Here's our initial take on Axon Enterprise's (AXON +1.10%) fourth-quarter financial report.
Key Metrics
| Metric | Q4 2023 | Q4 2024 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $430 million | $575 million | 34% | Beat |
| Earnings per share (adjusted) | $1.13 | $2.08 | 84% | Beat |
| Annual recurring revenue (ARR) | $732 million | $1.0 billion | 37% | n/a |
| Net revenue retention | 122% | 123% | 100 bps | n/a |
Axon Offers Up Strong Growth and Guidance
There's plenty to like in this tech company's fourth-quarter results. The company's revenue grew by 34%, exceeding analysts' expectations as well as Axon's own.
Not only did Axon surprise investors on the top line, but the company became more profitable. Its adjusted gross margin increased by 120 basis points year over year, and adjusted EPS handily exceeded expectations. Operating cash flow of $250 million represented a staggering 79% year-over-year growth rate.
Looking beyond the profitability metrics, for the full year 2024, Axon's annual recurring revenue grew 37% and now makes up nearly half of the company's total sales. Within that, the high-margin cloud and services revenue jumped by 44%.
It wasn't just the current numbers that were impressive. Axon has $10.1 billion in future contracted bookings and reported full-year 2025 revenue guidance of $2.6 billion at the midpoint of its range, significantly higher than the $2.56 billion analyst consensus estimate. Plus management now expects that its total addressable market has increased to $129 billion between all of the areas the company operates, and its 2025 revenue expectation represents about 2% of this -- so there could be much more growth ahead.
NASDAQ: AXON
Key Data Points
Immediate Market Reaction
Simply put, beating expectations on earnings, revenue, and guidance is the trifecta. So it isn't too much of a surprise that the initial market reaction was a very positive one. About 15 minutes after the earnings announcement, Axon was up by more than 11% in after-hours trading.
However, it's worth noting that this reaction was before the company's earnings conference call, which was scheduled for 5 p.m. the same afternoon. The items discussed on the call can certainly move the stock in one way or the other.
What to Watch
Not only has Axon's net revenue retention remained impressive, but it is actually accelerating. Axon posted a retention rate of 123%, one of the most impressive of any company we follow, which is a full percentage point greater than a year ago. This means that the typical Axon customer is spending 23% more with the company than it did a year ago, indicating that customers are increasingly finding more value in the company's products and (especially) its services. This is a number worth keeping an eye on as Axon continues to innovate with new hardware and software products.
