We've Got a New Price Target for Axon, as Earnings Confirm Position
Vibrant bookings boost our view on this holding, but we're also eyeing the near-term margin headwinds and product investments.
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Following our quick take this morning on Axon’s (AXON) blowout quarterly results and outsized guidance, let’s dig deeper into what the company delivered. We'll explain why this report keeps us bullish on the longer-term story for Axon -- and why we’re glad we picked up more shares for the Portfolio when we did earlier this month.
Axon delivered a sizable jump in its future contracted bookings to $14.4 billion at the end of December as bookings for 2025 climbed 40% year over year to $7 billion. To be fair, given the timing of the government shutdown, Axon’s December-ending quarter bookings surged more than 50%, but that likely represents some catch up spending. Bookings outside of U.S. state and local law enforcement surpassed the $2 billion mark with more than $1 billion coming from markets outside the U.S.
On the AI front, we’ve shared many a signal with you over the last several months about AI adoption and usage in the public safety sector, and we have confirmation that Axon is not being left out. It’s AI Ear Plan accounted for around $750 million in 2025 bookings, roughly 10% of total, and indications are Axon has a large pipeline on that front that should lead to it becoming a larger driver of bookings in the coming quarters. In those coming quarters, we’ll be paying close attention to bundling of AI products and services with other Axon products, a move that would make them even more sticky with customers.
All in all, we would say the bookings and related figures put up by Axon should put to rest concerns over shifting market shares and AI headwinds that weight on AXON shares since late January. Those same bookings give ample coverage for Axon’s 2026 top line guidance of $3.53 billion-$3.61 billion, up around 28% at the midpoint and nicely ahead of the $3.44 billion market consensus.
One adjustment we do need to make is our margin assumption. While the mix shift toward the higher margin software and services business is continuing, Axon continues to invest in new products, and as we’ve seen in other markets, tariffs and higher component costs will be a bit of a headwind. As these new product investments mature, including those for in-car cameras, vehicle intelligence and new AI products, Axon targets adjusted earnings before interest, taxes, depreciation and amortization margins of 28% by 2028 vs. the 25.5% posted in 2025. It also sees $6 billion in annual revenue for 2028 compared to the $2.8 billion posted in 2025.
That is certainly a favorable long-term outlook, however, we’ve seen expected margin improvement get delayed at other companies as they ramp capacity or bring new products to market. And while Axon may be overly conservative with its guidance, we’re going to take a more cautious approach and that means slimming down our price target to $700 from $800. As margins rebound, and the mix shift toward software and services accelerates, due in part of further AI adoption, we can revisit our target price as needed.
Our new price target gives ample support for continuing our One rating, but given the degree of short covering that is likely happening today, our recommendation is for members looking to add AXON shares, be patient. Typically, as such short covering subsides, we tend to see a stock give back some of those covering related gains.
On the Portfolio management side of things, the post earnings pop is pushing the Portfolio’s position near the 4.5% level. Should it hit that mark, some prudent portfolio trimming may ensue, but that doesn’t mean our bullishness on the shares has diminished.
The Pro Portfolio is long AXON.
