Next-generation AI And Drones Will Transform Public Safety

Key Takeaways

• Adoption of advanced tech and premium bundled SaaS offerings is boosting customer value, margins, and recurring revenue growth as agencies modernize and upgrade.
  
• Global expansion and rising public safety challenges are broadening the addressable market, supporting growth and reducing reliance on any single region or product.
  
• Dependence on government funding, regulatory scrutiny, rising competition, international risks, and increasing costs threaten stability, margin strength, and global growth prospects.

Catalysts

Develops, manufactures, and sells conducted energy devices (CEDs) under the TASER brand in the United States and internationally.

• Accelerating demand for next-generation technologies-including AI, drones, robotics, body cameras, and digital evidence management-demonstrates a rapid shift by public safety agencies toward modern, cloud-based, and connected solutions; this supports sustained revenue growth as agencies upgrade from legacy systems and adopt more comprehensive SaaS offerings.
  
• Fast-track adoption of new Axon products such as Draft One (AI), TASER 10, Axon Body 4, and Dedrone (counter-drone) is driving up average deal values and product bundles per customer, raising net revenue per user and supporting higher long-term margins as the ecosystem deepens.
  
• International expansion, highlighted by record deals in regions like Africa and growing traction in Europe, LATAM, and Asia, are broadening Axon's global addressable market and diversifying revenue streams, which is expected to accelerate aggregate top-line growth and reduce revenue volatility over time.
  
• Increasing public safety challenges (e.g., civil unrest, immigration pressures, drone threats) are prompting governments to invest more in non-lethal defense technologies and digital collaboration platforms, creating durable tailwinds for Axon's integrated product suite and underpinning both bookings growth and future recurring revenue.
  
• The ongoing shift by public safety agencies from basic contracts to premium plans and AI-enabled bundles, together with a large installed base yet to upgrade, offers a clear multi-year upsell runway that is likely to drive growing net revenue retention, expansion of recurring SaaS revenues, and higher overall earnings.

Axon Enterprise Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Axon Enterprise's revenue will grow by 24.3% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 13.6% today to 10.4% in 3 years time.
• Analysts expect earnings to reach $476.0 million (and earnings per share of $4.72) by about September 2028, up from $326.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $951.7 million in earnings, and the most bearish expecting $330.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 197.2x on those 2028 earnings, up from 176.1x today. This future PE is greater than the current PE for the US Aerospace & Defense industry at 34.4x.
• Analysts expect the number of shares outstanding to grow by 2.95% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Axon Enterprise Future Earnings Per Share Growth

Risks

• Heavy reliance on government contracts and budgets, which are inherently vulnerable to political changes, funding cycles, and shifting public sentiment about law enforcement resources, could lead to revenue volatility and impact long-term earnings growth.
  
• Increased public scrutiny, regulatory, and privacy concerns over surveillance and law enforcement technology (such as body cameras and AI-powered analytics) could prompt stricter legislation or limitations, potentially hampering the adoption of Axon's key products and limiting recurring SaaS revenue expansion.
  
• Growing competition from both established defense technology players and innovative startups, particularly in high-margin areas like AI analytics, drones, and evidence management, poses a risk to Axon's pricing power and margin sustainability.
  
• Exposure to international market expansion risk, including potential shifts in government procurement favoring local/domestic suppliers or rapidly changing regulatory environments, may inhibit Axon's global growth ambitions and prevent meaningful revenue diversification.
  
• Ongoing increases in tariffs, manufacturing costs, and potential product liability risks (highlighted by concerns over misuse of Axon hardware or software) could compress gross and net margins, escalating operational and legal costs and reducing long-term profitability.

Valuation

• The analysts have a consensus price target of $884.692 for Axon Enterprise based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $1000.0, and the most bearish reporting a price target of just $800.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.6 billion, earnings will come to $476.0 million, and it would be trading on a PE ratio of 197.2x, assuming you use a discount rate of 7.7%.
• Given the current share price of $731.98, the analyst price target of $884.69 is 17.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.