Axon Enterprise, Inc. AXON achieved an adjusted EBITDA of $201.6 million in first-quarter 2026, which surged 29.9% year over year. However, the company's adjusted EBITDA margin was 25%, reflecting a decrease of 70 basis points (bps). The decline was attributable to the adverse impacts of higher operating costs and expenses, global tariffs and increased investment in R&D.
Despite impressive revenue growth of 33.7% year over year, AXON’s adjusted gross margin in the first quarter fell 200 basis points to 61.6%. The company’s cost of sales increased 38.8%, while its selling, general and administrative expenses surged 15.9% in the quarter.
Nevertheless, the company’s focus on effective cost management and revenue growth is expected to improve its margin performance. For 2026, AXON currently expects an adjusted EBITDA margin of approximately 25.5%, relatively flat year over year. The company has set a long-term financial target to achieve about 28% of adjusted EBITDA margin by 2028, supported by annual revenues of $6 billion.
It's worth noting that, effective first-quarter 2025, Axon realigned its business segments. This realignment has been enhancing the company’s visibility into segment-specific performance and enabling it to effectively manage its costs. This strategic move is expected to continue supporting its margin performance and operational efficiency.
Peer’s Margin performance
Among its major peers, Kratos Defense & Security Solutions, Inc. KTOS is facing cost pressure. In first-quarter 2026, its total costs increased 22.9% year over year, while its SG&A expenses rose 26.8%. Kratos Defense’s gross margin declined 10 bps to 24.2% in the quarter.
Woodward, Inc.’s WWD total costs and expenses rose 23% year over year in second-quarter fiscal 2026 (ended March 2026). Woodward’s selling, general, and administrative expenses increased 22.1% year over year. Despite the increase in costs, Woodword’s segmental margins expanded, which was driven by higher sales, improved mix of commercial services activity and solid defense OEM demand.
AXON’s Price Performance, Valuation and Estimates
Shares of Axon have gained 10.6% in the past month compared with the industry’s growth of 5.2%.
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From a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 47.67X, above the industry’s average of 46.98X. Axon carries a Value Score of F.
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The Zacks Consensus Estimate for AXON’s 2026 earnings has inched down 0.4% over the past 60 days.
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The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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