Axon Enterprise vs. Fastly: Which Industrials Stock Is a Better Buy in 2026?

Choosing between Axon Enterprise (NASDAQ:AXON) and Fastly Inc. (NASDAQ:FSLY) requires balancing the steady growth of public safety infrastructure against the high-velocity demands of modern edge cloud computing and content delivery.

Axon Enterprise provides mission-critical tools for law enforcement while Fastly powers the digital experiences of global media brands. This comparison examines their financials and risk profiles to help you determine which is the better buy.

The case for Axon Enterprise

Axon Enterprise provides hardware and cloud software for public safety, including Taser devices, body cameras, and digital evidence management. Within the world of defense stocks, the company is unique for its integrated ecosystem of connected hardware alongside cloud-based software such as Axon Evidence and Axon Records. This software-heavy approach allows the company to lock in long-term contracts with law enforcement agencies and federal entities.

In its latest annual report, filed for FY 2025, revenue reached about $2.8 billion, representing growth of roughly 33.5% compared to the prior year. The company reported a net income of approximately $124.9 million, resulting in a net margin of around 4.5%. This net margin declined from roughly 18.1% in the previous year as the company invested in expanding its product suite and headcount.

As of its December 2025 balance sheet, the debt-to-equity ratio is approximately 0.6x, meaning total debt is about 60% of shareholder equity. The current ratio of nearly 2.5x indicates a strong ability to cover short-term debts with current assets. Free cash flow was around $75.1 million, though stock-based compensation represented roughly 300% of operating cash flow, meaning reported cash generation is heavily inflated by this non-cash add-back.

The case for Fastly Inc.

Fastly operates an edge cloud computing platform that serves a global customer base, specifically focusing on the media and entertainment industry. While it maintains a broad customer list, the company remains dependent on a limited number of major accounts for a significant portion of its revenue. Following a 2025 restructuring, the company continues its relationship with TikTok and has expanded its partnership with Jio Platforms to power infrastructure across India.

In FY 2025, revenue reached about $624.0 million, an increase of roughly 14.8% over the prior twelve months. The company reported a net loss of approximately $121.7 million, which translates to a net margin of nearly negative 19.5%. While still negative, this reflects an improvement over the net margin of roughly negative 29.1% seen in 2024, as the company works toward narrowing its losses.

As of its December 2025 balance sheet, the debt-to-equity ratio is approximately 0.5x, showing a relatively conservative use of debt. The current ratio of nearly 2.6x indicates the company has sufficient short-term assets to cover its immediate liabilities. Free cash flow was roughly $65.8 million, but stock-based compensation represented roughly 124% of operating cash flow, meaning reported cash generation is heavily inflated by this non-cash add-back.

Risk profile comparison

Axon Enterprise faces strategic dependence on law enforcement agencies globally, making it vulnerable to shifts in municipal budgets and policy changes. The company also deals with operational risks related to the semiconductor supply chain and the heavy burden of managing sensitive evidence data. Furthermore, increasing reliance on subscription billing models impacts short-term liquidity, and the company must navigate restrictive financial covenants under its current credit facilities.

Fastly deals with significant revenue concentration from a limited number of major customers, particularly within the media sector. It faces intense competition from large-scale providers like Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), and Cloudflare Inc. (NYSE:NET), which may offer more aggressive pricing. Any interruption in its edge cloud platform could lead to service-level claims and reputational damage, while evolving data privacy regulations add another layer of compliance risk.

Valuation comparison

Axon Enterprise trades at a much higher premium to Fastly, reflecting its positive net income and stronger revenue growth rate compared to the edge cloud provider.

Valuation metrics include those sourced from Financial Modeling Prep (FMP) and may differ from those of other data providers.

The Forward P/E ratio compares the stock price to future earnings estimates for the coming year. The P/S ratio measures market value against sales over the past twelve months.

Which stock would I buy in 2026?

Fastly processes over 5 trillion requests a day, a huge number that is actually just a small part of the total addressable market (TAM) for the business. Management sees the TAM as $22 billion, giving it a long runway for growth. The company has posted three straight quarters of more than 20% growth (year-over-year).

One of the company's competitive edges, it says, is that it delivers its resources dynamically, allocating them in real time to whatever the load is on a global basis. So, for example, one Thursday night, its network might be delivering Thursday Night Football. On Black Friday, the exact same network is handling e-commerce. The next week, it might be handling a video game release. Fastly says that makes it a much more efficient network than competitors, who have siloed networks for security, compute, and delivery, et cetera.

For the current fiscal year, look for sales to grow to $741 million, a 19% rise over the prior year, with a much narrower net loss of about $72 million.

Axon Enterprise has a fine outlook for growth as law enforcement is increasingly equipped with Tasers and the public is becoming increasingly demanding that agents wear body cameras. Its cloud-based evidence control system is also an increasingly desired service for law enforcement organizations, too.

Expansion into Europe and Canada should also help, as should a focus on producing personal consumer-protection devices. In particular, all the data and video created by Axon customers have to be managed, and the company is seeing strong demand for its AI-based management systems from customers who find many of the services create efficiencies within their operations.

In its fiscal 2026, sales are seen growing well, up about a third to $3.7 billion, with net income of around $290 million and free cash flow of $425 million, well over 2025's levels.

Axon's strong growth makes it appealing, but the valuation is a stumbling block right now. Axon shares are priced as if they are tech growth stocks. They could be, given the company's expansion into cloud services, but it feels too high. Fastly is more affordable and brings decent top-line growth as well.

Brendan Coffey has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Axon Enterprise, Cloudflare, Fastly, and Microsoft. The Motley Fool has a disclosure policy.