Can Axon Enterprise Sustain EBITDA Margin Momentum Amid Cost Pressures?

Axon Enterprise, Inc. AXON achieved a solid adjusted EBITDA of $155.2 million in the first quarter of 2025, which increased 9.6% year over year. The company's adjusted EBITDA margin reached 25.7%, reflecting an increase of 200 basis points (bps). This improved margin not only reflects its strong operational efficiency but also benefits from the continued adoption of its premier products and solutions.Despite rising operating expenses, AXON’s adjusted gross margin grew 40 basis points to 63.6%. The improvement in margins was driven by higher revenues generated from robust sales of TASER 10, Axon Body 4, personal sensors and platform sensor products. It’s worth noting that the company reported revenues of $603.6 million in the first quarter, which increased 31.3% year over year.Axon Enterprise’s focus on effective cost management and revenue improvement is likely to expand its margin performance. For 2025, AXON currently expects adjusted EBITDA in the range of $650-$675 million, higher than its previous outlook of $640-$670 million. The updated guided range implies an adjusted EBITDA margin of approximately 25%. It's worth noting that, effective first-quarter 2025, Axon Enterprise realigned its business segments. This realignment is expected to enhance the company’s visibility into segment-specific performance and enable it to effectively manage its costs. This strategic move will likely support Axon Enterprise’s ongoing margin improvement and operational efficiency.Peers’ Margin PerformanceWhile AXON is putting its best foot forward to improve margins, the road ahead for its peers like Kratos Defense & Security Solutions, Inc. KTOS and Teledyne Technologies Incorporated TDY looks bumpy as they struggle to maintain healthy margins.Among its major peers, Kratos Defense is facing cost pressure. In the first quarter of 2025, its cost of sales increased 11.1% year over year, while its SG&A expenses rose 4.8%. Kratos Defense’s gross margin declined 30 bps to 24.3% in the quarter.Teledyne Technologies’ cost of sales rose 7.8% year over year in first-quarter 2025. The company’s SG&A expenses also increased 6.5% year over year. Teledyne Technologies’ gross margin declined 320 basis points to 42.7% in the same period.AXON’s Price Performance, Valuation and EstimatesShares of Axon Enterprise have surged 48.3% in the past three months compared with the industry’s growth of 22.5%.Image Source: Zacks Investment ResearchFrom a valuation standpoint, AXON is trading at a forward price-to-earnings ratio of 115.81X above the industry’s average of 48.85X. Axon Enterprise carries a Value Score of F.Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for AXON’s 2025 earnings has declined 0.8% over the past 60 days.Image Source: Zacks Investment ResearchThe company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 256 positions with double- and triple-digit gains in 2024 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Teledyne Technologies Incorporated (TDY): Free Stock Analysis Report Kratos Defense & Security Solutions, Inc. (KTOS): Free Stock Analysis Report Axon Enterprise, Inc (AXON): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks