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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025
or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to __________
Commission File Number: 001-16391

Axon Enterprise, Inc.
(Exact name of registrant as specified in its charter)

Delaware 86-0741227
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

17800 North 85th Street

Scottsdale , Arizona
85255

(Address of principal executive offices) (Zip Code)

( 480 ) 991-0797
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.00001 Par Value AXON The NASDAQ Stock Market LLC

______________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
x Accelerated filer o

Non-accelerated Filer o Smaller reporting company o

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of the registrant’s common stock outstanding as of October 31, 2025 was 78,910,466 .

Table of Contents

AXON ENTERPRISE, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

Page
Special Note Regarding Forward-Looking Statements
ii

PART I - FINANCIAL INFORMATION
1

Item 1. Financial Statements (unaudited)
1

Consolidated Balance Sheets
2

Consolidated Statements of Operations and Comprehensive Income (Loss)
3

Consolidated Statements of Stockholders’ Equity
4

Consolidated Statements of Cash Flows
6

Condensed Notes to Consolidated Financial Statements
7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
33

Item 3. Quantitative and Qualitative Disclosures About Market Risk
48

Item 4. Controls and Procedures
48

PART II - OTHER INFORMATION
49

Item 1. Legal Proceedings
49

Item 1A. Risk Factors
49

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
74

Item 3. Defaults Upon Senior Securities
74

Item 4. Mine Safety Disclosures
74

Item 5. Other Information
74

Item 6. Exhibits
74

SIGNATURES
75

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Special Note Regarding Forward-Looking Statements
Statements contained in this Quarterly Report on Form 10-Q that are not historical are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, beliefs, intentions and strategies regarding the future. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Words such as “may,” “will,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. However, not all forward-looking statements contain these identifying words.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Many events beyond our control may determine whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. This Quarterly Report on Form 10-Q lists various important factors that could cause actual results to differ materially from historical and expected results, which are set forth more fully in Part II, Item 1A. These factors are intended as cautionary statements for investors within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Readers can find them under the heading “Risk Factors” in this Quarterly Report on Form 10-Q, and investors should refer to them. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 8-K, 10-Q and 10-K reports to the Securities and Exchange Commission (“SEC”). Our filings with the SEC may be accessed at the SEC’s web site at www.sec.gov.
ii

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
1

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AXON ENTERPRISE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

September 30,
2025 December 31,
2024
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,423,871   $ 454,844  
Short-term investments 952,786   333,235  
Marketable securities 68,179   198,270  
Accounts and notes receivable, net of allowance of $ 3,237 and $ 3,322 as of September 30, 2025 and December 31, 2024, respectively
700,742   547,572  
Contract assets, net 537,198   367,929  
Inventory 317,513   265,316  
Prepaid expenses and other current assets 216,447   130,315  
Total current assets 4,216,736   2,297,481  
Property and equipment, net 283,208   247,324  
Deferred tax assets, net 344,803   304,282  
Intangible assets, net 159,048   175,157  
Goodwill 773,386   756,838  
Long-term notes receivable, net 2,893   3,460  
Long-term contract assets, net 163,956   119,876  
Strategic investments 386,947   332,550  
Other long-term assets 326,388   237,620  
Total assets $ 6,657,365   $ 4,474,588  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 114,995   $ 71,955  
Accrued liabilities 293,344   279,193  
Current portion of deferred revenue 639,087   612,955  
Current portion of notes payable, net 279,560   680,289  
Customer deposits 15,045   20,626  
Other current liabilities 7,699   12,857  
Total current liabilities 1,349,730   1,677,875  
Deferred revenue, net of current portion 364,519   360,685  
Liability for unrecognized tax benefits 22,354   25,007  
Long-term deferred compensation 22,675   15,877  
Long-term lease liabilities 90,209   41,383  
Long-term notes payable, net 1,729,366   —  
Other long-term liabilities 50,762   26,096  
Total liabilities 3,629,615   2,146,923  
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $ 0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively
—   —  
Common stock, $ 0.00001 par value; 200,000,000 shares authorized, 99,111,447 shares issued and 78,891,165 shares outstanding as of September 30, 2025, and 200,000,000 shares authorized, 96,839,558 shares issued and 76,619,331 shares outstanding as of December 31, 2024
1   1  
Additional paid-in capital 2,262,306   1,689,781  
Treasury stock at cost, 20,220,282 shares and 20,220,227 shares as of September 30, 2025 and December 31, 2024, respectively
( 155,952 ) ( 155,947 )
Retained earnings 933,925   812,014  
Accumulated other comprehensive loss ( 12,530 ) ( 18,184 )
Total stockholders’ equity 3,027,750   2,327,665  
Total liabilities and stockholders’ equity $ 6,657,365   $ 4,474,588  

The accompanying notes are an integral part of these consolidated financial statements.
2

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AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net sales from products $ 405,399   $ 327,900   $ 1,122,655   $ 891,087  
Net sales from services 305,242   216,374   860,157   616,294  
Net sales 710,641   544,274   1,982,812   1,507,381  
Cost of product sales 203,173   156,167   566,861   450,954  
Cost of service sales 80,120   57,360   219,121   160,896  
Cost of sales 283,293   213,527   785,982   611,850  
Gross margin 427,348   330,747   1,196,830   895,531  
Operating expenses:
Selling, general and administrative 252,803   192,189   718,524   514,228  
Research and development 176,674   114,477   490,264   307,008  
Total operating expenses 429,477   306,666   1,208,788   821,236  
Income (loss) from operations ( 2,129 ) 24,081   ( 11,958 ) 74,295  
Interest income 23,941   12,624   57,798   36,407  
Interest expense ( 28,912 ) ( 1,646 ) ( 65,419 ) ( 5,273 )
Other income, net 22,803   44,510   104,790   191,510  
Income before provision for income taxes 15,703   79,569   85,211   296,939  
Provision for (benefit from) income taxes 17,889   12,544   ( 36,700 ) 55,089  
Net income (loss) $ ( 2,186 ) $ 67,025   $ 121,911   $ 241,850  
Net income (loss) per common and common equivalent shares:
Basic $ ( 0.03 ) $ 0.89   $ 1.57 $ 3.20
Diluted $ ( 0.03 ) $ 0.86   $ 1.48 $ 3.12
Weighted average number of common and common equivalent shares outstanding:
Basic 78,416 75,697 77,774 75,543
Diluted 78,416 78,080 82,218 77,614
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income (loss) $ ( 2,186 ) $ 67,025   $ 121,911   $ 241,850
Foreign currency translation adjustments ( 25 ) 4,640   5,492   1,112
Unrealized gain on available-for-sale investments 213   434   162   447  
Comprehensive income (loss) $ ( 1,998 ) $ 72,099   $ 127,565   $ 243,409

The accompanying notes are an integral part of these consolidated financial statements.
3

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AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)

Common Stock Additional
Paid-in
Capital Treasury Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance, December 31, 2024 76,619,331 $ 1   $ 1,689,781   20,220,227 $ ( 155,947 ) $ 812,014   $ ( 18,184 ) $ 2,327,665  
Issuance of common stock under employee plans, net 190,558 —  ( 5,035 ) — —  —  —  ( 5,035 )
Stock-based compensation — —  140,239   — —  —  —  140,239  
Induced conversion of convertible debt 1,038,259 —  20,819   — —  —  —  20,819  
Tax effect of partial repurchase of convertible debt — —  ( 16,049 ) — —  —  —  ( 16,049 )
Net income — —  —  — —  87,980   —  87,980  
Other comprehensive income, net — —  —  — —  —  234   234  
Balance, March 31, 2025 77,848,148 $ 1   $ 1,829,755   20,220,227 $ ( 155,947 ) $ 899,994   $ ( 17,950 ) $ 2,555,853  
Issuance of common stock 250,000 —  183,643   — —  —  —  183,643  
Issuance of common stock under employee plans, net 404,893 —  ( 187,800 ) — —  —  —  ( 187,800 )
Stock-based compensation — —  139,244   — —  —  —  139,244  
Tax effect of partial repurchase of convertible debt — —  111   — —  —  —  111  
Net income — —  —  — —  36,117   —  36,117  
Other comprehensive income, net — —  —  — —  —  5,232   5,232  
Balance, June 30, 2025 78,503,041 $ 1   $ 1,964,953   20,220,227 $ ( 155,947 ) $ 936,111   $ ( 12,718 ) $ 2,732,400  
Issuance of common stock 213,088 —  178,498   — —  —  —  178,498  
Issuance of common stock under employee plans, net 175,033 —  ( 27,305 ) — —  —  —  ( 27,305 )
Stock-based compensation — —  146,152   — —  —  —  146,152  
Conversion of convertible debt and shares received from convertible note hedge, net 3 —  8 55 ( 5 ) —  —  3  
Net loss — —  —  — —  ( 2,186 ) —  ( 2,186 )
Other comprehensive income, net — —  —  — —  —  188   188  
Balance, September 30, 2025 78,891,165 $ 1   $ 2,262,306   20,220,282 $ ( 155,952 ) $ 933,925   $ ( 12,530 ) $ 3,027,750  

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Common Stock Additional
Paid-in
Capital Treasury Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Stockholders’
Equity
Shares Amount Shares Amount
Balance, December 31, 2023 75,301,424 $ 1   $ 1,347,410   20,220,227 $ ( 155,947 ) $ 434,980   $ ( 10,679 ) $ 1,615,765  
Issuance of common stock under employee plans, net 164,747 —  ( 2,710 ) — —  —  —  ( 2,710 )
Stock-based compensation — —  75,115   — —  —  —  75,115  
Issuance of replacement awards in connection with acquisitions — —  1,265   — —  —  —  1,265  
Net income — —  —  — —  133,352   133,352  
Other comprehensive loss, net — —  —  — —  —  ( 907 ) ( 907 )
Balance, March 31, 2024 75,466,171 $ 1   $ 1,421,080   20,220,227 $ ( 155,947 ) $ 568,332   $ ( 11,586 ) $ 1,821,880  
Issuance of common stock under employee plans, net 107,043 —  ( 2,185 ) — —  —  —  ( 2,185 )
Stock-based compensation — —  74,821   — —  —  —  74,821  
Net income — —  —  — —  41,473   —  41,473  
Other comprehensive loss, net — —  —  — —  —  ( 2,608 ) ( 2,608 )
Balance, June 30, 2024 75,573,214 $ 1   $ 1,493,716   20,220,227 $ ( 155,947 ) $ 609,805   $ ( 14,194 ) $ 1,933,381  
Issuance of common stock under employee plans, net 160,847 —  ( 17,430 ) — —  —  —  ( 17,430 )
Stock options exercised 350,118 —  10,006   — —  —  —  10,006  
Stock-based compensation — —  101,780   — —  —  —  101,780  
Net income — —  —  — —  67,025   —  67,025  
Other comprehensive income, net — —  —  — —  —  5,074   5,074  
Balance, September 30, 2024 76,084,179 $ 1   $ 1,588,072   20,220,227 $ ( 155,947 ) $ 676,830   $ ( 9,120 ) $ 2,099,836  

The accompanying notes are an integral part of these consolidated financial statements.
5

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AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Nine Months Ended September 30,
2025 2024
Cash flows from operating activities:
Net income $ 121,911   $ 241,850  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Stock-based compensation 425,635   251,716  
Gain on strategic investments and marketable securities, net ( 134,647 ) ( 192,158 )
Debt inducement expense 28,584   —  
Depreciation and amortization 56,216   30,745  
Provision for bad debts and inventory 8,828   13,824  
Deferred income taxes ( 53,696 ) ( 27,061 )
Other noncash items 15,930   13,183  
Change in assets and liabilities:
Receivables and contract assets ( 366,053 ) ( 226,759 )
Inventory ( 58,177 ) ( 11,629 )
Deferred revenue 21,556   56,720  
Accounts payable, accrued and other liabilities 44,730   10,243  
Prepaid expenses and other assets ( 116,713 ) ( 2,528 )
Net cash provided by (used in) operating activities ( 5,896 ) 158,146  
Cash flows from investing activities:
Purchases of investments ( 2,045,738 ) ( 615,414 )
Business combinations, net of cash acquired ( 22,809 ) ( 237,796 )
Proceeds from call, maturity, and sale of investments 1,644,556   858,326  
Purchases of property and equipment ( 74,450 ) ( 53,984 )
Other, net ( 49 ) 34  
Net cash used in investing activities ( 498,490 ) ( 48,834 )
Cash flows from financing activities:
Net proceeds from equity offering 362,241   —  
Proceeds from issuance of notes 1,750,000   —  
Proceeds from options exercised —   9,717  
Principal payments for conversion of convertible debt ( 407,472 ) —  
Payments to third-parties for debt issuance, amendment and repurchase activity ( 26,888 ) —  
Income and payroll tax payments for net-settled stock awards ( 209,631 ) ( 22,325 )
Other, net ( 226 ) —  
Net cash provided by (used in) financing activities 1,468,024   ( 12,608 )
Effect of exchange rate changes on cash and cash equivalents 5,741   75  
Net increase (decrease) in cash and cash equivalents 969,379   96,779  
Cash and cash equivalents and restricted cash, beginning of period 466,763   600,670  
Cash and cash equivalents and restricted cash, end of period $ 1,436,142   $ 697,449  

Supplemental disclosures:
Cash and cash equivalents $ 1,423,871   $ 695,144  
Restricted cash (Note 1) 12,271   2,305  
Total cash, cash equivalents and restricted cash shown in the statements of cash flows $ 1,436,142   $ 697,449  

Cash paid for interest $ 56,468   $ 1,725  
Cash paid for income taxes, net of refunds $ 51,608   $ 60,670  

Non-cash transactions:
Leased assets obtained in exchange for new operating lease liabilities $ 51,780   $ 11,728  
Expense for induced conversion of convertible debt, debt offering and revolver modification $ 31,570   $ —  
Taxes withheld on stock-based awards included in accrued expenses $ 10,510   $ —  
Property and equipment purchases in accounts payable and accrued liabilities $ 3,432   $ 10,214  

The accompanying notes are an integral part of these consolidated financial statements.
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Note 1 - Organization and Summary of Significant Accounting Policies
Axon Enterprise, Inc. (“Axon”, the “Company”, “we”, or “us”) is a provider of public safety technology solutions. Our mission is to protect life in service of promoting peace, justice and strong institutions.
The accompanying unaudited consolidated financial statements include the accounts of Axon Enterprise, Inc. and our subsidiaries. All intercompany accounts, transactions and profits have been eliminated.
Basis of Presentation and Use of Estimates
These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) has been condensed or omitted. The accounting policies followed in the preparation of these unaudited consolidated financial statements are consistent with those followed in our consolidated financial statements for the year ended December 31, 2024, as filed on our amended 2024 Annual Report on Form 10-K/A. In the opinion of management, these unaudited consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with the financial statements included in our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024. Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform to current period presentation.
Our results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year (or any other period). The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. We believe the estimates used in the preparation of these unaudited consolidated financial statements are reasonable; however, actual results could differ materially from those estimates.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of accounts and notes receivable, contract assets and cash. Historically, we have experienced an immaterial level of write-offs related to uncollectible accounts.
We hold the majority of our cash and cash equivalents accounts at three depository institutions. As of September 30, 2025, the aggregate balances in such accounts were $ 1.3 billion. Our balances with these and other institutions regularly exceed Federal Deposit Insurance Corporation insured limits for domestic deposits and various deposit insurance programs in countries such as Australia, Belgium, Canada, Finland, France, Germany, Greece, India, Italy, the Netherlands, Spain, the United Kingdom and Vietnam. To manage the related credit exposure, management continually monitors the creditworthiness of the financial institutions where we have deposits.
Major Customers / Suppliers
For the three and nine months ended September 30, 2025 and 2024, no customer represented more than 10% of total net sales. At September 30, 2025 and December 31, 2024, no customer represented more th an 10% o f the aggregate balance of accounts and notes receivable and contract assets. For additional details, refer to Note 2.
We currently purchase both off-the-shelf and custom components, including finished circuit boards, injection-molded plastic components, small machined parts, custom cartridge components, electronic components and sub-assemblies from suppliers located in the United States, Taiwan, Mexico, China, Germany and the Republic of Korea, among others. Although we currently obtain components from single source suppliers, we own substantially all injection-molded component tooling, designs and test fixtures used in production for all custom components. As a result, we believe we could obtain alternative suppliers in most cases. We acquire most of our components on a purchase order basis and do not currently have significant long-term purchase contracts with most component suppliers.
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Segment Information
As previously disclosed within our Quarterly Report on Form 10-Q for the three months ended March 31, 2025, we realigned our business into two reportable segments, Connected Devices and Software and Services (the “Segment Realignment”). As a result of the Segment Realignment, we have recast our segment and other relevant disclosures for the three and nine months ended September 30, 2024 to conform to the new presentation.
Reportable segments are determined based on discrete financial information provided to our Chief Executive Officer who is our chief operating decision maker (“CODM”). In deciding how to allocate resources and assess performance, the CODM reviews adjusted gross margin by segment to evaluate segment profitability, identify cost trends and make operational decisions to support our segments. Accordingly, t he segment measure of profit and loss used by the CODM is adjusted gross margin, defined as gross margin before stock-based compensation expense, amortization of acquired intangible assets, inventory step-up amortization related to acquisitions, and payroll taxes related to the Axon Enterprise, Inc. 2024 Employee eXponential Stock Plan vesting (the “2024 Employee XSP”). For additional details, refer to Note 16.
In addition, the CODM reviews consolidated financials and revenue by major geography and product and service lines. Consolidated financials provide a holistic view of our overall financial health to guide capital allocation and entity-wide decisions. Disaggregated views of revenue by major geography and product line support the evaluation of specific market and product performance to understand customer trends. There are no operating segments that are aggregated, and there are no inter-segment sales. Assets and other expense items, such as research and development and selling, general, and administrative expenses, are not provided to the CODM by segment, as our CODM does not evaluate our operating segments using this discrete information. As such, these items are not relevant to adjusted gross margin leveraged by the CODM to assess segment performance. As a result, they are not disclosed by segment. We perform an analysis of our reportable segments at least annually.
Geographic Information
Most of our sales to international customers are transacted in foreign currencies and are attributed to each country based on the shipping address of the distributor or customer. For the three and nine months ended September 30, 2025 and 2024, no individual country outside the United States represented more than 10% of total net sales. Substantially all of our assets are located in the United States. For additional details, refer to Note 2.
Most of our long-lived assets, including property, plant and equipment and right-of-use lease assets are located within the United States. International long-lived assets are immaterial. Additionally, the majority of our revenues are generated within the United States.
Restricted Cash
Restricted cash balances were $ 12.3 million and $ 11.9 million as of September 30, 2025 and December 31, 2024, respectively. This balance is primarily attributable to a $ 9.7 million payment held in escrow related to the potential construction of our headquarters building in Scottsdale, Arizona. Restricted cash also includes funds held in international bank accounts for various operating and financing activities. As of September 30, 2025, approximately $ 12.2 million was included in prepaid expenses and other current assets on our consolidated balance sheets, with the remainder in other long-term assets.
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Warranty Reserves
We warranty our conducted energy devices (“CEDs”), Axon cameras and other hardware on a limited basis for a period of primarily one year after purchase. Changes in our estimated product warranty liabilities were as follows (in thousands):

Nine Months Ended September 30,
2025 2024
Balance, beginning of period $ 8,284   $ 7,374  
Utilization of reserve ( 6,757 ) ( 5,007 )
Warranty expense 9,378   4,860  
Balance, end of period $ 10,905   $ 7,227  

Income (Loss) per Common Share
Basic income per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the periods presented. Diluted income per share reflects the potential dilution from outstanding stock-based awards, our 2027 Notes, and warrants to acquire shares of our common stock (the “Warrants” or “2027 Warrants”). The effects of outstanding stock-based awards, our 2027 Notes, and our 2027 Warrants are excluded from the computation of diluted net income (loss) per share in periods in which the effect would be antidilutive. For additional information regarding our 2027 Notes and 2027 Warrants, refer to Note 10.
The calculation of the weighted average number of shares outstanding and earnings per share is as follows (in thousands except per share data):

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Numerator for basic and diluted earnings per share:
Net income (loss) $ ( 2,186 ) $ 67,025   $ 121,911   $ 241,850  

Denominator:    
Weighted average shares outstanding 78,416   75,697   77,774   75,543  
Dilutive effect of stock-based awards —   1,317   1,846   1,298  
Dilutive effect of 2027 Notes (1)
—   1,015   1,092   773  
Dilutive effect of 2027 Warrants —   51   1,506   —  
Diluted weighted average shares outstanding 78,416   78,080   82,218   77,614  

Net income (loss) per common share:
Basic $ ( 0.03 ) $ 0.89   $ 1.57   $ 3.20  
Diluted $ ( 0.03 ) $ 0.86   $ 1.48   $ 3.12  

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(1) For the nine months ended September 30, 2025, the impact of the early repurchase of a portion of the 2027 Notes is weighted based upon the number of days in each corresponding period of time for (a) the period between January 1, 2025 and the closing date of the repurchase, which includes the total amount of shares issuable upon a conversion of all of the 2027 Notes; and (b) subsequent to the closing date of the repurchase through September 30, 2025, which includes the amount of shares issuable upon a conversion of the 2027 Notes that remain outstanding after the early repurchase. Refer to Note 10 for additional details.
Potentially dilutive securi ties that are not included in the calculation of diluted net income (loss) per share because doing so would be antidilutive are as follows (i n thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Stock-based awards 5,138   4,574   3,299   4,620  
2027 Notes 1,235   2,002   401   2,244  
2027 Warrants 3,017   2,966   1,511   3,017  
Total potentially dilutive securities 9,390   9,542   5,211   9,881  

Accounting Guidance and Disclosure Rules - Recently Adopted
In November 2024, the Financial Accounting Standards Board ( “FASB” ) issued Accounting Standard Update ( “ ASU ” ) 2024-04, Debt (Topic 470): Debt with Conversion and Other Options. ASU 2024-04 clarifies the assessment of whether certain transactions should be accounted for as an induced conversion or debt extinguishment. The provisions of ASU 2024-04 are effective for our Annual Report on Form 10-K for the year ending December 31, 2026, with early adoption permitted. We elected to early adopt ASU 2024-04 in the first quarter of 2025 and applied the standard when assessing the accounting treatment for our convertible debt repurchase. For additional details, refer to Note 10.
Accounting Guidance and Disclosure Rules - Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures by requiring (1) consistent categories and additional disaggregation of information in the effective tax rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. We plan to adopt ASU 2023-09 on a prospective basis for our Annual Report on Form 10-K for the year ending December 31, 2025. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures. ASU 2024-03 is intended to enhance the level of detail disclosed related to expense categories and provide additional disclosure of expenses by nature. The provisions of ASU 2024-03 are effective for our Annual Report on Form 10-K for the year ending December 31, 2027, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.
In July 2025, the FASB issued ASU 2025‑05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025‑05 is intended to provide a practical expedient for estimating expected credit losses on current trade receivables and current contract asse ts. T he provisions of ASU 2025‑05 are effective for annual periods beginning after December 15, 2025, with early adoption permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.
In September 2025, the FASB issued ASU 2025‑06 Intangibles - Goodwill and Other - Internal‑Use Software (Sub-topic 350-40): Targeted Improvements to the Accounting for Internal‑Use Software. ASU 2025‑06 is intended to modernize the internal‑use software model primarily by removing software development stages and introducing a “ probable-to-complete recognition threshold ” . The provisions of ASU 2025‑06 are effective for annual periods beginning after December 15, 2027, with early adoption permitted. Entities may apply the guidance prospectively, retrospectively, or using a modified prospective approach. We are currently evaluating the impact of this update on our consolidated financial statements.
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Note 2 - Revenues
Nature of Products and Services
The following tables present our revenues by primary product and service offering and reportable segment (in thousands). All periods presented reflect the impact of the Segment Realignment discussed in Note 1.

Three Months Ended September 30, 2025 Three Months Ended September 30, 2024
Connected Devices Software and Services Total Connected Devices Software and Services Total
TASER (1)
$ 237,950   $ —   $ 237,950   $ 203,612   $ —   $ 203,612  
Personal Sensors (2)
106,677   —   106,677   88,660   —   88,660  
Platform Solutions (3)
60,772   —   60,772   35,628   —   35,628  
Software and Services —   305,242   305,242   —   216,374   216,374  
Total $ 405,399   $ 305,242   $ 710,641   $ 327,900   $ 216,374   $ 544,274  

Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024
Connected Devices Software and Services Total Connected Devices Software and Services Total
TASER (1)
$ 649,679   $ —   $ 649,679   $ 549,759   $ —   $ 549,759  
Personal Sensors (2)
287,901   —   287,901   231,773   —   231,773  
Platform Solutions (3)
185,075   —   185,075   109,555   —   109,555  
Software and Services —   860,157   860,157   —   616,294   616,294  
Total $ 1,122,655   $ 860,157   1,982,812   $ 891,087   $ 616,294   $ 1,507,381  

(1) 'TASER' includes TASER handles, cartridges and related extended warranties.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes interview room, fleet in-car video, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
The following table presents our revenues disaggregated by geography (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
United States $ 593,939   84   % $ 482,596   89   % $ 1,660,695   84   % $ 1,298,775   86   %
Other countries 116,702   16   61,678   11   322,117   16   208,606   14  
Total $ 710,641   100   % $ 544,274   100   % $ 1,982,812   100   % $ 1,507,381   100   %

Contract Balances
The following table presents our contract assets, contract liabilities and certain information related to these balances as of and for the nine months ended September 30, 2025 and year ended December 31, 2024 (in thousands):

September 30, 2025 December 31, 2024
Contract assets, net $ 701,154   $ 487,805
Contract liabilities (deferred revenue) 1,003,606   973,640

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During the nine months ended September 30, 2025 and 2024, we recognized revenue of $ 590.3 million and $ 432.4 million, respectively, from the beginning contract liabilities balance as of December 31, 2024 and 2023, respectively.
Remaining Performance Obligations
As of September 30, 2025, we had approximately $ 8.1 billion of remaining performance obligations, which included both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under ASC 606 as of September 30, 2025. We currently expect to recognize approximately 20 % - 25 % of this balance over the next 12 months, and expect the remainder to be recognized over the following ten years , subject to risks related to delayed deployments, budget appropriation or other contract cancellation clauses.

Note 3 - Cash, Cash Equivalents and Investments
The following tables summarize our cash, cash equivalents, marketable securities and available-for-sale debt investments at September 30, 2025 and December 31, 2024 (in thousands):

As of September 30, 2025
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Cash and
Cash
Equivalents Marketable
Securities Short-Term
Investments
Cash $ 878,921 $ — $ — $ 878,921 $ 878,921 $ — $ —

Level 1:
Money market funds 334,128 — — 334,128 334,128 — —
U.S. Treasury bills 213,516 69 — 213,585 151,483 — 62,102
Marketable securities 36,794 31,385 — 68,179 — 68,179 —
Agency bonds 25,911 4 — 25,915 — — 25,915
U.S. Government bonds 6,485 — — 6,485 — — 6,485
Subtotal 616,834 31,458 —   648,292 485,611 68,179 94,502
Level 2:
Term deposits 749,618 — — 749,618 59,339 — 690,279
Corporate bonds 125,936 68 ( 7 ) 125,997 — — 125,997
Commercial paper 40,507 — — 40,507 — — 40,507
Certificates of deposit 1,500 1 — 1,501 — — 1,501
Subtotal 917,561 69 ( 7 ) 917,623 59,339 — 858,284
Total $ 2,413,316 $ 31,527 $ ( 7 ) $ 2,444,836 $ 1,423,871 $ 68,179 $ 952,786

During the three and nine months ended September 30, 2025 , proceeds from the sale of available-for-sale securities were $ 24.0 million. As of September 30, 2025, we had $ 191.0 million of available-for-sale debt investments with unrealized losses, of which none have been in a continuous unrealized loss position for 12 months or longer. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.
Acquired common stock is recorded as marketable securities in the consolidated balance sheets and i ts fair value is adjusted every reporting period. Changes in fair value are recorded in the consolidated statements of operations and comprehensive income (loss) as unrealized gain (or loss) on marketable securities, which is included in other income, net . During the three and nine months ended September 30, 2025 , net proceeds from the sales of marketable securities were $ 84.1 million, representing a $ 30.9 million net realized gain from the time of purchase. D uring the three and nine months ended September 30, 2025 , net losses of $ 1.0 million and $ 33.1 million were recognized for securities sold in the period, respectively, within other income, net in the consolidated statements of operations and comprehensive income (loss). D uring the three and nine months ended September 30, 2025 , we recorded an unrealized gain of $ 9.3 million and an unrealized loss of $ 12.9 million on marketable securities still held as of the reporting date, respectively. We recorded an unrealized gain on marketable securities of $ 44.0 million and $ 73.6 million , respectively, for the same periods in the prior year.
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As of December 31, 2024
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value Cash and
Cash
Equivalents Marketable
Securities Short-Term
Investments
Cash $ 94,919   $ —  $ —  $ 94,919   $ 94,919   $ —   $ —  

Level 1:            
Money market funds 322,874   —   —   322,874   322,874   —   —  
Marketable securities 90,000   108,270   —   198,270   —   198,270   —  
U.S. Government bonds 75,994   7   ( 5 ) 75,996   —   —   75,996  
U.S. Treasury bills 14,431   25   —   14,456   —   —   14,456  
Agency bonds 996   —   —   996   —   —   996  
Subtotal 504,295 108,302 ( 5 ) 612,592 322,874 198,270 91,448
Level 2:
Term deposits 136,480   —   —   136,480   11,480   —   125,000  
Corporate bonds 122,018   10   ( 63 ) 121,965   24,075   —   97,890  
Commercial paper 20,393   —   —   20,393   1,496   —   18,897  
Subtotal 278,891   10   ( 63 ) 278,838   37,051   —   241,787  
Total $ 878,105   $ 108,312   $ ( 68 ) $ 986,349   $ 454,844   $ 198,270   $ 333,235  

As of December 31, 2024, we had $ 136.7 million of available-for-sale investments with unrealized losses, of which none have been in a continuous unrealized loss position for 12 months or longer. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.

Note 4 - Expected Credit Losses
Accounts and notes receivable and contract assets are presented net of a reserve for expected credit losses. The following table provides a roll-forward of the allowance for expected credit losses. The expected credit losses for receivables are deducted from the amortized cost basis of accounts receivable, contract assets and notes receivable to present the net amount expected to be collected (in thousands):

Three Months Ended September 30, 2025 Three Months Ended September 30, 2024
United States Other countries Total United States Other countries Total
Balance, beginning of period $ 5,506   $ 1,112   $ 6,618   $ 4,961   $ 791   $ 5,752  
Provision for expected credit losses 628   207   835   615   ( 34 ) 581  
Amounts written off charged against the allowance ( 770 ) ( 71 ) ( 841 ) ( 301 ) ( 13 ) ( 314 )
Other, including foreign currency translation —   —   —   —   ( 1 ) ( 1 )
Balance, end of period $ 5,364   $ 1,248   $ 6,612   $ 5,275   $ 743   $ 6,018  

Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024
United States Other countries Total United States Other countries Total
Balance, beginning of period $ 4,785   $ 824   $ 5,609   $ 3,369   $ 597   $ 3,966  
Provision for expected credit losses 4,564   682   5,246   2,606   216   2,822  
Amounts written off charged against the allowance ( 3,985 ) ( 258 ) ( 4,243 ) ( 700 ) ( 84 ) ( 784 )
Other, including foreign currency translation —   —   —   14   14  
Balance, end of period $ 5,364   $ 1,248   $ 6,612   $ 5,275   $ 743   $ 6,018  

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As of September 30, 2025 and December 31, 2024 , the allowance for expected credit losses for each type of customer receivable were as follows (in thousands):

September 30, 2025 December 31, 2024
Accounts receivable and notes receivable, current $ 3,237   $ 3,322  
Contract assets, net 3,327   2,239  
Long-term notes receivable, net of current portion 48   48  
Total allowance for expected credit losses on customer receivables $ 6,612   $ 5,609  

Note 5 - Inventory
Inventory consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):

September 30, 2025 December 31, 2024
Raw materials $ 129,703   $ 86,840  
Work-in-process 7,861   6,230  
Finished goods 179,949   172,246  
Total inventory $ 317,513   $ 265,316  

Note 6 – Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the nine months ended September 30, 2025 were as follows (in thousands):

Connected Devices Software and
Services Total
Balance, beginning of period (1)
$ 46,674   $ 710,164   $ 756,838  
Goodwill acquired 4,733   15,517   20,250  
Purchase accounting adjustments ( 446 ) ( 7,082 ) ( 7,528 )
Foreign currency translation adjustments 281   3,545   3,826  
Balance, end of period $ 51,242   $ 722,144   $ 773,386  

(1) Due to the Segment Realignment, the beginning goodwill balances have been recast to conform to the new segment presentation. Refer to Note 1 for additional details.
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Intangible assets (other than goodwill) consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):

September 30, 2025 December 31, 2024
Useful
Life Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Amortizable (definite-lived) intangible assets:
Developed technology 3 ‑ 8 years
$ 136,972   $ ( 36,884 ) $ 100,088   $ 118,322   $ ( 21,337 ) $ 96,985  
Customer relationships 5 ‑ 10 years
34,027   ( 7,663 ) 26,364   33,223   ( 4,716 ) 28,507  
Issued trademarks 3 ‑ 23 years
6,704   ( 3,221 ) 3,483   6,706   ( 1,784 ) 4,922  
Issued patents 8 ‑ 26 years
2,990   ( 1,552 ) 1,438   2,931   ( 1,470 ) 1,461  
Domain names 5 ‑ 10 years
3,043   ( 2,662 ) 381   3,043   ( 2,433 ) 610  
Total amortizable   183,736   ( 51,982 ) 131,754   164,225   ( 31,740 ) 132,485  
Non-amortizable (indefinite-lived) intangible assets:          
In-process research and development (1)
25,750   —  25,750   41,000   —  41,000  
Trademarks   1,068   —  1,068   1,068   —  1,068  
Patents and trademarks pending   476   —  476   604   —  604  
Total non-amortizable   27,294   —  27,294   42,672   —  42,672  
 Total intangible assets   $ 211,030   $ ( 51,982 ) $ 159,048   $ 206,897   $ ( 31,740 ) $ 175,157  

(1) Consists of in-process research and development costs pertaining to the acquisition of Dedrone Holdings, Inc. (“Dedrone”). During the nine months ended September 30, 2025, approximately $ 15.3 million has been placed into service.
Amortization expense of intangible assets for the three and nine months ended September 30, 2025 was $ 6.9 million and $ 20.2 million, respectively. Amortization expense of intangible assets for the three and nine months ended September 30, 2024 was $ 3.8 million and $ 10.7 million , respectively. Estimated amortization for intangible assets with definite lives for the remaining three months of 2025 , the next five years ended December 31, and thereafter, is as follows (in thousands):

2025 remaining $ 7,048  
2026 28,179  
2027 26,946  
2028 24,714  
2029 22,366  
2030 13,377  
Thereafter 9,124  
Total $ 131,754  

Note 7 - Strategic Investments
Strategic investments include equity and debt investments in a number of non-public technology driven companies. We generally account for strategic equity investments under the ASC 321 measurement alternative for equity securities without readily determinable fair values, as there are no quoted market prices for the equity investments. The equity investments are measured at cost less impairment, adjusted for observable price changes and are assessed for impairment whenever events or changes in circumstances indicate that the fair value may be less than its carrying value. For the debt security strategic investments, we have elected to account for these investments and the associated embedded derivatives utilizing the fair value option. Unrealized and realized changes in fair value for the entire hybrid instruments are recorded within other income, net in the consolidated statements of operations and comprehensive income (loss).

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During the nine months ended September 30, 2025, we closed a series of transactions to acquire additional equity interests in an existing strategic investee for an aggregate amount of $ 215.1 million.

During the first quarter of 2025, we also recognized a gain of $ 167.4 million related to an observable price change of a separate existing strategic investee. Furthermore, we entered into a series of transactions to sell certain interests and recognized proceeds from the sales of $ 340.7 million for the nine months ended September 30, 2025. Previously unrealized gains of $ 320.8 million were realized from the collective sales, net of $ 1.3 million of transaction costs.

During the third quarter of 2025, a strategic investee completed a change-of-control transaction resulting in liquidation of the entity and distribution of consideration to its shareholders. In connection with the transaction, we received consideration of $ 36.9 million. We recognized a gain of $ 14.6 million from the sale, net of $ 0.1 million of transaction costs. Previously unrealized gains of $ 2.6 million were realized as a result of this sale.
The following table presents the carrying value of our strategic investments (in thousands) as of:

September 30, 2025
Strategic investments Warrants   Call options Total
Equity securities:
Non-marketable equity securities $ 368,184   $ 6,617   $ 11,600   $ 386,401  
Debt securities:
Non-marketable debt securities 546   —   —   546  
Total strategic investments $ 368,730   $ 6,617   $ 11,600   $ 386,947  

December 31, 2024
Strategic investments Warrants Call options Total
Equity securities:
Non-marketable equity securities $ 319,598   $ 4,368   $ —   $ 323,966  
Debt securities:
Non-marketable debt securities 8,584   —   —   8,584  
Total strategic investments $ 328,182   $ 4,368   $ —   $ 332,550  

The life to date cumulative upward and downward adjustments to the carrying value of our strategic equity investments accounted for under the ASC 321 measurement alternative and still held as of September 30, 2025 were $ 10.4 million and $ 16.3 million, respectively.

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The following tables summarize the gains and losses associated with our strategic investments during the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, 2025 Three Months Ended September 30, 2024
Strategic Investments Warrants Call options Total Strategic Investments Warrants Call options Total
Realized gains recognized on strategic investments during the period, net $ 17,157   $ —   $ —   $ 17,157   $ —   $ —   $ —   $ —  
Reversal of prior period cumulative unrealized gains, net, for securities sold during the period ( 2,585 ) —   —   ( 2,585 ) —   —   —   —  
Unrealized gains on strategic investments still held at the reporting date (1)
46   —   —   46   449   —   —   449  
Unrealized losses, including impairments, on strategic investments still held at the reporting date —   —   —   —   —   —   —   —  
Gains on strategic investments, net $ 14,618   $ —   $ —   $ 14,618   $ 449   $ —   $ —   $ 449  

(1) Includes unrealized gains of $ 0.5 million for the entire hybrid debt security strategic investment instrument of a strategic investee for the three months ended September 30, 2024 .

Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024
Strategic Investments Warrants Call options Total Strategic Investments Warrants Call options Total
Realized gains (losses) recognized on strategic investments during the period, net (1)
$ 337,974   $ —   $ —   $ 337,974   $ 45,162   $ —   $ ( 2,849 ) $ 42,313  
Reversal of prior period cumulative unrealized gains, net, for securities sold during the period (1)
( 161,820 ) —   —   ( 161,820 ) —   —   —   —  
Unrealized gains on strategic investments still held at the reporting date (2)
6,536   —   —   6,536   75,370   855   —   76,225  
Unrealized losses, including impairments, on strategic investments still held at the reporting date ( 2,048 ) —   —   ( 2,048 ) —   —   —   —  
Gains (losses) on strategic investments, net $ 180,642   $ —   $ —   $ 180,642   $ 120,532   $ 855   $ ( 2,849 ) $ 118,538  

(1) Includes realized gains and reversal of prior unrealized gains of $ 2.6 million and $ 1.1 million, respectively, for a hybrid debt security strategic investment instrument related to a strategic investee liquidation event for the nine months ended September 30, 2025.
(2) Includes unrealized gains of $ 0.6 million for the entire hybrid debt security strategic investment instrument of a strategic investee for the nine months ended September 30, 2024 .

Note 8 - Variable Interest Entities
We evaluate our investments and other significant relationships to determine whether any investee is a variable interest entity (“VIE”). If we conclude that an investee is a VIE, we evaluate our power to direct the activities of the investee, our obligation to absorb the expected losses of the investee and our right to receive the expected residual returns of the investee to determine whether we are the primary beneficiary of the investee. If we are the primary beneficiary of a VIE, we will consolidate such entity and reflect the non-controlling interest of other beneficiaries of that entity.
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We determine whether we are the primary beneficiary of a VIE by performing an analysis that principally considers:

• The VIE’s purpose, design, and risks the VIE was designed to create and pass through to its variable interest holders;
• The VIE’s capital structure;
• The terms between the VIE and its variable interest holders and other parties involved with the VIE; and
• Related party affiliations.
As of September 30, 2025 and December 31, 2024, the unconsolidated non-public VIEs in which we hold variable interests were as follows (in thousands):

September 30, 2025 December 31, 2024
Carrying value of variable interest - assets (1)
$ 3,824 $ 25,171

(1) Balance reflects the maximum exposure to loss, which is limited to the carrying value of the interest.
The primary purpose of our U.S.-based, unconsolidated VIE investments is to create strategic partnerships with market-leading providers of public safety technology solutions. We present all variable interests in unconsolidated VIEs as strategic investments within the long-term assets section of the consolidated balance sheets .
We have provided financial support to the unconsolidated VIEs in exchange for investments in debt and equity securities as well as warrants or call options that give us the ability to commit additional capital over time. Financial support provided to the unconsolidated VIEs is used to continue to finance their operations.

Note 9 - Accrued Liabilities
Accrued liabilities consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):

September 30, 2025 December 31, 2024
Accrued commissions $ 57,705   $ 88,237  
Accrued bonus 56,183   59,780  
Accrued salaries and benefits 34,881   25,233  
Accrued income and other taxes 21,811   27,863  
Accrued third-party product costs 21,708   6,728  
Accrued cloud hosting fees 13,903   10,673  
Accrued inventory in transit 12,690   13,101  
Accrued warranty expense 10,905   8,284  
Accrued consulting and IT fees 7,072   7,846  
Accrued interest 5,222   134  
Other accrued expenses 51,264   31,314  
Total accrued liabilities $ 293,344   $ 279,193  

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Note 10 – Notes Payable, Net
Notes payable, net, consisted of the following (in thousands):

September 30, 2025 December 31, 2024
2030 Notes $ 1,000,000   $ —  
2033 Notes 750,000   —  
2027 Notes 282,528   690,000  
Total principal 2,032,528   690,000  
Unamortized debt issuance costs ( 23,602 ) ( 9,711 )
Total carrying amount of notes payable, net 2,008,926   680,289  
Less: current portion (1)
( 279,560 ) ( 680,289 )
Long-term notes payable, net $ 1,729,366   $ —  

(1) Pursuant to the terms of the 2027 Notes, as of September 30, 2025 and December 31, 2024, the last reported sale price per share of our common stock exceeded 130 % of the conversion price for each of at least 20 trading days during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Therefore, the 2027 Notes, net of unamortized debt issuance costs, were classified as current liabilities within the consolidated balance sheets as of September 30, 2025 and December 31, 2024.
2030 and 2033 Notes

In March 2025, we issued $ 1.0 billion aggregate principal amount of Senior Notes due 2030 (the “2030 Notes”) and $ 750.0 million aggregate principal amount of Senior Notes due 2033 (the “2033 Notes” and, together with the 2030 Notes, the “Senior Notes”) in a private offering. The 2030 Notes will mature on March 15, 2030 unless earlier redeemed or repurchased. Interest on the 2030 Notes accrues from March 11, 2025 and is payable semiannually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025, at a rate of 6.125 % per year. The 2033 Notes will mature on March 15, 2033 unless earlier redeemed or repurchased. Interest on the 2033 Notes accrues from March 11, 2025 and is payable semia nnually in arrears on March 15 and September 15 of each year, commencing on September 15, 2025, at a rate of 6.250 % per year. The total combined gross proceeds from the issuance of the Senior Notes, were $ 1.75 billion, and after deducting initial purchasers’ discounts and commissions and other debt issuance costs of approximately $ 22.4 million, the total combined net proceeds were approximately $ 1.73 billion. The effective interest rate for the 2030 Notes and 2033 Notes was 6.42 % and 6.45 %, respectively, including interest payable and amortization of debt issuance costs.
Each of the series of Senior Notes were issued pursuant to an indenture. Such indentures contain certain restrictions on liens, mergers, consolidations and transfers of all or substantially all of the Company’s assets. Additionally, upon the occurrence of specified change of control triggering events, we will be required to offer to repurchase the Senior Notes at 101 % of the principal amount, plus accrued and unpaid interest to the purchase date. The indentures set forth certain events of default after which the Senior Notes may be declared immediately due and payable, as well as certain types of bankruptcy or insolvency events of default after which the Senior Notes become automatically due and payable.

Prior to March 15, 2027, we may redeem the 2030 Notes at our option, in whole or in part at any time, at a redemption price equal to 100 % of the principal amount of the 2030 Notes redeemed, plus a “make whole” premium and accrued and unpaid interest, if any. In addition, we may redeem up to 40 % of the aggregate principal amount of the 2030 Notes at any time before March 15, 2027, with the net cash proceeds from certain equity offerings at a redemption price equal to 106.125 % of the principal amount of the 2030 Notes, plus accrued and unpaid interest, if any. On or after March 15, 2027, we may redeem the 2030 Notes at our option, in whole or in part at any time, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any:

Year Percentage
2027 103.063   %
2028 101.531   %
2029 and thereafter 100.000   %

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Prior to March 15, 2028, we may redeem the 2033 Notes at our option, in whole or in part at any time, at a redemption price equal to 100 % of the principal amount of the 2033 Notes redeemed, plus a “make whole” premium and accrued and unpaid interest, if any. In addition, we may redeem up to 40 % of the aggregate principal amount of the 2033 Notes at any time before March 15, 2028, with the net cash proceeds from certain equity offerings at a redemption price equal to 106.250 % of the principal amount of the 2033 Notes, plus accrued and unpaid interest, if any. On or after March 15, 2028, we may redeem the 2033 Notes at our option, in whole or in part at any time, at a redemption price equal to the percentage of principal amount set forth below, plus accrued and unpaid interest, if any:

Year Percentage
2028 103.125   %
2029 101.563   %
2030 and thereafter 100.000   %

Interest expense related to the Senior Notes was as follows (in thousands):

Three Months Ended Nine Months Ended
September 30, 2025 September 30, 2025
Contractual interest expense $ 27,031   $ 60,069  
Amortization of debt issuance costs 791   1,741  
Total interest expense $ 27,822   $ 61,810  

2027 Notes
In December 2022, we issued $ 690.0 million aggregate principal amount of our Convertible Senior Notes due 2027 (the “2027 Notes”) in a private offering, of which the aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $ 90.0 million principal amount. The 2027 Notes mature on December 15, 2027 and bear interest at a fixed rate of 0.50 % per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023. The total combined gross proceeds from the issuance of the 2027 Notes wer e $ 690.0 million, and after deducting initial purchasers’ discounts and commissions and other debt issuance costs of $ 16.2 million, the total combin ed net proceeds were approximately $ 673.8 million. The effective interest rate for the 2027 Notes was 0.99 % and included interest payable and amortization of debt issuance costs.

Maturity Date Initial Conversion Price per Share Initial Conversion Rate per $1,000 Par Value Initial Number
of Shares (Prior to Repurchase)
2027 Notes December 15, 2027 $ 228.73 4.3720 shares 3,016,680

The terms of the 2027 Notes require conversion into cash up to the principal amount, with conversion into common stock, cash, or a combination of cash and common stock, at our option, for any amount in excess of the principal. Any shares issued upon conversion are recorded in stockholders' equity. The 2027 Notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding September 15, 2027 only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during such fiscal quarter), if the last reported sale price per common stock exceeds 130 % of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;
• any time preceding September 15, 2027, when during the five consecutive business days immediately after any 10 consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of 2027 Notes for each trading day of the Measurement Period was less than 98 % of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day;
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• upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the indenture governing the 2027 Notes;
• if we call the 2027 Notes for redemption; or any time from, and including, September 15, 2027 until the close of business on the second scheduled trading day immediately before the maturity date
If we undergo a fundamental change (as defined in the indenture governing the 2027 Notes), holders may require us to repurchase for cash all or any portion of their 2027 Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid interest, if any, up to but excluding the fundamental change repurchase date. In addition, following certain corporate events or if we issue a notice of redemption, it may increase the conversion rate for holders who elect to convert their 2027 Notes in connection with such corporate event or during the relevant redemption period.
On or after December 22, 2025, we may redeem for cash all or any portion of the 2027 Notes in accordance with the optional redemption terms of the convertible debt agreement.
In March 2025, we entered into and closed separate, privately negotiated agreements with certain holders (the “Holders”) of the 2027 Notes to exchange approximately $ 407.5 million aggregate principal amount of the 2027 Notes for consideration consisting of cash and shares of our common stock that were determined over an averaging period commencing on March 7, 2025 and ending on March 10, 2025 (the “Exchange Transactions”). The consideration transferred to the Holders aggregated to $ 408.0 million in cash (inclusive of accrued interest and cash paid for fractional shares) and an aggregate of 1,038,259 shares of our common stock. The Exchange Transactions were accounted for as induced conversions, and we recognized an expense of $ 26.2 million, calculated as of the date the inducement offers were accepted, representing the excess of the equity consideration transferred in the Exchange Transactions over the fair value of securities and other consideration issuable pursuant to the original conversion terms defined in the indenture governing the 2027 Notes. We also recognized approximately $ 2.5 million of third-party transaction costs which were expensed as a cost of inducement. As a result, we recorded an aggregate of $ 28.7 million of induced conversion expense within other income, net in the consolidated statements of operations and comprehensive income (loss). As a result of the Exchange Transactions, we recorded $ 26.1  million in additional paid-in capital and we reclassified $ 5.3 million of unamortized debt issuance costs into equity as part of the derecognition of the associated net carrying amount of the portion of the 2027 Notes which were exchanged, resulting in a net impact of $ 20.8  million to equity related to the Exchange Transactions. Following the closing of the Exchange Transactions, we have approximately $ 282.5 million aggregate principal amount of 2027 Notes outstanding. The effective interest rate for the outstanding 2027 Notes after the Exchange Transactions is 0.98 % and includes interest payable and amortization of debt issuance costs. The Exchange Transactions did not impact the Note Hedge or Warrants, which remain outstanding and are discussed in further detail below.
Interest expense related to the 2027 Notes was as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Contractual interest expense $ 354   $ 862   $ 1,487   $ 2,588  
Amortization of debt issuance costs 332   803   1,411   2,368  
Total interest expense $ 686   $ 1,665   $ 2,898   $ 4,956  

We consider the fair value of each of our outstanding notes payable to be a Level 2 measurement. The estimated fair value at September 30, 2025 and December 31, 2024 is based on the closing trading price of the respective notes payable as of the last day of trading for each period (in millions):

September 30, 2025 December 31, 2024
2027 Notes $ 882.0   $ 1,798.5  
2030 Notes 1,027.5   —  
2033 Notes 775.4   —  

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Convertible Note Hedge
To reduce the impact of potential economic dilution upon conversion of the 2027 Notes, we entered into a convertible note hedge transaction (the “Note Hedge” or “2027 Note Hedge”) with certain investment banks, with respect to our common stock, concurrently with the issuance of the 2027 Notes.

Purchase Price
(in thousands) Shares Purchased
2027 Note Hedge $ 194,994   3,016,680

The Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial conversion price of the respective 2027 Notes, subject to adjustment, and is exercisable upon conversion of the 2027 Notes. If exercised, we may elect to receive cash, shares of our common stock, or a combination of cash and shares. Any shares received upon exercise of the options underlying the 2027 Notes are considered treasury stock. We have accounted for the aggregate amount of purchase price for the Note Hedge as a reduction to additional paid-in capital. The Note Hedge will expire upon the maturity of the 2027 Notes. The Note Hedge is intended to reduce the potential economic dilution upon conversion of the 2027 Notes in the event that the market value per share of our common stock at the time of exercise is greater than the conversion price of the 2027 Notes. The Note Hedge is a separate transaction and is not part of the terms of the 2027 Notes. Holders of the 2027 Notes do not have any rights with respect to the Note Hedge. The Note Hedge does not impact earnings per share, as it was entered into to offset any dilution from the 2027 Notes. Considering the impact of any voluntary conversions and concurrent hedge option exercises as of September 30, 2025, 3,016,597 sh ares remain subject to the Note Hedge.
Convertible Note Warrants

Proceeds
(in thousands) Shares Strike Price First Expiration
2027 Warrants $ 124,269   3,016,680 $ 338.86   March 15, 2028

Separately, we entered into warrant transactions with certain investment banks, whereby we sold Warrants to acquire, subject to adjustment, the number of shares of our common stock shown in the table above. If the average market value per share of our common stock exceeds the strike price of the Warrants, such Warrants would have a dilutive effect on our earnings per share to the extent we report net income. According to the terms of the Warrants, the Warrants will be automatically exercised over a 60 -trading day period beginning on the first expiration date as set forth above.
Future Maturities of Notes Payable
Maturities of principal amounts of notes payable are as follows for each respective year (in thousands). These maturities do not reflect the impact of any put or conversion provisions associated with certain debt instruments:

Remainder of 2025 $ —  
2026 —  
2027 (1)
282,528  
2028 —  
2029 —  
2030 1,000,000  
After 2030 750,000  
Total principal
$ 2,032,528  

(1) The Notes are contractually due in fiscal year 2027. However, as of December 31, 2024 and September 30, 2025, the Notes were convertible at the option of the holders into cash up to the principal amount, with conversion into common stock, cash, or a combination of cash and common stock, at our option, for any amount in excess of the principal. Therefore, the Notes were classified as current liabilities within our consolidated balance sheets as of December 31, 2024 and September 30, 2025.
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Note 11 - Income Taxes
In the third quarter of 2025, we implemented the relevant provisions of the One Big Beautiful Bill Act (“OBBBA”), enacted on July 4, 2025. As a result, we recognized a reduction in our R&D tax credit and we have accelerated the expense recognition of certain previously capitalized R&D costs.
Effective Tax Rate
The overall effective tax rate for the three months ended September 30, 2025 was 113.9 %, significantly higher than the federal statutory rate due to lower pre-tax book income in the current period, magnifying the relative impact of permanent and discrete items. A major driver of the increase in rate was the enactment of the OBBBA in the quarter, which resulted in a reduction in our R&D tax credit. The effective tax rate was favorably impacted by a $ 15.4 million net tax benefit related to stock-based compensation for stock awards that vested during the three months ended September 30, 2025.
By comparison, our overall effective tax rate for the three months ended September 30, 2024 was 15.8 %. This rate differed from the federal statutory rate due to the net favorable impacts of stock-based compensation and R&D tax credits. The effective tax rate was favorably impacted by a $ 5.6 million net tax benefit related to stock-based compensation for stock awards that vested during the three months ended September 30, 2024.
Our overall effective tax rate for the nine months ended September 30, 2025 was ( 43.1 )%. This rate differs from the federal statutory rate due to the net favorable impacts of stock-based compensation and R&D tax credits, partially offset by an increase in uncertain tax positions. The effective tax rate was favorably impacted by a $ 84.2 million net tax benefit related to stock-based compensation for stock awards that vested during the nine months ended September 30, 2025.
By comparison, our overall effective tax rate for the nine months ended September 30, 2024 was 18.6 %. This rate differed from the federal statutory rate due to the net favorable impact of stock-based compensation, R&D tax credits, and a net gain related to an investment transaction not recognized for tax purposes. The effective tax rate was favorably impacted by a $ 13.0 million net tax benefit related to stock-based compensation for stock awards that vested during the nine months ended September 30, 2024.
Deferred Tax Assets

The change in deferred tax balances from $ 301.9 million as of December 31, 2024 to $ 342.7 million as of September 30, 2025, was primarily driven by a reduction and realization of previous unrealized mark-to-market gains, increase in stock-based-compensation expense not deductible until vest; partially offset by the reversal of certain deferred tax assets through additional paid-in-capital, associated with the partial repurchase of our 2027 Notes.

Note 12 - Stockholders’ Equity
Common Stock and Preferred Stock
We have authorized the issuance of two classes of stock designated as “common stock” and “preferred stock,” each having a par value of $ 0.00001 per share. We are authorized to issue 200 million shares of common stock and 25 million shares of preferred stock.
2024 Employee XSP and 2024 CEO Performance Award
On May 10, 2024, our shareholders approved the 2024 Employee XSP. The 2024 Employee XSP includes an approved pool of approximately 4.5 million shares of common stock reserved for grants of eXponential Stock Units (“XSUs”) to employees, of which approximately 0.8 million XSUs remain available to grant to employees under this program as of September 30, 2025. A total of approximately 0.1 million XSUs were granted during the nine months ended September 30, 2025. The program includes seven substantially equal tranches that wi ll vest upon certification by the Compensation Committee of the Board of Directors upon achievement of three independent vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service conditions.
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Additionally, on May 10, 2024, shareholders approved a grant of 679,102 XSUs to our CEO, Patrick Smith, (the “ 2024 CEO Performance Award ” ). The stock price goals and operational goals applicable to the 2024 CEO Performance Award are identical to those under the 2024 Employee XSP, but Mr. Smith is subject to a longer minimum required service period.

The three independent vesting conditions are described in the following table:

Operational Goals (1)
(in millions)
Stock Price
Goal Minimum Service Requirement
Tranche (2)
Revenue Adj. EBITDA (3)
2024 Employee XSP 2024 CEO Performance Award Goal Expiration
1 $ 1,834   or $ 382   and $ 247.40   and June 2025 December 2028 December 31, 2026
2 2,293   or 497   and 309.25   and December 2025 December 2028 December 31, 2027
3 2,866   or 611   and 386.56   and June 2026 December 2029 December 31, 2028
4 3,583   or 801   and 483.20   and December 2026 December 2029 December 31, 2029
5 4,479   or 1,044   and 604.00   and June 2027 December 2030 December 31, 2030
6 5,599   or 1,356   and 755.00   and December 2027 December 2030 December 31, 2031
7 6,999   or 1,706   and 943.75   and June 2028 December 2030 December 31, 2032

(1)     Operational goals are measured, as of any date, for the previous four consecutive fiscal quarters, beginning with the Company's first full fiscal quarter ending after the fiscal quarter in which the grant date occurred.

(2)     Tranche 1 vested and settled in June 2025. For certain grantees, the shares acquired upon vesting and settlement of Tranche 1 are subject to a holding period requirement under the plan, which will expire on the earlier of (i) December 31, 2030 and (ii) the date on which the subsequent tranche vests and settles.
(3)     In connection with certain acquisitions which were completed during fiscal year 2024, the adjusted EBITDA goals were adjusted as required by the terms of the 2024 Employee XSP and 2024 CEO Performance Award. As the operational goals for Tranches 1 and 2 were met as of December 31, 2024, no further adjustment to the adjusted EBITDA goals for these tranches was made in the current period, in accordance with the terms of the awards.
Restricted Stock Units
The following table summarizes restricted stock unit (“RSU”) activity for the nine months ended September 30, 2025 and 2024 (number of units and aggregate intrinsic value in thousands):

Nine Months Ended September 30,
2025 2024
Number of
Units Weighted Average
Grant-Date Fair Value Number of
Units Weighted Average
Grant-Date Fair Value
Units outstanding, beginning of year 1,684 $ 356.31   1,615   $ 193.09  
Granted 121 696.46   595 269.18  
Released ( 533 ) 265.47   ( 488 ) 185.33  
Forfeited ( 73 ) 446.21   ( 128 ) 202.01  
Units outstanding, end of period 1,199 425.48   1,594   223.16  
Aggregate intrinsic value at period-end $ 860,416   $ 636,869  

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $ 717.64 per share, multiplied by the number of RSUs outstanding. As of September 30, 2025, there was $ 381.1 million in unrecognized compensation expense related to RSUs under our stock plans for shares that are expected to vest. We expect to recognize the cost related to the RSUs over a weighted average period of 1.89 years. Shares underlying RSUs are generally released when vesting requirements are met.
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Performance Stock Units
The following table summarizes performance stock unit (“PSU”) activity, inclusive of XSUs, for the nine months ended September 30, 2025 and 2024 (number of units and aggregate intrinsic value in thousands):

Nine Months Ended September 30,
2025 2024
Number of
Units Weighted Average
Grant-Date Fair Value Number of
Units Weighted Average
Grant-Date Fair Value
Units outstanding, beginning of year 4,865   $ 261.18   394   $ 201.61  
Granted 137   603.12   4,517   240.07  
Released ( 532 ) 293.78   ( 11 ) 149.49  
Forfeited ( 143 ) 317.66   ( 345 ) 232.01  
Units outstanding, end of period 4,327   266.10   4,555   237.57  
Aggregate intrinsic value at period-end $ 3,105,220   $ 1,820,338  

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $ 717.64 per share, multiplied by the number of PSUs outstanding. As of September 30, 2025, there was $ 555.3 million in unrecognized compensation expense related to PSUs under our stock plans for awards that are expected to vest. We expect to recognize the cost related to PSUs over a weighted average period of 3.62 years. Shares underlying PSUs are generally released when vesting requirements are me t.
Stock Option Activity
The following table summarizes stock option activity for the nine months ended September 30, 2025 and 2024 (number of units and aggregate intrinsic value in thousands):

Nine Months Ended September 30,
2025 2024
Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years)
Options outstanding, beginning of year 21 $ 28.58 531 $ 28.58
Granted — — — —
Exercised — — ( 350 ) 28.58
Expired / terminated — — — —
Options outstanding and exercisable, end of period 21 $ 28.58 2.41 181 $ 28.58 3.41
Aggregate intrinsic value at period-end $ 14,423   $ 67,085  

Aggregate intrinsic value repr esents the difference between the exercise price of the underlying stock options and the closing stock price on the last trading day of the period ended September 30, 2025, which was $ 717.64 per share. There was no stock option activity during the nine months ended September 30, 2025.
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Stock-based Compensation Expense
The following table summarizes the composition of stock-based compensation expense for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Cost of product and service sales $ 12,703   $ 10,123   $ 38,151   $ 48,235  
Selling, general and administrative expenses 75,072   55,248   218,606   117,036  
Research and development expenses 58,377   36,409   168,878   86,445  
Total stock-based compensation expense $ 146,152   $ 101,780   $ 425,635   $ 251,716  

Stock Incentive Plan
In May 2024, our shareholders approved the Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan (the “Amended 2022 Plan”) authorizing an additional 2.2 million shares, plus remaining available shares under prior plans, for issuance under the Amended 2022 Plan. Combined with the shares of our common stock available under our legacy stock incentive plans, there are 3.2 million shares of our common stock available for grant under the Amended 2022 Plan as of September 30, 2025.
At-The-Market Equity Offering
We participate in an “at-the-market” equity offering program (the “ATM”), pursuant to which we are authorized to sell up to a total of approximately 2.0 million shares of our common stock.
During the nine months ended September 30, 2025, we sold approximately 0.5 million shares of our common stock under our ATM. We generated approximately $ 366.3 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $ 362.1 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $ 4.2 million. As of September 30, 2025, $ 0.1 million of these costs were not yet paid.
As of September 30, 2025, there were approximately 1.5 million shares remaining. We utilize the net proceeds from this offering program for general corporate purposes, which may include providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock compensation awards granted to our employees under our stock plans and funding ongoing strategic investments and acquisitions as we continue to expand our product ecosystem.
Stock Repurchase Plan
In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $ 50.0 million of our outstanding common stock subject to stock market conditions and corporate considerations. As of September 30, 2025, $ 16.3 million remained available under the plan for future purchases.

Note 13 - Line of Credit
In December 2022, we entered into a credit agreement that provides for a senior unsecured multi-currency revolving credit facility (the “Credit Agreement”) in an aggregate principal amount of up to $ 200.0 million, $ 30.0 million of which is available for the issuance of letters of credit. The Credit Agreement originally matured on the earlier of December 15, 2027 or the date that is six months prior to the stated maturity date of the 2027 Notes unless the 2027 Notes had been redeemed, repurchased, converted or defeased in full. Additionally, the Credit Agreement had an accordion feature which allowed for an increase in the total line of credit up to $ 300.0 million, in each lender’s sole discretion.
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In March 2025, immediately prior to the consummation of the closing of the 2030 and 2033 Notes offering, we entered into an amendment (the “Amendment”) to the Credit Agreement. The Amendment increased the existing revolving credit facility by $ 100.0 million to a total aggregate principal amount of $ 300.0 million (with an accordion feature which allows for an increase in the total line of credit up to $ 400.0 million), increased availability for the issuance of letters of credit by $ 20.0 million to $ 50.0 million, extended the maturity date of the Credit Agreement from December 15, 2027 to March 11, 2030 (or, in each case, the date that is six months prior to the stated maturity date of the 2027 Notes unless the 2027 Notes have been redeemed, repurchased, converted or defeased in full), permitted the 2030 and 2033 Notes offering, and provided for other updates to the covenants and terms of the Credit Agreement.
As of September 30, 2025, no amounts were drawn under the Credit Agreement. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of September 30, 2025, we had letters of credit outstanding of approximately $ 8.9 million under the facility and available borrowing of $ 291.1 million, excluding amounts available under the accordion feature. Advances under the line of credit bear interest at Term SOFR plus 1.25 to 1.75 % per year determined in accordance with a pricing grid based on our net leverage ratio and consolidated interest coverage ratio discussed further below. “SOFR” is defined as a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York or a successor administrator of the secured overnight financing rate.
We are required to comply with a net leverage ratio, defined as conso lidated total indebtedness to EBITDA, and a consolidated interest coverage ratio, defined as EBITDA to consolidated interest expense. As of September 30, 2025, we are in compliance with the associated covenants under the Credit Agreement.

Note 14 - Commitments and Contingencies
Product Litigation
As a manufacturer of weapons and other law enforcement tools used in high-risk field environments, we are often the subject of products liability litigation concerning the use of our products. We are currently named as a defenda nt in two s uch lawsuits in which the plaintiffs allege either wrongful death or personal injury in situations in which a TASER CED was used by law enforcement officers in connection with arrests or training. While the facts vary from case to case, these product liability claims typically allege defective product design, manufacturing, and/or failure to warn. They seek compensatory and sometimes punitive damages, often in unspecified amounts.
We continue to aggressively defend all product litigation. As a general rule, it is our policy not to settle suspect injury or death cases. Exceptions are sometimes made where the settlement is strategically beneficial to us. Due to the confidential nature of our litigation strategy and the confidentiality agreements that are executed in the event of a settlement, we do not identify or comment on specific settlements by case or amount. Based on current information, we do not believe that the outcome of any such legal proceeding will have a material effect on our financial position, results of operations or cash flows. We are self-insured for the first $ 5.0 million of any product claim made after 2014. No judgment or settlement has ever exceeded this amount in any products liability case. We continue to maintain product liability insurance coverage, including an insurance policy fronting arrangement, above our self-insured retention with various limits depending on the policy period.
Other Matters
Despite the Federal Trade Commission’s (“FTC”) dismissal of its administrative enforcement complaint against us without consent decree or other condition in October 2023, other parties continue to allege that our May 2018 acquisition of an insolvent body camera competitor, Vievu LLC, was anticompetitive. Pending in the District of New Jersey (Case No. 3:23-cv-7182) is a purported antitrust class action brought by three municipalities based largely on the FTC’s unproven allegations. We deny all allegations of anticompetitive or other misconduct and are vigorously defending the case.
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Pending in the Eastern District of Virginia (Case No. 1:24-CV-01625) is a patent infringement suit filed by Airspace Systems, Inc. (“Airspace”) against Dedrone involving certain drone technology. After we acquired Dedrone on October 1, 2024, Airspace amended its complaint and added us as a defendant. Airspace seeks injunctive relief and treble damages in an unspecified amount. We and Dedrone deny infringement and further contend that the three asserted patents are invalid and/or contain patent ineligible subject matter. To that end, we have simultaneously challenged all three patents in the United States Patent and Trademark Office and the court has stayed the litigation. On October 8, 2025, the Patent Trial and Appeal Board granted our petitions and instituted review on all claims of all three asserted patents. By statute, a decision is required within one year or October 8, 2026. It is expected that the district court litigation will remain stayed during this time.
General
From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time.
Based on our assessment of outstanding litigation and claims as of September 30, 2025, we have determined that it is not reasonably possible that these losses, if any, from lawsuits will individually, or in the aggregate, materially affect our results of operations, financial condition or cash flows. H owever, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows.
Off-Balance Sheet Arrangements
Under certain circumstances, we use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the installation and integration of Axon cameras and related technologies. Certain of our letters of credit and surety bonds have stated expiration dates with others being released as the contractual performance terms are completed. At September 30, 2025, we had outstanding letters of credit issued under our credit facility of $ 8.9 million that are expected to expire through 2026. We also had outstanding letters of credit of $ 0.3 million that do not draw against our credit facility. Additionally, we had $ 22.0 million of outstanding surety bonds as of September 30, 2025, with expiration dates ranging through 2029.

Note 15 – Accumulated Other Comprehensive Income (Loss)
The following tables reflect the changes in accumulated other comprehensive income (loss), net of tax (in thousands):

Unrealized (Losses) Gains
on Available-for-Sale
Investments Foreign Currency
Translation Total
Balance, December 31, 2024 $ ( 30 ) $ ( 18,154 ) $ ( 18,184 )
Other comprehensive (loss) income ( 124 ) 358   234  
Balance, March 31, 2025 $ ( 154 ) $ ( 17,796 ) $ ( 17,950 )
Other comprehensive income 73   5,159   5,232  
Balance, June 30, 2025 $ ( 81 ) $ ( 12,637 ) $ ( 12,718 )
Other comprehensive income (loss) 213   ( 25 ) 188  
Balance, September 30, 2025 $ 132   $ ( 12,662 ) $ ( 12,530 )

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Unrealized (Losses) Gains
on Available-for-Sale
Investments Foreign Currency
Translation Total
Balance, December 31, 2023 $ ( 399 ) $ ( 10,280 ) $ ( 10,679 )
Other comprehensive loss ( 106 ) ( 801 ) ( 907 )
Balance, March 31, 2024 $ ( 505 ) $ ( 11,081 ) $ ( 11,586 )
Other comprehensive income (loss) 119   ( 2,727 ) ( 2,608 )
Balance, June 30, 2024 $ ( 386 ) $ ( 13,808 ) $ ( 14,194 )
Other comprehensive income 434   4,640   5,074  
Balance, September 30, 2024 $ 48   $ ( 9,168 ) $ ( 9,120 )

Note 16 - Segment Data
Segment information for the three and nine months ended September 30, 2024 has been recast to reflect the Segment Realignment. Refer to Note 1 for additional details. Information relative to our reportable segments was as follows (in thousands ):

Three Months Ended September 30,
2025 2024
Connected Devices Software and Services Total Connected Devices Software and Services Total
Net sales $ 405,399   $ 305,242   $ 710,641   $ 327,900   $ 216,374   $ 544,274  
Cost of sales 203,173   80,120   283,293   156,167   57,360   213,527  
Other segment items (1)
8,902   9,200   18,102   7,104   6,039   13,143  
Adjusted gross margin $ 211,128   $ 234,322   $ 445,450   $ 178,837   $ 165,053   $ 343,890  
Other segment items (1)
( 18,102 ) ( 13,143 )
Selling, general and administrative ( 252,803 ) ( 192,189 )
Research and development ( 176,674 ) ( 114,477 )
Interest income 23,941   12,624  
Interest expense ( 28,912 ) ( 1,646 )
Other income, net 22,803   44,510  
Income before provision for income taxes $ 15,703   $ 79,569  

(1)      Other segment items includes the adjustment for noncash stock-based compensation expense and amortization of acquired intangible assets to arrive at the profit measure used by the CODM.
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Nine Months Ended September 30,
2025 2024
Connected Devices Software and Services Total Connected Devices Software and Services Total
Net sales $ 1,122,655   $ 860,157   $ 1,982,812   $ 891,087   $ 616,294   $ 1,507,381  
Cost of sales 566,861   219,121   785,982   450,954   160,896   611,850  
Other segment items (1)
27,872   27,922   55,794   41,490   15,043   56,533  
Adjusted gross margin $ 583,666   $ 668,958   $ 1,252,624   $ 481,623   $ 470,441   $ 952,064  
Other segment items (1)
( 55,794 ) ( 56,533 )
Selling, general and administrative ( 718,524 ) ( 514,228 )
Research and development ( 490,264 ) ( 307,008 )
Interest income 57,798   36,407  
Interest expense ( 65,419 ) ( 5,273 )
Other income, net 104,790   191,510  
Income before provision for income taxes $ 85,211   $ 296,939  

(1)      Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of acquired intangible assets, inventory step-up amortization related to acquisitions and payroll taxes related to 2024 Employee XSP vesting to arrive at the profit measure used by the CODM.
The following table presents supplemental information included within the measure of profit or loss, adjusted gross margin, reviewed by our CODM (in thousands). There are no other material items presented to our CODM by segment or included within adjusted gross margin for supplemental disclosure.

Three Months Ended September 30,
2025 2024
Connected Devices Software and Services Total Connected Devices Software and Services Total
Depreciation and amortization
$ 9,188   $ 4,324   $ 13,512   $ 4,545   $ 4,291   $ 8,836  
Significant noncash items:

Stock-based compensation expense
7,584   5,119   12,703   6,722   3,401   10,123  
Provisions for inventory
1,737   —   1,737   2,204   —   2,204  
Warranty reserve expense 2,584   —   2,584   3,047   —   3,047  

Nine Months Ended September 30,
2025 2024
Connected Devices Software and Services Total Connected Devices Software and Services Total
Depreciation and amortization
$ 26,783   $ 12,381   $ 39,164   $ 15,393   $ 8,120   $ 23,513  
Significant noncash items:

Stock-based compensation expense
22,643   15,508   38,151   40,432   7,803   48,235  
Provisions for inventory
3,578   —   3,578   11,047   —   11,047  
Warranty reserve expense 9,378   —   9,378   4,860   —   4,860  

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Note 17 – Business Combinations
Fusus
On January 31, 2024, we acquired the remaining 79.7 % interest in Fusus, LLC ("Fusus") for incremental consideration transferred of approximately $ 241.3 million. Based on the final purchase price allocation, we recorded $ 249.9 million of goodwill, $ 72.9 million of identifiable intangible assets, and other net liabilities assumed of $ 7.8 million, excluding deferred taxes. We also recorded a net deferred tax liability of $ 10.4 million. As of the acquisition date, the identifiable intangible assets recognized in the acquisition included $ 56.6 million of developed technology, $ 14.4 million of customer relationships, and $ 1.9 million of trademarks.
As a result of the Segment Realignment, the goodwill recognized in the acquisition has been reallocated between our two reportable segments, Connected Devices and Software and Services.
Dedrone
On October 1, 2024, we acquired the remaining 79.8 % interest in Dedrone, a global leader in air space security, for incremental consideration transferred of approximately $ 391.1 million. We recorded incremental acquisition-related transaction and integration costs of $ 0.5 million and $ 2.6 million for the three and nine months ended September 30, 2025, respectively. These costs were expensed as incurred in selling, general, and administrative ("SG&A") expenses in our consolidated statements of operations and comprehensive income (loss).
The purchase price allocation was subject to revision during the measurement period through September 30, 2025. As of the nine months ended September 30, 2025, we recorded various measurement period adjustments primarily consisting of adjustments to working capital resulting in a $ 7.5 million decrease to goodwill. These measurement period adjustments also include $ 3.3 million indemnification assets related to certain pre-acquisition contingencies.
Based on the final purchase price allocation, including measurement period adjustments, we have recorded $ 443.6 million of goodwill, $ 100.5 million of identifiable intangible assets, and other net liabilities assumed of $ 43.9 million, excluding deferred taxes. We have also recorded a net deferred tax asset of $ 3.1 million. As of the acquisition date, the identifiable intangible assets recognized in the acquisition included $ 41.0 million of developed technology, $ 41.0 million of in-process research and development, $ 15.0 million of customer relationships, and $ 3.5 million of trademarks.
As a result of the Segment Realignment, the goodwill recognized in the acquisition has been reallocated between our two reportable segments, Connected Devices and Software and Services.
Other Acquisitions
During the nine months ended September 30, 2025, we completed certain acquisitions for total purchase consideration of approximately $ 24.0 million primarily to enhance our end-to-end public safety ecosystem. The acquisitions were not material to our consolidated statements of operations, either individually or in the aggregate.

Note 18 - Subsequent Events
Invictus Apps, Inc.
In October 2025, we acquired the remaining outstanding stock of Invictus Apps, Inc. (“Prepared”), a leading provider of AI-powered emergency communications software, for a base purchase price of $ 637.5  million, subject to customary purchase price adjustments. The goodwill associated with this acquisition is currently expected to be recorded to our Software and Services segment. The acquisition aligns with our mission and positions us to accelerate next-generation public safety communications and emergency response solutions.

Prior to this transaction, we held an approximately 1 % ownership interest in Prepared. This transaction is considered a “step acquisition” under GAAP whereby our ownership interest held before the acquisition is required to be remeasured to fair value at the date of the acquisition.
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Due to the proximity of the closing date of the acquisition to the date of this filing, the initial accounting for the acquisition is not yet complete. Transaction costs related to the acquisition were approximately $ 3.5 million for the nine months ended September 30, 2025. These transaction costs were expensed as incurred in SG&A in our consolidated statements of operations and comprehensive income (loss).
Carbyne Ltd.
On November 4, 2025, we entered into a definitive agreement to acquire Carbyne Ltd. (“Carbyne”), a leading cloud-native emergency communications and response platform for a base purchase price of $ 625.0  million, subject to customary purchase price adjustments and closing conditions. The acquisition is expected to be completed in the first quarter of 2026 .
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition as of September 30, 2025, and results of operations for the three and nine months ended September 30, 2025 and 2024, should be read in conjunction with the unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes in our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on May 7, 2025. The discussion includes references to non-GAAP financial measures, such as adjusted gross margin, which supplement our GAAP results by providing additional insight into our financial and operational performance. For definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, refer to “Non-GAAP Measures” within this Quarterly Report on Form 10-Q. This discussion also contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to those described under “Part II, Item 1A. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements” on page ii of this Quarterly Report on Form 10-Q.

Overview
Axon is a technology leader in global public safety. Our moonshot goal is to cut gun-related deaths between police and the public in the United States in half by 2033. Axon is building the public safety operating system of the future by integrating a suite of hardware devices and cloud software solutions that not only revolutionize modern policing but also cater to federal agencies, corrections, justice and enterprise-level security needs. Axon’s suite includes cloud-hosted digital evidence management solutions, productivity and real-time operations software, body cameras, in-car cameras, TASER energy devices, drone and robotic security, and training solutions. Our financial results are reported in two reportable segments, Connected Devices and Software and Services.
Our revenues for the three months ended September 30, 2025 were $710.6 million, an increase of $166.4 million, or 30.6%, from the three months ended September 30, 2024. We had loss from operations of $2.1 million, compared to income from operations of $24.1 million for the same period in the prior year. Gross margin dollars increased $ 96.6 million and decreased as a percentage of revenue to 60.1% from 60.8% compared to the three months ended September 30, 2024. Adjusted gross margin decreased to 62.7% for the three months ended September 30, 2025 compared to 63.2% for the same period in the prior year, primarily driven by global tariffs and a higher mix of Platform Solutions revenue, partially offset by Software and Services. Operating expenses increased by $122.8 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net loss of $2.2 million included a $17.9 million tax provision, net realized and unrealized gains of $14.6 million related to our strategic investments, and a net realized and unrealized gain of $8.3 million related to our marketable securities. Net income of $67.0 million for the three months ended September 30, 2024 included a noncash unrealized gain of $44.0 million on our investment in marketable securities.
Our revenues for the nine months ended September 30, 2025 were $2.0 billion, an increase of $475.4 million, or 31.5%, from the nine months ended September 30, 2024. We had loss from operations of $12.0 million, compared to income from operations of $74.3 million for the same period in the prior year. Gross margin dollars increased $301.3 million and increased as a percentage of revenue to 60.4% from 59.4% compared to the nine months ended September 30, 2024. The increase was primarily driven by leverage on stock-based compensation expense and intangibles amortization. Adjusted gross margin remained consistent at 63.2% for the nine months ended September 30, 2025 compared to the same period in the prior year. Operating expenses increased by $387.6 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $121.9 million included net realized and unrealized gains of $180.6 million related to our strategic investments and a $36.7 million tax benefit, partially offset by a net realized and unrealized loss of 46.0 million related to our marketable securities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes, as discussed further within Note 10. Net income of $241.9 million for the nine months ended September 30, 2024 included a realized gain of $42.3 million related to our acquisition in Fusus, unrealized gains of $76.2 million related to our strategic investments, and a noncash unrealized gain of $73.6 million on our investment in marketable securities.
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Results of Operations
Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024
The following table presents data from our consolidated statements of operations and comprehensive income (loss) as well as the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (loss) (dollars in thousands):

Three Months Ended September 30,
2025 2024
Net sales from products $ 405,399 57.0  % $ 327,900 60.2  %
Net sales from services 305,242 43.0  216,374 39.8 
Net sales 710,641 100.0  544,274 100.0 
Cost of product sales 203,173 28.6  156,167 28.7 
Cost of services sales 80,120 11.3  57,360 10.5 
Cost of sales 283,293 39.9  213,527 39.2 
Gross margin 427,348 60.1  330,747 60.8 
Operating expenses:
Selling, general and administrative 252,803 35.6  192,189 35.3 
Research and development 176,674 24.8  114,477 21.0 
Total operating expenses 429,477 60.4  306,666 56.3 
Income (loss) from operations (2,129) (0.3) 24,081 4.5 
Interest income 23,941 3.4  12,624 2.3 
Interest expense (28,912) (4.1) (1,646) (0.3)
Other income, net 22,803 3.2  44,510 8.1 
Income before provision for income taxes 15,703 2.2  79,569 14.6 
Provision for (benefit from) income taxes 17,889 2.5  12,544 2.3 
Net income (loss) $ (2,186) (0.3) % $ 67,025 12.3  %

The following table presents our revenues disaggregated by geography (dollars in thousands):

Three Months Ended September 30,
2025 2024
United States $ 593,939  84  % $ 482,596  89  %
Other countries 116,702  16  61,678  11 
Total $ 710,641  100  % $ 544,274  100  %

International revenue increased compared to the prior year September 30, 2024 comparative period, primarily driven by increased sales in our EMEA region.
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Net Sales
Net sales by product line were as follows (dollars in thousands):

Three Months Ended September 30, Dollar
Change Percent
Change
2025 2024
Connected Devices segment:
TASER (1)
$ 237,950  33.5  % $ 203,612  37.4  % $ 34,338  16.9  %
Personal Sensors (2)
106,677  15.0  88,660  16.3  18,017  20.3 
Platform Solutions (3)
60,772  8.5  35,628  6.5  25,144  70.6 
Total Connected Devices segment 405,399  57.0  327,900  60.2  77,499  23.6 
Total Software and Services segment 305,242  43.0  216,374  39.8  88,868  41.1 
Total net sales $ 710,641  100.0  % $ 544,274  100.0  % $ 166,367  30.6  %

(1) 'TASER' includes TASER handles, cartridges and related extended warranties.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes interview room, fleet in-car video, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
Net sa les for the Connected Devices segment increased 23.6% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase of $34.3 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $18.0 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $25.1 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment, virtual reality training, and fleet systems.
Net sales for the Software and Services segment increased 41.1% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $88.9 million.
Gross Margin
As a percentage of net sales, gross margin for the Connected Devices segment decreased to 49.9% from 52.4% for the three months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense and acquired intangibles amortization, was 52.1% for the three months ended September 30, 2025, compared to 54.5% for the three months ended September 30, 2024. The decrease is primarily driven by global tariffs and higher mix of Platform Solutions revenue.
As a percentage of net sales, gross margin for the Software and Services segment increased to 73.8% from 73.5% for the three months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense and acquired intangibles amortization, increased to 76.8% for the three months ended September 30, 2025, compared to 76.3% for the three months ended September 30, 2024. The increase was primarily driven by higher software mix.
Selling, General and Administrative Expenses
SG&A expenses were comprised as follows (dollars in thousands):

Three Months Ended September 30, Dollar
Change Percent
Change
2025 2024
Total selling, general and administrative expenses $ 252,803  $ 192,189  $ 60,614  31.5  %
As a percentage of net sales 35.6% 35.3%    

Stock-based compensation expense increased $19.8 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.
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Salaries, benefits and bonus expense increased $17.3 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.
Sales and marketing expense increased $5.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to increased commissions.
Other SG&A expenses increased $18.4 million in comparison to the prior year September 30, 2024 comparable period , primarily driven by an increase in professional and consulting expenses of $12.0 million and an increase in travel expenses of $4.0 million.
Research and Development Expenses
R&D expenses were comprised as follows (dollars in thousands):

Three Months Ended September 30, Dollar
Change Percent
Change
2025 2024
Total research and development expenses $ 176,674 $ 114,477 $ 62,197 54.3  %
As a percentage of net sales 24.9  % 21.0  %

Stock-based compensation e xpense increased $22.0 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.
Salaries, benefits and bonus expense increased $19.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.
Other R&D expenses increased $ 21.1 million in comparison to the prior year September 30, 2024 comparable period, partially driven by an increase in professional and consulting expenses of $ 9.2 million.
Interest Income (Loss), Net
Interest income (loss), net, was as follows (in thousands):

Three Months Ended September 30,
2025 2024
Interest income $ 23,941  $ 12,624 
Interest expense (1)
(28,912) (1,646)
Total interest income (loss), net
$ (4,971) $ 10,978 

(1) Interest expense increased in comparison to the prior year September 30, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.
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Other Income, Net
Other income, net , was as follows (in thousands):

Three Months Ended September 30,
2025 2024
Realized and unrealized gain on fair value adjustments of strategic investments, net $ 14,618  $ 449 
Realized and unrealized gain on marketable securities, net (1)
8,275  44,010 
Loss on foreign currency transactions, net (160) (233)
Other, net 70  284 
Other income, net $ 22,803  $ 44,510 

(1) Reflects the net realized and unrealized gain on marketable securities, during the three months ended September 30, 2025, as discussed within Note 3.
Provision for Income Taxes
The effective tax rate was 113.9%, for the three months ended September 30, 2025, compared to 15.8% for the three months ended September 30, 2024. The increase in tax provision is driven by lower pre-tax book income in the current period, magnifying the impact of permanent and discrete items. The major driver of the increase in rate was the enactment of the OBBBA in the quarter, which resulted in a reduction of our R&D tax credit, partially offset by the net tax benefit related to stock-based compensation.
Provision for income taxes and effective tax rates were as follows (dollars in thousands):

Three Months Ended September 30,
2025 2024 Change
Income before provision for income taxes $ 15,703  $ 79,569  $ (63,866)
Provision for income taxes $ 17,889  $ 12,544  $ 5,345 
Effective tax rate 113.9  % 15.8  %

Net Income (Loss)
We recorded net loss of $2.2 million for the three months ended September 30, 2025 compared to net income of $67.0 million for the three months ended September 30, 2024. Net income (loss) per basic share was $(0.03) for the three months ended September 30, 2025 compared to $0.89 for the three months ended September 30, 2024. Net income (loss) per diluted share was $(0.03) for the three months ended September 30, 2025 compared to $0.86 for the three months ended September 30, 2024.
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Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024
The following table presents data from our consolidated statements of operations and comprehensive income (loss) as well as the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (loss) (dollars in thousands):

Nine Months Ended September 30,
2025 2024
Net sales from products $ 1,122,655 56.6  % $ 891,087 59.1  %
Net sales from services 860,157 43.4  616,294 40.9 
Net sales 1,982,812 100.0  1,507,381 100.0 
Cost of product sales 566,861 28.6  450,954 29.9 
Cost of services sales 219,121 11.0  160,896 10.7 
Cost of sales 785,982 39.6  611,850 40.6 
Gross margin 1,196,830 60.4  895,531 59.4 
Operating expenses:
Selling, general and administrative 718,524 36.2  514,228 34.1 
Research and development 490,264 24.8  307,008 20.4 
Total operating expenses 1,208,788 61.0  821,236 54.5 
Income (loss) from operations (11,958) (0.6) 74,295 4.9 
Interest income 57,798 2.9  36,407 2.4 
Interest expense (65,419) (3.3) (5,273) (0.3)
Other income, net 104,790 5.3  191,510 12.7 
Income before provision for income taxes
85,211 4.3  296,939 19.7 
Provision for (benefit from) income taxes (36,700) (1.8) 55,089 3.7 
Net income $ 121,911 6.1  % $ 241,850 16.0  %

The following table presents our revenues disaggregated by geography (dollars in thousands):

Nine Months Ended September 30,
2025 2024
United States $ 1,660,695  84  % $ 1,298,775  86  %
Other countries 322,117  16  208,606  14 
Total $ 1,982,812  100  % $ 1,507,381  100  %

International revenue increased compared to the prior year September 30, 2024 comparative period, primarily driven by increased sales in our Americas region.
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Net Sales
As a result of the Segment Realignment, we have updated and recast our disaggregated revenue categories. Net sales by product line were as follows (dollars in thousands):

Nine Months Ended September 30, Dollar
Change Percent
Change

2025 2024
Connected Devices segment:
TASER (1)
$ 649,679  32.8  % $ 549,759  36.5  % $ 99,920  18.2  %
Personal Sensors (2)
287,901  14.5  231,773  15.4  56,128  24.2 
Platform Solutions (3)
185,075  9.3  109,555  7.2  75,520  68.9 
Total Connected Devices segment 1,122,655  56.6  891,087  59.1  231,568  26.0 
Total Software and Services segment 860,157  43.4  616,294  40.9  243,863  39.6 
Total net sales $ 1,982,812  100.0  % $ 1,507,381  100.0  % $ 475,431  31.5  %

(1) 'TASER' includes TASER handles, cartridges and related extended warranties.
(2) 'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.
(3) 'Platform Solutions' primarily includes interview room, fleet in-car video, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
Net sales for the Connected Devices segment increased 26.0% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase of $99.9 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $56.1 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $75.5 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and virtual reality training.
Net sales for the Software and Services segment increased 39.6% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $243.9 million.
Gross Margin
As a percentage of net sales, gross margin for the Connected Devices segment increased to 49.5% from 49.4% for the nine months ended September 30, 2025 and 2024, respectively. The increase was primarily due to lower stock-based compensation expense. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense, acquired intangibles amortization, inventory step-up amortization related to acquisitions and payroll taxes related to 2024 Employee XSP vesting, was 52.0% for the nine months ended September 30, 2025, compared to 54.0% for the nine months ended September 30, 2024. The decrease is primarily driven by global tariffs and higher mix of Platform Solutions revenue.
As a percentage of net sales, gross margin for the Software and Services segment increased to 74.5% from 73.9% for the nine months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization and payroll taxes related to 2024 Employee XSP vesting, increased to 77.8% for the nine months ended September 30, 2025, compared to 76.3% for the nine months ended September 30, 2024. The increase was primarily driven by higher software mix.
Selling, General and Administrative Expenses
SG&A expenses were comprised as follows (dollars in thousands):

Nine Months Ended September 30, Dollar
Change Percent
Change
2025 2024
Total selling, general and administrative expenses $ 718,524  $ 514,228  $ 204,296  39.7  %
As a percentage of net sales 36.2% 34.1%

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Stock-based compensation ex pense increased $101.6 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.
Salaries, benefits and bonus expense increased $53.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.
Sales and marketing expense increased $14.5 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to increased commissions.
Other SG&A expenses increased $ 35.1 million in comparison to the prior year September 30, 2024 comparable period, primarily driven by an increase in professional and consulting expenses of $ 11.0 million and an increase in travel expenses of $ 10.3 million.
Research and Development Expenses
R&D expenses were comprised as follows (dollars in thousands):

Nine Months Ended September 30, Dollar
Change Percent
Change
2025 2024
Total research and development expenses $ 490,264 $ 307,008 $ 183,256 59.7  %
As a percentage of net sales 24.7  % 20.4  %

Stock-based compensa tion expense increased $82.4 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.
Salaries, benefits and bonus expense increased $53.8 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.
Other R&D expenses increased $ 47.1 million in comparison to the prior year September 30, 2024 comparable period, partially driven by an increase in professional and consulting expenses of $ 21.5 million.

Interest Income (Loss), Net
Interest income (loss), net, was as follows (in thousands):

Nine Months Ended September 30,
2025 2024
Interest income $ 57,798  $ 36,407 
Interest expense (1)
(65,419) (5,273)
Total interest income (loss), net $ (7,621) $ 31,134 

(1) Interest expense increased in comparison to the prior year September 30, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.
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Other Income, Net
Other income, net, was as follows (in thousands):

Nine Months Ended September 30,
2025 2024
Realized and unrealized gain on fair value adjustments of strategic investments, net $ 180,642  $ 118,538 
Realized and unrealized gain (loss) on marketable securities, net (1)
(45,994) 73,620 
Loss on foreign currency transactions, net (1,376) (180)
Induced conversion of convertible debt (2)
(28,666) — 
Other, net 184  (468)
Other income, net $ 104,790  $ 191,510 

(1) Reflects the net realized and unrealized loss on marketable securities during the nine months ended September 30, 2025, as discussed within Note 3.
(2) Reflects the inducement expense associated with the early repurchase of a portion of our 2027 Notes in the first quarter of 2025, as discussed further within Note 10.
Provision for (Benefit from) Income Taxes
The effective tax rate was (43.1)% for the nine months ended September 30, 2025, compared to 18.6% for the nine months ended September 30, 2024. The change is attributable to the net tax benefit related to stock-based compensation and R&D tax credits. These were partially offset by increased unrecognized tax benefits. The overall change in the effective tax rate also reflects the impact of lower pre-tax book income in the current period, which magnifies the relative effect of permanent and discrete item.
Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):

Nine Months Ended September 30,
2025 2024 Change
Income before provision for income taxes $ 85,211  $ 296,939  $ (211,728)
Provision for (benefit from) income taxes
$ (36,700) $ 55,089  $ (91,789)
Effective tax rate (43.1) % 18.6  %

Net Income
We recorded net income of $121.9 million for the nine months ended September 30, 2025 compared to net income of $241.9 million for the nine months ended September 30, 2024. Net income per basic share was $1.57 for the nine months ended September 30, 2025 compared to $3.20 for the nine months ended September 30, 2024. Net income per diluted share was $1.48 for the nine months ended September 30, 2025 compared to $3.12 for the nine months ended September 30, 2024.

Non-GAAP Measures
We utilize certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted gross margin as defined below to enhance understanding of our financial results and related measures. We have adjusted for expenses that we believe are not indicative of our core operating results, including stock-based compensation expense and amortization of acquired intangible assets. To improve comparability, prior periods have been conformed to the current period presentation. Our management uses these non-GAAP financial measures in evaluating our operating performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented below.
• EBITDA (most comparable GAAP measure: Net income) - Earnings before interest expense, investment interest income, income taxes, depreciation and amortization.
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• Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments, marketable securities, and mark-to-market on our non-qualified deferred compensation liabilities; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; inventory step-up amortization related to acquisitions; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; losses incurred as a result of the disposal, abandonment, and impairment of property, equipment and intangible assets; payroll taxes related to 2024 Employee XSP vesting and 2018 CEO Performance Award option exercises; and other unusual, non-recurring pre-tax items that are not considered representative of our underlying operating performance (listed in the tables below).
• Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross margin before noncash stock-based compensation expense, amortization of acquired intangible assets, inventory step-up amortization related to acquisitions, and payroll taxes related to 2024 Employee XSP vesting.
Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing our operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:
• these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to our GAAP financial measures;
• these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, our GAAP financial measures;
• these non-GAAP financial measures should not be considered to be superior to our GAAP financial measures; and
• these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q were prepared under a comprehensive set of rules or principles.
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EBITDA and adjusted EBITDA reconcile to net income (loss) as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net income (loss) $ (2,186) $ 67,025 $ 121,911 $ 241,850
Depreciation and amortization 21,310 14,762 59,829 39,326
Interest expense 28,912 1,646 65,419 5,273
Investment interest income (23,941) (12,624) (57,798) (36,407)
Provision for (benefit from) income taxes 17,889 12,544 (36,700) 55,089
EBITDA $ 41,984 $ 83,353 $ 152,661 $ 305,131

Non-GAAP adjustments:
Stock-based compensation expense 146,152 101,780 425,635 251,716
Unrealized and realized losses (gains) on investments and marketable securities, net (21,820) (44,459) (132,013) (149,845)
Realized gains on previously held minority interests acquired in business combinations, net — — — (42,313)
Debt inducement expense — — 28,666 —
Transaction costs related to strategic investments and acquisitions 4,774 2,652 9,731 13,145
Litigation and regulatory costs 5,490 — 8,313 224
Inventory step-up amortization — — 607 —
Loss on disposal, abandonment, and impairment of property, equipment and intangible assets, net 430 — 430 —
Payroll taxes related to 2024 Employee XSP vesting and 2018 CEO Performance Award option exercises — 1,727 9,782 1,727
Adjusted EBITDA $ 177,010 $ 145,053 $ 503,812 $ 379,785

As a result of the Segment Realignment, we have recast adjusted gross margin for the three and nine months ended September 30, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):

Three Months Ended September 30,
2025 2024
Connected Devices Software and
Services Total Connected Devices Software and
Services Total
Gross margin $ 202,226 $ 225,122 $ 427,348 $ 171,733 $ 159,014 $ 330,747
Stock-based compensation expense 7,584 5,119 12,703 6,722 3,401 10,123
Amortization of acquired intangible assets 1,318 4,081 5,399 382 2,638 3,020
Adjusted gross margin $ 211,128 $ 234,322 $ 445,450 $ 178,837 $ 165,053 $ 343,890
Gross margin % 49.9  % 73.8  % 60.1  % 52.4  % 73.5  % 60.8  %
Adjusted gross margin % 52.1  % 76.8  % 62.7  % 54.5  % 76.3  % 63.2  %

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Nine Months Ended September 30,
2025 2024
Connected Devices Software and
Services Total
Connected Devices Software and
Services Total
Gross margin $ 555,794 $ 641,036 $ 1,196,830 $ 440,133 $ 455,398 $ 895,531
Stock-based compensation expense 22,643 15,508 38,151 40,432 7,803 48,235
Amortization of acquired intangible assets 3,988 11,560 15,548 1,058 7,240 8,298
Payroll taxes related to 2024 Employee XSP vesting 634 854 1,488 — — —
Inventory step-up amortization 607 — 607 — — —
Adjusted gross margin $ 583,666 $ 668,958 $ 1,252,624 $ 481,623 $ 470,441 $ 952,064
Gross margin % 49.5  % 74.5  % 60.4  % 49.4  % 73.9  % 59.4  %
Adjusted gross margin % 52.0  % 77.8  % 63.2  % 54.0  % 76.3  % 63.2  %

Liquidity and Capital Resources
Summary

September 30, 2025 December 31, 2024 Dollar Change
Cash and cash equivalents $ 1,423,871  $ 454,844  $ 969,027 
Available-for-sale investments 952,786  333,235  619,551 
Total $ 2,376,657  $ 788,079  $ 1,588,578 

Our most significant source of liquidity continues to be funds generated by operating activities and available cash and cash equivalents and short-term investments. As of September 30, 2025, we had $1.4 billion of cash and cash equivalents, an increase of $969.0 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of September 30, 2025, we had $952.8 million of available-for-sale investments, an increase of $619.6 million from December 31, 2024 primarily as a result of investment activity following the issuance of the Senior Notes in March 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the issuance.
In additi on, our Credit Agreement is available for additional working capital needs or investment opportunities. The Credit Agreement provides for a senior unsecured multi-currency revolving credit facility in an aggregate principal amount of up to $300.0 million, $50.0 million of which is available for the issuance of letters of credit. As of September 30, 2025, and December 31, 2024, respectively, no amounts were drawn under the Credit Agreement. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of September 30, 2025, we had letters of credit outstanding of approximately $8.9 million under the facility and available borrowing of $291.1 million. Refer to Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.
As of September 30, 2025, we have an aggregate of $1.75 billion of Senior Notes outstanding. As of September 30, 2025, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 13% of our total revenue for the nine months ended September 30, 2025, and approximately 9% and 5% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of September 30, 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.
Furthermore, during the nine months ended September 30, 2025, we sold approximately 0.5 million shares of our common stock under our ATM. We generated approximately $366.3 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $362.1 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $4.2 million. Refer to Note 12 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.
Subsequent to the quarter ended September 30, 2025, we acquired the remaining outstanding stock of Prepared and we entered into a definitive agreement to acquire Carbyne. Refer to Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.
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We believe we have access to additional fina ncing. However, there is no assurance that such funding will be available on terms acceptable to us, or at all. We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements, including capital expenditures, working capital requirements, potential acquisitions or investments, income and payroll tax payments for net-settled stock awards, and other liquidity requirements through at least the next 12 months.
Going forward, we expect to continue to be an opportunistic issuer of debt securities and may issue new debt securities from time to time to fund our growth or refinance future debt maturities, among other things. In addition, from time to time, we may acquire our debt securities through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may from time to time determine, for cash or other consideration.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities (in thousands):

Nine Months Ended September 30,   Dollar
Change
2025 2024  
Operating activities $ (5,896) $ 158,146  $ (164,042)
Investing activities (498,490) (48,834) (449,656)
Financing activities 1,468,024  (12,608) 1,480,632 
Effect of exchange rate changes on cash and cash equivalents 5,741  75  5,666 
Net increase (decrease) in cash and cash equivalents and restricted cash $ 969,379  $ 96,779  $ 872,600