Is Axon Enterprise Stock's Valuation Justified?

Key Points

• Axon stock is up more than 3,000% over the last decade.

• The company has built a unique business in law enforcement tech.

• The business is still growing briskly and expanding into new technologies.

• 10 stocks we like better than Axon Enterprise ›

You might not know it, but Axon Enterprise (NASDAQ: AXON) is one of the best-performing stocks of the last decade. The maker of TASER electrical stun guns, body cameras, and related software is up more than 3,000% during that period.

The company has built a vast network of products and services across law enforcement technology, establishing itself, with the help of some acquisitions, as the clear leader in that niche but growing industry.

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The surge in Axon's price during that period hasn't come exclusively from growth in the business. As the chart below shows, the stock's earnings per share has grown by about 1,000% over the last decade, meaning its valuation has tripled.

Data by YCharts.

As its earnings multiple has expanded, the stock has gotten expensive. These days, the stock trades at a price-to-earnings ratio of 110. Is the stock overvalued, or is its valuation justified? Let's take a closer look at where Axon stands today to answer the question.

Image source: Axon.

A one-of-a-kind business

Axon's mission is to protect life and make the bullet obsolete. Over its history, that's expanded from its TASER less-than-lethal weapons to body cameras for recording police interactions and software that helps law enforcement agencies manage records, evidence, and other data.

Like Apple, Axon has created a hardware and software ecosystem with the two components complementing each other. Its body and dashboard cameras, for instance, generate footage that's stored with its cloud service. The company has even introduced a new generative AI offering, Draft One, that can create first drafts of police reports based on bodycam footage.

The company's ecosystem has driven strong growth over its history, solid profits, and an increasingly wide economic moat.

In its second quarter, revenue rose 33% to $669 million, its sixth consecutive quarter with growth above 30%. Gains were balanced across both the software and services and connected devices segments. It reported adjusted net income of $174 million. On a generally accepted accounting principles (GAAP) basis, net income was $36 million.

The company continues to update its core product portfolio with the TASER 10 and Axon Body 4 representing the latest versions of its hardware. It has also introduced new products and services, such as VR training and drone-as-first-responder systems. Most recently, management announced the acquisition of Prepared, an AI-powered emergency communications platform. Prepared's technology helps turn 911 calls into actionable intelligence, enabling a faster response from emergency responders.

Prepared is the type of company that fits well under the Axon umbrella as the company can fold it into the larger product portfolio to make its platform more attractive to law enforcement agencies.

Does the valuation make sense?

Axon reported a GAAP operating loss of $9.8 million through the first half of 2025 as the company undergoes an investment cycle in new technologies like AI, but software companies tend to earn a lofty earnings multiple if they can demonstrate growth and an adjusted profit.

One major line item the company excludes from its adjusted profit metrics is share-based compensation, which totaled $279 million year to date, or roughly 22% of revenue. Axon's outstanding share count has increased nearly 25% in just the past five years, though that hasn't been enough of a problem to deter its soaring share price.

With a triple-digit price-to-earnings ratio, investors should recognize the reduced margin of safety from such a valuation. But while Axon stock may be pricey, even after falling 20% from its all-time high, it remains fairly valued given its unique business model and strong track record.

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Jeremy Bowman has positions in Axon Enterprise. The Motley Fool has positions in and recommends Apple and Axon Enterprise. The Motley Fool has a disclosure policy.