Axon: Take Some Chips Off The Table (Rating Downgrade)

Axon delivered robust Q2 results, with 35% YoY revenue growth and strong AI Era business momentum. Future demand remains solid, evidenced by a 41% YoY increase in bookings and improved net revenue retention to 126%. Gross margin contracted 40 bps YoY, but adjusted EBITDA margin expanded 110 bps, highlighting operational leverage. Given a forward P/E of 77.26 and a premium forward PEG, I now see risk/reward as neutral. This is an opportunity to take some profits.

In late June, I upgraded Axon Enterprise, Inc. ( AXON ) to a buy rating for the first time. In that analysis, it was shown that the company is effectively integrating AI into their solutions and