Axon Enterprise (AXON) reported net income of $57 million in 3Q26, compared with a net loss of $2 million in the same period a year earlier. Revenue totaled $909 million ($908.6 million), up 28% from 3Q25. In the same release, the company announced a $1.2 billion investment in Skydio, which raises its stake to 37%.
Diluted earnings per share (EPS) were $0.68, compared with a loss of $0.03 a year earlier. Adjusted (non-GAAP, excluding items the company considers non-recurring) earnings per share were $1.72, compared with $1.24. Operating income was $42 million, compared with an operating loss of $2 million. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, with other adjustments) was $236 million, up 33%, with a margin of 25.9%.
Software & Services revenue rose 43% to $437 million. Connected Devices revenue grew 16% to $472 million, and Platform Solutions revenue increased 106% to $125 million. Gross margin was 56.7%, compared with 60.1%, due to a greater share of counter-drone equipment, higher memory costs and the expansion of new product categories. Free cash flow was negative $19 million, compared with an inflow of $33 million, due to about $100 million invested in inventory. The company had $1.7 billion in cash and short-term investments and $2.9 billion in convertible and senior notes.
Regarding Skydio, Axon became the company's exclusive distributor for public safety in the US and Canada. Skydio expects about $1 billion in orders this fiscal year.
For 4Q26, Axon projects revenue of $990 million to $1.01 billion and adjusted EBITDA of $245 million to $250 million. For 2026, it projects revenue of $3.61 billion to $3.63 billion, up about 30%, compared with the previous guidance of 32% to 34%. The reduction stems from the exclusion of three federal Dedrone deployments, worth about $130 million. Free cash flow guidance is $350 million to $400 million, compared with the previous target of $450 million.
