captured in six hours. Using this technology is just the next step of serving our citizens. Relationships are the foundation of high-performing teams, relationships built on trust and integrity. If you trust your teammates, extraordinary things are possible.

You can do anything. Today, I want to thank you for our relationship, for entrusting us to be on your team, because in the coming months and years, we're going to do extraordinary things. Unit 127 responding. Together.

All right. Thank you, Eric, and thank you everyone for joining us today. We completed another incredible year at Axon, and I'm humbled by what our team has accomplished. It goes beyond products and financial performance. It's about our mission and the work we're doing to accomplish even more in the years to come. As Eric mentioned, we're going to do things a little different today. After you hear from Josh and Brittany, I'll come back to tie it together with how we see Axon evolving and why I believe there is no better position to be in than the one we are in right now. Josh, you're up.

Thanks a lot, Rick, and good afternoon, everybody. I'm very proud of our team. They earned this result, and they deserve the credit. They are this good. It's a privilege to work with such talented people who are passionate about serving our customers and pursuing our mission. In 2025, their hard work yielded a number of exciting outcomes worth highlighting.

First, when it comes to our key indicators on our scoreboard, there is no metric more important than bookings. You may recall that over the past few quarters, we laid out an ambitious plan to drive record bookings. I'm proud to say the team left no doubt. 2025 full-year bookings surpassed $7 billion, and we're up more than 40% from last year.

That's on the back of fourth quarter bookings, up more than 50%, representing a major acceleration relative to two straight years of bookings growth in the high 20% range. To me, this is the beginning of a trend. We just booked almost as much business in the quarter as we did in the full year, just two years ago, and we see no sign of that slowing down. Generally, we aren't big on singling out specific teams because frankly, so many of them at Axon are operating at a world-class level right now.

Given the fourth quarter result, I want to call out a few stand-up performances. First, our US state and local team, led by Jessica Duncan. This is our best team at the company and possibly the best team in the entire industry. In 2025, they delivered not one, but three nine-figure deals.

A few years ago, that didn't even seem possible. This demonstrates the tremendous reception that our new products are receiving. Speaking of new products, a second highlight was that new product bookings, which include Air, AI and Fusus, totaled over $1 billion for the year and were nearly triple 2024's result.

For two years, we have recognized that for software companies to win in the age of AI, they must convert their existing customer base to AI users before someone else does, I believe Axon is doing that better than any company in public safety. To that end, in our first full year of selling the AI Era Plan, it accounted for approximately $750 million worth of bookings, or about 10% of the overall bookings total.

We are positioned to be a winner in this AI-driven environment. We intend to lap the field. Along those lines, we see a lot of runway across our new product portfolio. ALPR and Vehicle Intelligence is another one that has barely scratched the surface. Our pipeline is sitting in the nine figures for that new product set, and we expect that to continue to grow. These are exactly the signs we need to see to know we are on the right track, and it's why we keep building more.

The industry-wide scrutiny on data privacy and license plate readers is real, and we believe it's a tailwind for Axon. Our early and sustained investment in privacy by design and ethical governance has positioned us well.

We're hearing directly from customers, some of whom came to us from other vendors, that our track record on privacy and ethics was a deciding factor in their decision. Customers aren't just buying hardware and software, they're buying confidence that will help them deploy technology responsibly. That's a durable competitive advantage. Next up, we have new and emerging markets. Bookings in this category, which include everything outside US state and local law enforcement, surpassed $2 billion on the back of record results in international corrections and justice.

A huge shout-out to our international team specifically, who crossed $1 billion in annual bookings for the first time and delivered two of our largest deals in fourth quarter, both of which were large European cloud deployments coupled with connected devices. We're seeing this type of progress across multiple region as our land and expand strategy continues to gain momentum.

It's impossible to talk about explosive growth at Axon without mentioning our corrections team. A few years ago, it would have sounded crazy for me to predict this, but the largest single customer booking in Axon company history was delivered by our corrections team. What's really important about that is what's included: TASER 10, Body 4, real-time capabilities, AI, and more, showing we have product market fit across the platform. Corrections has become one of our many verticals to prove it can punch well above its weight.

While 2025 was a great year, and we're thrilled with such a strong result, we stopped celebrating this at about 12:10PM Pacific Time on 6 January 2026. That was 10 minutes into our 2026 company kickoff event. This is a team that is on to the next play.

Thank you, Josh. I echo Rick and Josh's comments when I say that I am truly thankful for our team and impressed with everything they were able to accomplish over the past year. First, I'll walk through our fourth quarter performance, then we'll move to guidance, our new 2028 targets, and how we think about the future. fourth quarter was another very strong quarter across the board. Revenue grew 39% year-over-year to $797 million, our eighth quarter and fourth year in a row, growing above 30%.

Our growth is supported across our product lines. Software and services grew 40% year-over-year to $343 million. Expansion within existing customers and growth with new customers both drive this segment.

We see strong demand with new products, including Fusus, AI, VR, and Counter-drone, each contributing to our software growth, alongside our digital evidence management platform. Net revenue retention expanded to 125% in the quarter, demonstrates the adoption of our new products by our existing customers. ARR grew 35% year-over-year to over $1.3 billion. We're also gaining new customers in diversified end markets, as Josh called out, including strong wins in corrections and international this quarter.

Connected devices was up 38% year-over-year, with revenue of $454 million. TASER revenue of $264 million grew 32%. Personal sensors revenue of $109 million grew 28%, platform solutions revenue of $81 million grew 81% in the quarter. TASER 10, Body 4, Counter-drone equipment, and VR Training solutions were all drivers.

Adjusted gross margin came in at 61.1%, down sequentially due to the impact of tariffs and increased mix from platform solutions, partially offset by continued strong growth in high-margin software and services. We expect to see quarter-to-quarter volatility from product mix, but over time, we will see the benefits of our software mix flow through to gross margins. Adjusted operating expenses of $1.1 billion increased $245 million sequentially, and decreased as a percentage of revenue from 39.2% to 38.2% year-over-year.

Increased operating expenses were driven by continued investment in R&D and our go-to-market functions as we scale the business to support future growth. This was partially offset by leverage on our G&A functions as we work to scale efficiently. Adjusted EBITDA grew 46% year-over-year to $206 million.

An adjusted EBITDA margin of 25.9% outperformed our expectations on higher revenue than forecasted and operating leverage. Operating cash flow of $217 million, Free cash flow conversion on adjusted EBITDA decreased year-over-year due to investments in inventory and the timing of collections, which we expect to catch up on in the coming quarters. We continue to target free cash flow conversion on adjusted EBITDA of 60%, and expect 2025 to represent a low point as we get back closer to that 60% level in 2026.

On our balance sheet, we leveraged our financing during the year to update our capital structure and completed the redemption of our outstanding convertible notes, limiting dilution while ensuring we have capital available to support our growth strategy.

We closed the acquisition of Prepared in fourth quarter and closed our acquisition of Carbyne this month. Turning to guidance. Our strong 2025 bookings, scaled manufacturing capacity, continued investment in new products, and a growing bookings backlog supports our expectations for another year of robust growth. Our forecast for 2026 is revenue growth in the range of 27% to 30% year-over-year, which is the strongest outlook we have had heading into the year. We see robust growth and are maintaining our adjusted EBITDA margin of 25.5% for the year.

This expectation includes the impact from our increased investment in several product and market areas, as well as impacts from global tariffs, inflationary componentry costs, including memory and acquisitions, which are still scaling. Obviously, there was big news on tariffs last week.

Right now, for us, very little has changed going forward, given the implementation of the new 15% global tariff. That is what we have baked in. We're not assuming anything on refunds until the process is clearer. In addition to our full year guidance, I'd like to provide some commentary on seasonality. fourth quarter is usually our strongest quarter for bookings, which we absolutely saw.

first quarter is a period where we build pipeline for the year, resulting in our slowest quarter for new bookings. We also pay bonuses and commissions in first quarter, resulting in a quarter that typically has lower free cash flow conversion than our average. We expect both dynamics again as we head into first quarter.

Awesome. Thank you, Brittany. It excites me that our team is thinking longer term, I believe that will be a competitive advantage for many years to come. Five years ahead, three years ahead is no time at all, and even in the history of TASER and Axon. With the technology advancing faster than ever, I have no doubt the world will look unrecognizable in just a few more short years, in a good way.

Before I talk about where we're going, I want to ground us in where we are today and what anchors us to do so much of what we do. Let me start with our moonshot. A few years ago, we introduced a moonshot to cut gun-related deaths between police and the public in the United States in half by 2033.

We do a lot of things at Axon, but when you step back and you think about impact, I believe it all harmonizes under this goal and our mission to protect life. I'm also excited to share, and look, this is still preliminary as data is still coming in from last year, but 2025 appears to be the first year where the number of gun-related deaths between police and the public actually went down substantially in the US.

It's too early to claim Axon had a direct causal impact, but I'm encouraged to see the trend is turning the right direction for the first time. We do have numerous anecdotes of specific instances where the capabilities of TASER 10 saved a life in situations where previously people would have been shot and killed.

See this video I'm going to show you now from our hometown here in Scottsdale, Arizona, where a woman called 911. She wanted to be shot and killed. She wanted to commit what's called suicide by cop. Let's play the video.

I just want to chat with you real quick, okay? Drop the knife. It's very important to me that you drop the knife, okay? Drop it. Drop the knife. Drop the knife! TASER, TASER, TASER. Drop the knife, drop the knife, drop the knife. Do not move. Do not move. Grab her. Go ahead. Grab her. I got her, I got her.

All right. As you can see there was another officer with a lethal weapon. I talked to some of the officers that were on scene that day, and they said she very likely would have been shot and killed had she taken another step, and only TASER 10 enabled them to shoot from that distance. Go and advance to the next slide, please. I also want to share that we've had customers now coming back and telling us they are seeing a result.

We had a major county sheriff's office, that means they're one of the largest in the US, tell us that they had a 42% reduction in deputy-involved shootings, and they believe that TASER 10 was a major contributing factor, along with de-escalation training, much of which happened in our VR system.

In addition to that quote, I just want to talk about, like, where this translates into our mission. Our mission translates into the products we build and the scale that we're now operating at. TASER is becoming synonymous with de-escalation and saving lives more than ever before, and in more places. Today, we estimate a TASER cartridge is fired in the field approximately every 30 seconds in the US In just the time I'm speaking, another TASER cartridge has been fired.

Every time a TASER device is used successfully, it has the potential to save a life, and that's what grounds us in how we think about this product line. Training is also a critical element. We can build the greatest device ever created, but if people aren't trained to use it effectively, it doesn't deliver its true value.

That's why we invested in building a suite of virtual reality training solutions over the last five years. We took a risk. VR training was not common or widely adopted when we started. As Brittany mentioned, we leaned in to be the innovators and disruptors here. Today, we see that was definitely the right direction. Last year, customers completed nearly a half a million VR training sessions.

That numbers continues to grow. VR training is nearly sold one-to-one with TASER 10 deployments. It can do much more than train users on our devices. This year, we are infusing our VR platform with AI-powered features that will transform how police are trained in the decade ahead.

We lean in and make bold bets before it's safe to do so, we garner significant first-mover advantages, and now we have what we believe is the most widely deployed VR Training platform in the US public safety sector and are well-positioned to layer in AI capabilities, just as we are across our massive sensor and software network. Another part of our strategy has been transparency and better decision-making in the moment. That led us to body cameras nearly 15 years ago. Today, our cameras are the standard in public safety.

We have stored and enabled recordings of more than 60 million hours of body-worn camera footage on our latest two generation of cameras, Axon Body 3 and Axon Body 4. In just the last year, we're helping customers use that body camera footage to drive more efficient workflows, provide transparency, and support faster and more effective justice.

Beyond body cameras, our real-time efforts expanded into fixed cameras, vehicle intelligence, and real-time operations. Through Fusus, we now power more than 1 million monthly live streams with more than 300,000 community cameras connected. That's powerful connectivity and insights unavailable anywhere else. Finally, we're leading and supporting and driving toward the future in the AI Era. We already have more than 500 public safety agencies live with Axon Assistant, generating more than 200,000 monthly messages.

We were the first to introduce a suite of industry-leading AI tools for our customers, we're not just enabling the ability to query, we're pioneering the ideas and the ways they will use AI and its features to do their jobs more safely and more effectively.

We're just getting started with what that Axon Assistant can do, and you'll continue to see us push the envelope well ahead of the pack. I know that sounds like a lot already, but in my view, you haven't seen anything yet. It's about to get a lot more exciting, and it's gonna happen faster than ever before. Let me summarize it in a succinct vision. This is how I think about Axon developing. Axon can be the provider of the world's largest global sensor network, fully connected and supercharged by AI. We will power the most intelligent, connected safety devices globally.

We will connect those sensor devices across the full life cycle of how they're used, and we'll build AI into every workflow safely, securely, and reliably. Let's go to the next slide. Now let's dive into what that means in more detail.

Thanks, Rick, and everyone. We'll spend the next half of the call today taking everyone's questions. Up first, we have Mike Ng at Goldman Sachs.

Wonderful. Good afternoon. Thank you for the question. Historically, you've given us a sense of what bookings growth could look like on an absolute basis or relative to revenue growth. I was just wondering if you could talk about what you're expecting around bookings growth and discuss the demand environment in 2026. Relatedly, are you expecting to see any meaningful product or customer vertical inflections over the next three years embedded in the guidance? Thank you very much.

Yeah, thanks a lot, Michael. I'd say at this point in time, we probably wanna stay away from any bookings guidance. I would say qualitatively, you know, as we get toward the later part of the year, and I start to have more visibility, just like in the past few years, I can certainly give more information then. From a demand perspective, never been more confident across the board.

Like, we knew our core was rolling, and we're excited about that, but seeing these new products layer on and just the standalone demand for them in some cases, and the kind of bundled demand in conjunction with some of our other products, it's just, it's coming together really nicely.

I think it's very, very possible that, you know, all four of our core markets are in a place to have banner years this year. It's gonna take a lot of execution and a lot of focus, a lot of discipline, but, I'll bet on our team.

Great. Just as my follow-up, just on the strategy to become the number one global sensor network, it seems like Axon 911, you know, building on Prepared and Carbyne, you know, should be really foundational to that. Could you talk a little bit about, you know, the differentiation that you guys have relative to the incumbents? What does the go-to market look like to address, you know, this wider group of constituents that, you know, you may have done a little bit less with in the past, like fire and EMS? Thank you very much.

Sure. Jeff, why don't you cover the product, or Rick, cover the product, and I'd be happy to cover the go-to-market motion.

I'm gonna give Jeff a little chance to speak here, and then maybe I'll top up after.

Sure. Thanks for the question, Michael. I think, you know, like we talked about before, you know, the combination of sort of two steps. One is within 911, and then 911, how it connects to the rest of the ecosystem and everything Rick just talked about. Within 911, you know, the combination of Prepared and Carbyne and why we were so excited to bring both of them into the Axon fold is because it's breadth and depth. What Prepared does is it is this AI-powered modern overlay that instantly adds value with almost zero deployment complexity, that can be done in extremely short order to any PSAP.

anywhere, instantly turbocharging their ability to have a faster and more efficient workforce, and to feed real-time data about incidents into a real-time crime center, like Fusus and the like. I'll come back to that in a moment. It is not competitive with the legacy systems. It is an add-on and an instant overlay that's extremely efficient and effective.

Carbyne comes right around behind that and says, as an agency is ready, whenever they're ready, and many and more of them are getting ready sooner to say: "We wanna modernize our overall call-handling infrastructure and have top to bottom the absolute best full stack for powering 911." Carbyne has already proven and continues to prove that, you know, pound for pound, they can outperform on every metric that matters, those incumbent systems.

The combination of those two, we think, sets us up very, very well, both right now and in the years to come. Both of those connect to the ecosystem in a very advantaged way, in the vignettes that Rick already shared.

The ability to, as seamlessly as possible, take that signal from 911, flow it right into the RTCC with Fusus, flow it right into DFR, with Skydio and more, and then all the way connected from there to all of our other sensors and signals, including the ones that are being worn by officers. Again, agencies will pick individually which pieces they want the most, but the complete combination is really unmatched and unbeatable.

Thanks a lot, Jeff. From a go-to-market perspective, Michael, you're right to identify the fact that while there's overlap in the Real-Time Crime Center, the PSAPs are an extension of our customer base. I think Prepared's brand. Look, the Carbyne acquisition closed just very recently, so most of my comments will be more geared toward Prepared as we've made a little more headway, given that, you know, the acquisition was last year. You know, these folks are very well-ingrained in this customer set, and they're very well-liked and respected.

I'd say any acquisition we do ever starts with the quality of the team. Like, it doesn't really matter to us who's ahead and who's behind. In this case, we believe Prepared is ahead and Carbyne is ahead in next-gen call handling, but these teams are very, very talented.

Not only are we placing a bet on this technology, we're placing a bet on the leaders here, and specifically Michael Chime, CEO of Prepared. This guy's gonna win in 911. We're betting on him. We're arming him with what he needs, coupled with Amir at Carbyne, we think we're gonna be a very, very, very competitive group into the future. We're excited about that.

Great. Thank you very much.

One thing I wanna just pile on with one other thing. If you look at. There's sort of two general acquisition strategies, I'd say, in our industry. There's buy the mature cash cow industry leader, and you sort of do the, that sort of a roll-up, which is not what we do, or you look at who are the disruptors that bring a fresh tech stack. You have Fusus, Dedrone, Prepared, Carbyne.

These are all category upstarts that have a fresh technology stack that we can bring and integrate with what we're doing. You know, the alternatives, you buy a ton of tech debt. Just because you've got a bunch of you know, sort of legacy businesses under one brand, doesn't mean that the systems play well together.

Especially if you don't get the cultural elements right, driving change in large organizations is ever harder. I wanna thank, you know, Jeff in particular, and Josh. I mean, I drive these guys nuts. They're trying to run a large business, and I'm always coming in like: "Hey, we got to push over here. We got to be changing." I'm really proud. I mean, Jeff has shown me just great examples. I think our team is adopting AI internally at a speed that I'm just really proud of, and it's not easy. There's also...

Frankly, at times, there's pressure to, "Hey, should we be more focused, stay in one market, stay in one product segment?" You look at the breadth of all the different things we're doing across that portfolio, and now in so many different markets, and the benefit of that is when the ground is shifting beneath our feet, we're not just reliant. I would not want to be a software-only company right now. I think this whole SaaSpocalypse has got some real risk to it.

When you combine, like, doing integrated hardware and software and all the data handling and network effects of sharing across all these different users, and now in each new market we go into, I just met with a huge company in the medical response space.

The ability we can give them to directly communicate and share data with other first responders without going, you know, having to rely on a radio right out of the 1970s, we think sets us up to continue to really build this ecosystem, you know, for the future and disrupt many of the category incumbents.

Thank you, Rick.

Thanks, Mike. Up next, we have, Will Power at Baird.

Okay, great. Well, really strong results. Congratulations to the whole team and Rick, and probably most importantly, great to hear some of the early green shoots. It seems like you're seeing out of the moonshot plan, so best of luck on that, obviously, moving forward. As I look at the future contract bookings, and that provides really strong visibility, seemingly for 2026.

I guess I want to focus on 2027 and 2028, and maybe, you know, better understand, you know, the confidence and visibility to, you know, sustain, you know, similar growth rates. Anything you can share on contribution from existing products versus new products, any particular standouts there? I have a quick follow-up.

Sure. I mean, I think, Will, in general, I think we're still growing into these new offerings. The AI Era Plan, the new version of OSP that launched this year, there's just more and more products. We have essentially more arrows in our quiver to keep selling, and all of the buying signals are there. And, you know, frankly, we see a multitude of ways to get to that CAGR. I mean, we have, like I said, four markets that are all really showing signs of growth and a bunch of new products that we're really excited to see the adoption of. Maybe I'll call out one, which is Dedrone.

That one I think has the potential to be, you know, really exciting, both because, you know, in state and local, we have the opportunity to really make an impact there with it, but it's really opening doors into both federal and international.

Often, like, the land and expand might not always be TASER into something else anymore. It might be Dedrone into something else, and we're just seeing that play out so beautifully across both federal and international. It gives us a lot of confidence in the out years. Certainly, everything we're looking at in terms of indicators suggest that the next three years is gonna be really exciting here.

Yeah, the only thing I would add for everyone is I don't think you need to assume anything differently than what we have just delivered in this last year, right? There's no major change that you have to forecast or underwrite for 2028. All of the product lines are growing. We're seeing traction in all the markets. You can just continue to roll that forward.

Okay. I just, that's all, that's all very helpful. Just maybe to follow up on some of the AI commentary, you know, great to see, you know, the booking strength there. It'd be great to get any kind of perspective on kind of what any year. I mean, I think last year was kind of the first big year for bookings, right, given when it was rolled out? You know, is that something that could, you know, could double this year? I mean, what does the pipeline look like, and what is the product roadmap there? Anything you can share on that front?

I take a lot of crap at Axon for sports analogies, so you're not helping me out here. I would say we're in the very early innings, like, bottom of the first, top of the second, we're talking about here.

Sure.

we've got a lot of pipeline ahead of us in AI, and we've got the opportunity to continue to deploy more and more AI products every year into this plan. As such, the value will continue to increase in it and certainly attract more and more customers along the way. This is one where this is, you know, like, game just started, national anthem's over, and teams are running out on the field here.

Awesome. Thank you all.

Thanks, Will. Up next, we have Jonathan Ho at William Blair.

Hi, good afternoon. Let me echo my the congratulations as well on the strong quarter. I also appreciate sort of the additional detail on your AI moats, and so I wanted to start there and maybe dig in a little bit more. Can you help us understand, you know, some of the domain knowledge and data moats that you have in the AI world? Maybe how does that relationship, you know, the vision for working with, you know, some of the frontier models, how does that look like now and in the future?

I was gonna see if Jeff wanted to take that one.

Yeah, I'll take it... [crosstalk]

You take that one first. Okay.

Yeah, I'll start, then, Rick, you can chime on. I think first, that the, you know, the grounding, you've heard us talk about this before and goes with what Josh was saying, too, is that I think, you know, differentiation and success, you know, here in AI at its core, in a world where everybody has access to the same, you know, commodity, but very powerful, you know, frontier models, is really, one, having the right physical sockets.

And that's why hardware plays such a big role, right? If you think about something like even translation that we came out with last year that is having such a big hit, the raw technology of translation, you know, comes with the core models.

That's not where our either our innovation or our differentiation or our moat is. The key is that we are marrying that up with a clear and present, very real, specific need for our customers all day, every day in their real job, and we are embedding it ergonomically and physically into the device that a very large number of the people in this, in this category are already wearing every day. That's why... like, if you think about an officer carrying a phone and trying to pull out the phone and launch an app, and this and that and the other, or add some other piece of equipment that they're not used to, or have a piece...

You know, all of those things are radically simplified when we simply can build in that functionality into an experience and a physical artifact that we already have that socket for. The second, as you said, is ultimately about the data. As you know, you know, we simultaneously have, I think, the highest bar of anyone out there in our own or even other segments about thinking ethically and responsibly about how we use any kind of data and certainly customer data in the right ways.

Ultimately, even with the highest possible bar of dedication to responsible innovation, our responsibility and our ability, given that massive, as you talked about, the millions of hours of video and everything else, is for us to use the state-of-the-art as it keeps evolving with what the models can do to get differentiated results out of the same models that everybody else can use, by leveraging, in a responsible way, the unique customer data that we are the custodians of.

Maybe I'll just add one really, really simple, add-on to that, which is, like, our CEO is in the top 0.0001% of AI users globally. You can imagine what that means for everyone else at the company when that's Rick, right. I think, you know, I'm particularly proud of the push we've gotten from Rick, but also Jeff equally leading the charge on this and really establishing our identity as an AI company in public safety.

The only thing I would add onto detail into that is also the fact that we are managing these business process flows of this critical information because of the whole Evidence.com ecosystem, right? The evidence comes in, we store it, we move it around workflows that have traditionally been manual. The opportunity for us to automate more and more of that with AI is just like we're in this incredible position to automate away just a ton of work for our customers, and then it goes to the prosecutor, it goes to the defense attorney. Now, you know, we're now selling premium product there.

Years ago, I think we still do have a free version of Evidence.com for prosecutors to be able to just receive evidence, but they're now buying premium versions because, boy, they'd sure love that evidence to come in and get processed for all the things they've got to do with it. Make sure we're helping track discovery requests and helping them find where the needle is in the haystack, the things they need to look at, most importantly, when they get 100 hours of video in a case. I think the...

It really is that we've got sort of the manual version of these workflows with this highly secure data, and it's, you know, shame on us if we can't be the ones who really delight our customers by bringing AI in to solve more and more problems for them on their existing workflows, and then doing new things that they never thought possible.

You know, sockets, workflows, and real jobs to be done. You know, so many companies out there that are trying to work their way through this situation, they are trying to sort of, you know, as Rick said before, kind of do AI for AI's sake or paint it on as an afterthought.

Foundationally, we are always grounded in actually solving the real everyday workflows for our customers, and we have the benefit of having these incredibly sticky, all-day, everyday workflows and physical sockets that they are already depending on us for, and they are the perfect conduits to insert AI done right to help accelerate what they're trying to get done.

Excellent. It looks like you're a clear beneficiary of this AI trend. You know, one thing I wanted to also better understand is with the enterprise opportunity, you've now called out, you know, sort of multiple large contracts. It seems like we're just at the beginning here as well. You know, what maybe has to happen from a go-to-market perspective, to achieve that vision? You know, what do you have to do to build out a channel, and to, you know, sell this, you know, even more into newer enterprises? Thank you.

Sure thing. I think, look, well, it's a different market. I think we've seen this play out before. Some of us were here in 2009, 2010, 2011 when we were building the video business in public safety, and we understand what it takes to, like, get momentum out of the gate, to make your first customer successful, to parlay that into customers two, three and four. The reality is, it's like it's an exponential curve. It's not linear. Like, we go from one to four to, you know, 12 customers, and each of those kind of is the next, like, you know, stone across the creek that we have to cross, and it's gonna take a little time.

For me, the most important thing out of the gate is not how many enterprise customers we sign up in short order, it's how many enterprise customers we make successful and delighted with the products early on, and then the rest has a way of figuring itself out. For us, it's much more about getting the right team, focusing on the right early customers, for focusing on the right channel partners in certain markets, like private security.

That's just a process that's playing out, but every year we see, you know, a few more indicators that this is something that's truly turning into, you know, a valuable business. While we've got some work to do, for sure, like, my opinion is, as long as we keep things simple and put one foot in front of the other, we're gonna end up in a very exciting place in the enterprise business.

Thanks, Jonathan. Up next, we have Andrew Sherman at TD Cowen.

Great, thanks. Good to see everybody. Congrats on the quarter. Josh, TASER saw a huge acceleration to 32% growth. Congrats on hitting a billion-dollar run rate there, and also the decline in the officer-related deaths. Talk about any specific drivers in the quarter that helped that. Where do you stand from a capacity standpoint, and is the Apollo cartridge still slated for this year?

I'll let Rick weigh in on the Apollo Dart project. In terms of TASER demand, I think it's a matter of just execution. I think one thing people have got to realize a little bit about bookings, and I think third quarter and fourth quarter were a good example of this, is the bigger the deals get, you know, like sometimes third quarter, like last year, will be, you know, a decent quarter, but not, you know, a double over the last year. We come back into fourth quarter with a couple of these large deals that we thought had a chance to close in third quarter, and they close in fourth quarter.

With nine-figure deals and these bigger deals, there's just a little more variability quarter to quarter. I think that's more of what happened. I think it was... you know, the demand was there and we were very confident in it. It's just, you know, some of those large deals pushed from third quarter to fourth quarter, and the team did a good job getting them sewn up before the end of the year. We certainly feel like TASER demand is very strong, and you know, it's exciting to see, obviously, the progress on the moonshot and to hear the testimonials from customers saying in or coming in.

You know, we're only talking about, you know, a low thousands number. When you hear an agency say, "Hey, there were five or seven of these that would have resulted in a shooting," that's like a statistically significant amount, you know, that we're starting to see in terms of saves instead of shootings in public safety. We're really encouraged to see the trend line. A lot of work to do but feeling like we're on the right track. Rick, did you want to cover the Apollo Dart?

Yeah, Apollo is testing extremely well, better than we even expected in laboratory testing, meaning the percentage of time it can get through heavy clothing, being very high, and the percentage of time we get an over-penetration, is very low. That's great. It's gonna be going shortly, up to the Arctic Circle for some field testing. We've made heavy investments in the automation. It is not an easy product to make. If you look at the videos, you know, it kinda looks like this, you know, pretty cool object.

The thing is a flying hypodermic needle that we have, like, cut with incredible precision to create these cascading crumple zones, so we can use the physics and fluid dynamics of skin puncture to create a chain reaction that makes this thing stop cutting through materials and penetrating.

I think it's a really big technological breakthrough, I would say it's probably not gonna be a meaningful contributor to revenue this year, but it'll start to be in real customers' hands, you know, for the next cold season, is the goal.

That's great. One more quick one for you, Josh. Europe obviously had a huge year. Great to hear the two big deals in fourth quarter. How's the pipeline for this year tracking? How do you keep up that momentum? What's driving that?

Sure thing. It's a story of, you know, now we had two huge deals at the end of the year that certainly helped the result, coupled with a lot of medium-sized deals, and I think that's kind of the thing. Like, as it's growing, we saw this in state and local, you know, we feel good about the foundational level, but for things to really grow fast, we gotta have more and more big deals.

We've got a bunch of big deal hunters over there in Europe now, and they're bringing back more and more opportunity every quarter. You know, while the timing's gonna vary a little quarter to quarter, we feel like we've got a few really, really exciting opportunities in international this year, and the team's gonna focus on closing them.

Thank you. Congrats.

Thanks, Andrew. Good to see you.

Thanks, Andrew. Up next, we have Mike Latimore at Northland.

All right, thanks. Yeah, great year, great year. I think you've mentioned that within the longer term guidance, maybe software grows a little faster than hardware. I guess, is there any thought that maybe the software growth rate actually improves or accelerates a little bit, given some of the AI applications that are going in it?

I mean, I think we're obviously really excited with the performance we saw, you know, our hardware business is also doing great. I mean, I think they're both performing so well, it's hard to really call which will be a bigger contributor. I think you've seen in the last couple of years, though, that software has been slightly outpacing hardware growth, that's a tailwind for us from a gross margin standpoint.

In just the monetary dynamics there with, like, how much software historically we've booked, when you just layer on the AI Era Plan on top of that, now there's just so many more dollars available in software and AI, you know, relative to hardware. Certainly, we're excited about that and seeing more and more software start to pile up here. [crosstalk]

Yeah, yeah, sure.

We do have some more hardware magic up our sleeve, you know, over the next couple of years here. I do wanna give a shout-out to Brittany as well. She had her work cut out, you know, working with me on the long-term plan, 'cause one of the things I worry about is that if we under-invest in continuing to build out the hardware elements of the ecosystem, which are, you know, they're not gonna be as high margin, at least initially, especially as the software, but I think it's important to the health of the business.

Brittany and her team really did a nice job of really rigorously modeling this out to show me we had plenty of room to be able to hit all the investments we want to invest in and continue to deliver growing profitability to our shareholders.

Right. Right. Just a second question for me, seems like you've won some good international cloud deals lately. Do you see sort of an acceleration there? Is that kind of loosening up where, you know, the dam sort of broken, and now international cloud is gonna... you know, they're more comfortable with that model?

Yeah, for sure. For sure. We think AI is the thing that takes that opportunity to the next level as well. Now, it's like, if you wanna deploy things on premise, you're essentially signing up for zero AI tools into the future, which I think is becoming pretty clearly not a winning formula. I think that is a nice push to the cloud for some governments that have been slow to adopt it. You know, we're here certainly waiting for that moment with a lot to offer, not only in cloud but also in AI.

Yep. All right, thank you.

Thanks.

Thanks, Mike. Up next, we have David Paige at RBC, and welcome to the calls with us.

Thanks, Eric. nice to be here. Congrats on the great results, team. I had a question, maybe jumping back to what Jonathan Ho had asked. In terms of driving growth in the enterprise market and the go-to-market, I guess if I think about, like, US public safety, a police station, like the chief of police would then call, like, the neighboring chief of police and say, "Oh, hey, I have this great, you know, Axon product.

Why don't you look at it? Look how, you know, beneficial it is." Like, a big box retailer wouldn't exactly call their biggest competitor and say, "Hey, I have this great camera that's reducing, you know, theft and all the benefits that it has." I was just curious, maybe you could flesh out just how you're, you know, going after new business there.

Yeah... [crosstalk]

Thank you.

Let me jump on that one to start, because I would actually tell you, they do call each other. The security departments are mostly former law enforcement, and they're under a lot of pressure, and they don't view that as a competitive advantage in any way. Like, that's an area, like, we partner with Auror, which is one of our investment companies out of New Zealand, that basically runs a case management software similar to Evidence.com for retailers, and they share wildly with each other 'cause they wanna track... you know, they're all being hit with these, you know, organized retail crime organizations.

There is actually much more collaboration than I was expecting. I expected a more competitive dynamic, and there certainly is on the retail side, but I'm not seeing anybody viewing this as an area of competitive advantage.

They're quite collaborative. Similarly, on the medical side, I was just with a major medical provider, and it was interesting. There's a fair amount of mission-driven stuff, too. This company, in particular, operates a ton of, you know, ambulances and vehicles and EMS services.

Their day-to-day, they're, you know, they're pretty geographically segmented, and they're constantly deploying ambulances that, you know, calls that may come into a competitor, or they'll have a call that comes in that they'll end up shunting over to a competitor. I think in those cases, I've not seen in those industries that a negative competitive dynamic. In fact, there's a lot of the same collaboration.

Yeah, just to add, it's incumbent upon us to build the business case also for every customer. Ultimately, I think you're right. In general, like, you know, there's an element of competition, at least a little more so than in public safety. You know, ultimately, all of these decision-makers understand what an ROI looks like, and that our products drive that ROI and solve real problems for them.

You know, our lead gen efforts and our, you know, how we show up for new prospects matters probably a little more here than in public safety. At the same time, you know, I think the market is so much bigger as well that, you know, I don't, I don't think the opportunity slows down as a result of that, you know, of that nuance.

Great, thanks. That's it for me. Thank you.

Thanks, David. Welcome.

Thanks, David. Up next, we have Jordan Lyonnais at Bank of America.

Hey, thank you for taking the question. Rick, you touched on it a little bit in the Boldly Go podcast, where things hadn't gone where you expected. When we look out to 2028, having this giant sensor, kit just under the Axon tool belt, what do you worry about could go wrong?

I think for us, a misstep around sort of privacy and data handling. You know, we are seeing that those are concerns right now out in the public. I think that would be one where, you know, we could make a mistake that would have outsized negative consequences. I think also, Our customers are going to expect that we continue to deliver more and more value. I mean, they're all hearing the same things we all are, that you can do more with less cost in terms of developing technology, I think it's incumbent on us to make sure we're still earning, you know, earning our way up the value chain the way we always have.

Something I'm particularly proud of, like, when Josh talks about, you know, where we were five years ago with a much lower, you know, peak price point, it was, I think, you know, like, in the $200 range. We haven't just, like, raised prices to get there. We've launched a ton of new products, that, you know, didn't exist, and I think that we've got to just continue to deliver there. Jeff and his team are pretty busy, you know, making sure that, I think, expectations for what we deliver in the AI Era Plan are gonna continue to grow, and we've got to hit it.

Thank you.

Thanks, Jordan. Up next, we have Keith Housum at Northcoast Research.

Good afternoon, all. Thanks for the opportunity here. Hey, just unpacking the enterprise opportunity a little bit more, perhaps you guys can provide a little bit of color about, one, I guess, which verticals are you having the initial success in? You know, perhaps any color you can give on this, you know, second large customer that you guys have in terms of which vertical they lie in.

Finally, I guess, as you guys are going after the enterprise market, are you leading with Fusus, are you leading with the Mini, or which kind of, like, lead product there? Are people, you know, signing up for, you know, a multi-pack, or are they going with one product, and the goal is to land and expand?

Thanks, Keith, and good to see you. I would say, look, our salespeople, we're as allergic as to the show up and throw-up mindset as you possibly could be. We want our salespeople showing up and asking a million questions to identify the opportunity and then figure out what product is gonna solve the problem. I think there's moments where ABW Mini leads or Axon Body Mini leads to, you know, more conversations around software and AI.

I think there's moments where Fusus is really the exciting part. I think there's moments where Outpost and Lightpost or DFR or Counter-drone are the exciting first opportunities, it's similar to international. It's like the beauty of it is you just gotta get in with one product, and then everything works so synergistically, we'll bet on ourselves and our ability to sell more over time. I think now more than ever, it varies. Like, for a little while, it was a body cam, and then you go to the next step. Now, it can be a number of different, you know, first products.

Great. Great. Any color on the large customer that you guys announced being your second one in enterprise?

I appreciate you asking, Keith. I, personally, I'm not sure that we're going to be announcing logos from us on enterprise deals. I'm not sure that it serves us. I think we'll see. I think some of these will just come out in the press, or hopefully, some of you guys are walking into these major businesses over time, and you see our products just being used in the wild. I think we're trying to do the calculus of, like, is it worth starting to identify these, you know, by name for competitive reasons or not? Hence our trepidation on that.

Fair enough. I know we're running out of time, so I'll turn it back over. Thanks, guys.

Thanks, Keith.

Thanks, Keith. Up next, we have Meta Marshall at Morgan Stanley.