What happened
Shares of law enforcement technology company Axon Enterprise (AXON 1.27%) surged on Wednesday, hitting all-time highs, after it reported financial results for the fourth quarter of 2022. As of 11:45 a.m. ET today, Axon stock was up about 7%.
So what
In 2022, Axon's revenue climbed 38% year over year to $1.2 billion. This was a sharp acceleration from its revenue growth of 27% in 2021. Moreover, the company's fourth-quarter net sales of $336 million far exceeded the high end of management's guidance of $310 million.
Axon sells hardware devices, but they're often bundled with software and sold as a subscription product, making recurring revenue an important metric to track as well. In the fourth quarter, the company reached annual recurring revenue of $473 million, an all-time high, up a massive 17% from the previous quarter, suggesting there were many important contract wins to close the year.
On that subject, total future revenue under contract for Axon surpassed $4.6 billion in the fourth quarter, up 25% quarter over quarter and 66% year over year. With strong and steady growth like this, it's no wonder the market was pleased with this growth stock today.
Now what
Management expects revenue growth of at least 20% in 2023. But Wall Street appears to be celebrating the longer-term guidance today. The company expects to generate more than $2 billion in revenue in 2025, which represents a greater than 20% compound annual growth rate between now and then.
Given the length of its contracts, management has good revenue visibility, and it's therefore reasonable to take this guidance seriously. And if it continues growing at this pace, it's possible the stock could reach several more new all-time highs over the next several years.
