What happened 

Shares of taser and body-camera maker Axon Enterprise (NASDAQ:AAXN) fell as much as 13.9% in trading Wednesday after reporting second-quarter earnings. At 3:20 p.m. EDT, shares were still 12.5% lower on the day. 

So what

Quarterly sales were up 36%, to $79.6 million, and net income was $2.3 million, or $0.04 per share. The revenue result was in line with expectations, and earnings beat by $0.01.

Officer with a body camera on, talking to a witness.

Image source: Axon Enterprise.

Despite the fact that the business is doing well and met expectations, shares are trading lower. A couple of reasons could be a decline in gross margin from 63% a year ago to 57%, driven largely by lower margins for body-camera sales. And operating costs were up 44.1%, outpacing revenue, as management invested heavily in growing the sales force and research and development. 

Now what

Long term, the growth story is intact and might be getting stronger as Axon releases new products like a gun holster that automatically activates a body camera and a new records-management system. But Axon is spending heavily in the meantime to build out these products, resulting in the company barely breaking even. That may be what investors are looking at today, but long term, Axon is in a great position and should be able to grow profitably as more Axon body cameras hit the market. 

Travis Hoium owns shares of Axon Enterprise. The Motley Fool owns shares of and recommends Axon Enterprise. The Motley Fool has a disclosure policy.