Axon Enterprise, Inc.
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Item 1. Business
Overview
Axon Enterprise, Inc. (“Axon,” the “Company,” “we” or “us”) is a technology company that provides integrated hardware and software solutions. Founder-led since 1993, Axon began with a mission to protect life and has grown into a global technology company serving a range of customers. Our products and services allow customers across the public and private sector to capture and use critical data to support fully-connected operational workflows. Our trusted network seamlessly integrates software and hardware with a range of connected devices, including TASER energy devices, cameras and sensors, drones and robotics, cloud-based evidence management, records management, real-time operations software, critical incident and emergency response systems, immersive training, and productivity tools – all enhanced by artificial intelligence (“AI”). Designed to work together, these solutions create a unified, data-driven operating system that prioritizes safety and helps protect people and places with greater speed, accuracy, transparency, and accountability.
Our integrated technology platform of hardware and software solutions advances our mission to (i) make the bullet obsolete, (ii) reduce social conflict, and (iii) enable a fair and effective justice system. Our products and technology solutions address complex, high-stakes challenges, and our mission attracts top talent. We aim to invent and deliver technology solutions that progressively make the right things easier and the wrong things harder every day.
Axon is a diversified technology company with employees distributed across multiple geographies. Alongside our primary corporate headquarters in Scottsdale, Arizona, we have hubs in many major cities across the United States and ongoing international expansion across Europe, Asia, and the Americas, as we continue to drive our mission globally.
Business Segments
During the year ended December 31, 2025, we realigned our business to better reflect our continued growth and expansion of our technology solutions. Previously reported within two reportable segments, TASER and Software and Sensors, we realigned our business in a manner that provides increased transparency and distinction between our software and services and hardware components.
Axon’s operations comprise a fully integrated suite of products across connected hardware, software, and services which are disclosed in two reportable segments:
1.Software and Services: We develop, manufacture and sell cloud-based Software-as-a-Service (“SaaS”) solutions that leverage AI and enable our customers to capture, securely store, manage, share and analyze video and other digital evidence. Our software offerings also support productivity and real-time operations. Our offerings include Axon Evidence, Draft One, Axon Records, Axon Standards, Axon Fusus, and Axon Assistant, among others. The Software and Services segment includes recurring cloud-hosted software revenue, related non-recurring professional services revenue, and revenue from certain software, including on-premise licenses.
2.Connected Devices: We develop, manufacture and sell fully integrated hardware solutions such as conducted energy devices (“CEDs”) sold under the TASER brand, body cameras, fixed and in-car cameras, drone and counter-drone technologies, and a broad ecosystem of accessories, extended warranties and related hardware products.
For further information about our reportable segments and sales by geographic region, refer to Note 1 of Part II, Item 8 of this Annual Report on Form 10-K.
Key Product Category Revenue Drivers: What We Offer
Axon’s products and services are designed to operate as an integrated ecosystem consisting of integrated connected hardware devices, cloud-hosted software applications and real-time operational tools. Our revenue is derived from a combination of hardware sales, multi-year recurring software subscriptions, professional services, and extended warranties. The following describes the principal product categories that drive revenue across our two reportable segments.
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Software and Services
Axon has a suite of cloud-based, SaaS solutions that deeply integrate with our hardware to benefit customers and drive annual recurring revenue, which totaled $1.3 billion1 as of December 31, 2025. Revenue from our SaaS solutions is primarily driven from subscription licensing, premium offering adoptions, and ecosystem expansion. Our SaaS solutions can be best categorized into three categories:
•Digital Evidence Management: Axon Evidence is a secure, cloud-based platform that enables public safety to efficiently store, manage and share critical evidence while ensuring chain of custody and compliance.
•Productivity Solutions: Our productivity suite includes Axon Records, Axon Standards, and a suite of solutions available under our AI Era Plan, including Real-Time Translation, Draft One, Policy Chat, and Auto-Transcribe, among others. These offerings are designed to boost efficiency and improve decision-making through automation, data integration, and intelligent workflows.
•Real-time Operations: Our real-time operations capabilities, which include Axon Respond, integrates location data, signal alerts and video feeds to provide a complete picture of evolving situations as they occur.
In addition to subscription SaaS revenue, this segment includes non-recurring professional services revenue supporting implementation, configuration, and ongoing workflow integration, as well as revenue from certain on-premise software licenses.
Connected Devices
Our Connected Devices segment consists of hardware products that seamlessly integrate with our suite of software solutions to revolutionize our customers' capabilities for capturing, analyzing, and responding to real-world events. Revenue in this segment is derived from device sales, accessories, and related extended warranties. These products are designed to operate as a networked system and include devices such as cameras, sensors, drones, and personal protection equipment across the following three categories:
•TASER: We develop smart devices, tools and services that support public safety officers in de-escalating situations, avoiding or minimizing use of force and aiding consumer personal protection. TASER energy devices are used by public safety customers as a less-lethal force option to de-escalate conflict. Revenue is generated through device sales, cartridges, accessories, and extended warranties.
•Personal Sensors: Axon devices address many needs, including transparency, real-time situational awareness, and accurate capture and integration of evidence with software workflows. Product categories within personal sensors include Axon Body cameras and accessories. Our software solutions also support an open ecosystem of connected devices produced by other vendors.
•Platform Solutions: Platform Solutions include Axon Fleet in-car video systems, fixed cameras, drone and counter-drone technology, virtual reality (“VR”) training hardware, and other devices that support operational awareness.
Our research & development (“R&D”) investments support continuous innovation on behalf of our customers. Our financial strategy is to build highly recurring, highly profitable businesses and to drive growth through this purposeful product innovation.
1 Calculated as monthly recurring license, integration, warranty, and storage revenue for the year ended December 31, 2025. Annual recurring revenue is a forward-looking performance indicator that management believes provides more visibility into the growth of our revenue generated by our highest margin, recurring services. Annual recurring revenue should be viewed independently of revenue and deferred revenue because it is an operating measure and is not intended to be combined with or to replace GAAP revenue or deferred revenue, as they can be impacted by contract start and end dates and renewal rates. Annual recurring revenue is not intended to be a replacement or forecast of revenue or deferred revenue.
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Sales and Distribution: Who We Sell To and Where We Deliver
Our core customers across the public and private sectors include U.S. federal, state, and local governments, international governmental entities, commercial enterprises, and consumers. Axon’s sales force and strong customer relationships represent key strategic advantages. Although the majority of our revenues are generated via direct sales, we also leverage distribution partners and third party resellers. No customer represented more than 10% of total net sales for the years ended December 31, 2025, 2024 or 2023. As we diversify into new markets, we have been investing in sales personnel and strategic headcount additions to support growth in these markets.
Resources
Manufacturing and Supply Chain
We perform manufacturing, final assembly and final test operations at our facilities in Arizona and own substantially all of the equipment required to develop, prototype, manufacture and assemble our finished products. We have continued to maintain both our ISO 9001 and our ISO 9001:2015 certifications.
We purchase many components and raw materials used in manufacturing our products from numerous suppliers in various countries. Although we currently obtain certain components from single source suppliers, we own substantially all injection-molded component tooling, designs and test fixtures used in production for all custom components. We continuously monitor our supply chain, identify alternate shipping and logistic sources, and work with foreign regulators so our suppliers can provide high quality parts. Supply chain disruptions are an ongoing occurrence and our continuous monitoring allows us to minimize their impact. For more information on the risks associated with manufacturing and supply chain, see “Item 1A. Risk Factors — Operational Risks”.
Intellectual Property
We protect our intellectual property with U.S. and foreign patents, U.S. and foreign trademark registrations, and U.S. copyright registrations. Our patents and pending patent applications relate to technology used by us in connection with our products. We also rely on international treaties, organizations and laws to protect our intellectual property. As of December 31, 2025, we hold over 370 U.S. patents, over 170 U.S. registered trademarks, over 350 international patents and over 480 international registered trademarks, as well as numerous pending patent and trademark applications.
We continuously assess whether and where to seek formal protection for particular technologies based on such factors as the significance to our operations and our competitors’ operations in particular regions, our strategies in different countries, and the degree to which intellectual property laws exist and are meaningfully enforced in different jurisdictions. We have the exclusive rights to many Internet domain names, primarily including “Axon.com,” “Evidence.com,” “TASER.com,” and “911.com.”
We also execute non-disclosure agreements with employees, consultants and key suppliers.
Competition
Sensors — Connected Cameras and Digital Evidence Management Software: The body camera and in-car video/automatic license plate readers industry is highly competitive. Our competition includes 10-8 Video Systems, 365Labs, Applied Concepts, Axis Communications, Coreforce, Digital Ally, Duress, Genetec, Getac, HALOS Body Cameras, Hikvision, Hytera, Insight LPR, IONODES, i-PRO, Kustom Signals, LensLock, Motorola Solutions, Tait Communications, Oracle, PatrolEyes, Pinnacle Response, Pro-Vision, Recoda, Reveal Media, Safe Fleet, Versaterm, Wireless CCTV, Wolfcom Enterprises, Wrap Technologies and Zepcam.
Our fixed automatic license plate recognition (“ALPR”) offerings, including Axon Outpost and Axon Lightpost, together with integrations enabled through our Works with Axon partnership program, compete with providers of fixed and semi-fixed ALPR cameras and associated analytics software used by public safety agencies and enterprise customers. Our competition in this area includes Flock Safety, Genetec (AutoVu), Jenoptik, Motorola Solutions (including its Vigilant and fixed LPR solutions), Neology (including its PIPS Technology business), NDI Recognition Systems, PlateSmart Technologies, and Rekor Systems.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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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 March 31, 2026, and results of operations for the three months ended March 31, 2026 and 2025, 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 2025 Annual Report on Form 10-K for the year ended December 31, 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.
Overview
Axon is a technology company that provides integrated hardware and software solutions. Our products and services allow customers across the public and private sector to capture and use critical data to support fully-connected operational workflows. Our trusted network seamlessly integrates software and hardware with a range of connected devices, including TASER energy devices, cameras and sensors, drones and robotics, cloud-based evidence management, records management, real-time operations software, critical incident and emergency response systems, immersive training, and productivity tools – all enhanced by artificial intelligence.
Our revenues for the three months ended March 31, 2026 were $807.3 million, an increase of $203.7 million, or 33.7%, from the three months ended March 31, 2025. We had income from operations of $29.2 million, compared to loss from operations of $8.8 million for the same period in the prior year. Gross margin dollars increased $111.5 million and decreased as a percentage of revenue to 59.1% from 60.6% compared to the three months ended March 31, 2025. Adjusted gross margin decreased to 61.6% for the three months ended March 31, 2026 compared to 63.6% for the same period in the prior year. The decrease in gross margin and adjusted gross margin was primarily driven by global tariffs, a higher mix of Platform Solutions revenue, and higher professional services costs. Operating expenses increased by $73.5 million, reflecting increased headcount and commissions to support business growth and consulting expenses. Net income of $169.3 million included a $30.9 million tax provision, income from strategic investments, net, of $196.6 million, and a net realized and unrealized loss of $5.5 million related to our marketable securities. Net income of $88.0 million for the three months ended March 31, 2025 included net realized and unrealized gains from strategic investments of $167.3 million, offset by a noncash unrealized loss of $23.4 million related to our investment in marketable securities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes.
On February 20, 2026, the Supreme Court determined that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized. The ruling did not provide guidance regarding the recovery of amounts previously remitted. As of March 31, 2026, we have not recorded a benefit for any potential refunds of IEEPA tariffs previously paid, as recovery is not considered probable. We continue to monitor trade policy developments and will reassess the accounting treatment as additional information becomes available.
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Results of Operations
Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025
The following table presents data from our consolidated statements of operations as well as the percentage relationship to total net sales (dollars in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net sales from products | $ | 452,821 | 56.1 | % | $ | 340,896 | 56.5 | % | |||||||||||||||
| Net sales from services | 354,524 | 43.9 | 262,737 | 43.5 | |||||||||||||||||||
| Net sales | 807,345 | 100.0 | 603,633 | 100.0 | |||||||||||||||||||
| Cost of product sales | 232,156 | 28.8 | 170,181 | 28.2 | |||||||||||||||||||
| Cost of service sales | 97,903 | 12.1 | 67,713 | 11.2 | |||||||||||||||||||
| Cost of sales | 330,059 | 40.9 | 237,894 | 39.4 | |||||||||||||||||||
| Gross margin | 477,286 | 59.1 | 365,739 | 60.6 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 259,093 | 32.1 | 223,509 | 37.0 | |||||||||||||||||||
| Research and development | 188,950 | 23.4 | 151,023 | 25.0 | |||||||||||||||||||
| Total operating expenses | 448,043 | 55.5 | 374,532 | 62.0 | |||||||||||||||||||
| Income (loss) from operations | 29,243 | 3.6 | (8,793) | (1.4) | |||||||||||||||||||
| Interest income | 10,611 | 1.3 | 10,604 | 1.8 | |||||||||||||||||||
| Interest expense | (28,643) | (3.5) | (7,821) | (1.3) | |||||||||||||||||||
| Other income, net | 189,010 | 23.4 | 114,401 | 19.0 | |||||||||||||||||||
| Income before provision for income taxes | 200,221 | 24.8 | 108,391 | 18.1 | |||||||||||||||||||
| Provision for income taxes | 30,909 | 3.8 | 20,411 | 3.4 | |||||||||||||||||||
| Net income | $ | 169,312 | 21.0 | % | $ | 87,980 | 14.7 | % | |||||||||||||||
The following table presents our revenues disaggregated by geography (dollars in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| United States | $ | 646,527 | 80 | % | $ | 529,383 | 88 | % | |||||||||||||||
| Other countries | 160,818 | 20 | 74,250 | 12 | |||||||||||||||||||
| Total | $ | 807,345 | 100 | % | $ | 603,633 | 100 | % | |||||||||||||||
International revenue increased compared to the prior year March 31, 2025 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 March 31, | Dollar Change | Percent Change | |||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||
| Connected Devices segment: | |||||||||||||||||||||||||||||||||
TASER (1) | $ | 232,853 | 28.8 | % | $ | 195,495 | 32.4 | % | $ | 37,358 | 19.1 | % | |||||||||||||||||||||
Personal Sensors (2) | 108,751 | 13.5 | 88,405 | 14.7 | 20,346 | 23.0 | |||||||||||||||||||||||||||
Platform Solutions (3) | 111,217 | 13.8 | 56,996 | 9.4 | 54,221 | 95.1 | |||||||||||||||||||||||||||
| Total Connected Devices segment | 452,821 | 56.1 | 340,896 | 56.5 | 111,925 | 32.8 | |||||||||||||||||||||||||||
| Total Software and Services segment | 354,524 | 43.9 | 262,737 | 43.5 | 91,787 | 34.9 | |||||||||||||||||||||||||||
| Total net sales | $ | 807,345 | 100.0 | % | $ | 603,633 | 100.0 | % | $ | 203,712 | 33.7 | % | |||||||||||||||||||||
(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 fleet in-car video, interview room, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.
Net sales for the Connected Devices segment increased 32.8% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase of $37.4 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $20.3 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $54.2 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and fleet systems.
Net sales for the Software and Services segment increased 34.9% for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. 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 $91.8 million.
Gross Margin
As a percentage of net sales, gross margin for the Connected Devices segment decreased to 48.7% from 50.1% for the three months ended March 31, 2026 and 2025, respectively. Adjusted gross margin for the Connected Devices segment was 50.4% for the three months ended March 31, 2026, compared to 52.8% for the three months ended March 31, 2025. The decrease in gross margin and adjusted gross margin was primarily driven by global tariffs and a higher mix of Platform Solutions revenue.
As a percentage of net sales, gross margin for the Software and Services segment decreased to 72.4% from 74.2% for the three months ended March 31, 2026 and 2025, respectively. Adjusted gross margin for the Software and Services segment decreased to 75.8% for the three months ended March 31, 2026, compared to 77.7% for the three months ended March 31, 2025. The decrease in gross margin and adjusted gross margin was primarily driven by higher professional services costs.
Selling, General and Administrative Expenses
SG&A expenses were as follows (dollars in thousands):
| Three Months Ended March 31, | Dollar Change | Percent Change | |||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||
| Total selling, general and administrative expenses | $ | 259,093 | $ | 223,509 | $ | 35,584 | 15.9 | % | |||||||||||||
| As a percentage of net sales | 32.1% | 37.0% | |||||||||||||||||||
Salaries, benefits and bonus expense increased $10.8 million in comparison to the prior year March 31, 2025 comparable period, primarily attributable to an increase in headcount and higher wages.
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Sales and marketing expense increased $10.2 million in comparison to the prior year March 31, 2025 comparable period, primarily attributable to increased commissions.
Other SG&A expenses increased $14.6 million in comparison to the prior year March 31, 2025 comparable period, primarily driven by an increase in professional and consulting expenses of $9.1 million.
Research and Development Expenses
R&D expenses were as follows (dollars in thousands):
| Three Months Ended March 31, | Dollar Change | Percent Change | |||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||
| Total research and development expenses | $ | 188,950 | $ | 151,023 | $ | 37,927 | 25.1 | % | |||||||||||||
| As a percentage of net sales | 23.4 | % | 25.0 | % | |||||||||||||||||
Salaries, benefits and bonus expense increased $21.3 million in comparison to the prior year March 31, 2025 comparable period, which was primarily attributable to an increase in headcount and higher wages.
Other R&D expenses increased $16.6 million in comparison to the prior year March 31, 2025 comparable period, partially driven by an increase in professional and consulting expenses of $6.8 million.
Interest Income (Expense), Net
Interest income (expense), net, was as follows (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Interest income | $ | 10,611 | $ | 10,604 | |||||||
Interest expense (1) | (28,643) | (7,821) | |||||||||
| Total interest income (expense), net | $ | (18,032) | $ | 2,783 | |||||||
(1)Interest expense increased in comparison to the prior year March 31, 2025 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 8.
Other Income, Net
Other income, net, was as follows (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
Income from strategic investments, net (1) | $ | 196,600 | $ | 167,321 | |||||||
Realized and unrealized loss on marketable securities, net (2) | (5,511) | (23,400) | |||||||||
| Loss on foreign currency transactions, net | (2,166) | (803) | |||||||||
| Induced conversion of convertible debt | — | (28,666) | |||||||||
| Other, net | 87 | (51) | |||||||||
| Other income, net | $ | 189,010 | $ | 114,401 | |||||||
(1)Reflects the net realized and unrealized income associated with our strategic investments, during the three months ended March 31, 2026 and 2025, as discussed within Note 6.
(2)Reflects the net realized and unrealized loss on marketable securities, during the three months ended March 31, 2026 and 2025, as discussed within Note 3.
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Provision for Income Taxes
The effective tax rate was 15.4%, for the three months ended March 31, 2026, compared to 18.8% for the three months ended March 31, 2025. The decrease in effective tax rate for the quarter was primarily driven by a nontaxable gain on an investment transaction and an increase in pre-tax book income, which reduced the relative impact of other permanent and discrete items.
Provision for income taxes and effective tax rates were as follows (dollars in thousands):
| Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | Change | ||||||||||||||
| Income before provision for income taxes | $ | 200,221 | $ | 108,391 | $ | 91,830 | ||||||||||
| Provision for income taxes | $ | 30,909 | $ | 20,411 | $ | 10,498 | ||||||||||
| Effective tax rate | 15.4 | % | 18.8 | % | ||||||||||||
Net Income
We recorded net income of $169.3 million for the three months ended March 31, 2026 compared to net income of $88.0 million for the three months ended March 31, 2025. Net income per basic share was $2.11 for the three months ended March 31, 2026 compared to $1.14 for the three months ended March 31, 2025. Net income per diluted share was $2.05 for the three months ended March 31, 2026 compared to $1.08 for the three months ended March 31, 2025.
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. Our management uses these non-GAAP financial measures in evaluating our operating performance. 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.
Beginning in the quarterly period ended March 31, 2026, we updated the calculation of Adjusted EBITDA to exclude all components of other income (loss), net – primarily resulting in incremental adjustments for foreign currency exchange gains and losses, net and fees incurred related to our Credit Agreement, as we do not consider these adjustments to be representative of our core operating results. For all comparable prior periods presented, our adjustment for other income (loss), net does not include the above incremental items, as the impact of this change on historical periods was determined to be de minimis. Accordingly, other income (loss), net for all comparable prior periods has not been recast and solely reflects adjustment for the impacts of net realized and unrealized gains on strategic investments and marketable securities, net realized gains on previously held minority interests acquired in business combinations and debt inducement expense.
•EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense, investment interest income, income taxes, depreciation and amortization.
•Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; all components of other income (loss), net, which is primarily comprised of fair value adjustments and income or losses related to strategic investments and marketable securities, debt inducement expense associated with the early repurchase of a portion of our 2027 Notes, foreign currency exchange gains and losses, net, and fees incurred related to our Credit Agreement; noncash stock-based compensation expense; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; non-recurring severance costs, including employee cash payments, equity, and related benefits; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; mark-to-market adjustments on our non-qualified deferred compensation liabilities; payroll taxes related to Employee XSP vesting; losses incurred as a result of the disposal, abandonment, and impairment of property, equipment and intangible assets, net; and inventory step-up amortization related to acquisitions.
•Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross margin before noncash stock-based compensation expense; amortization of acquired intangible assets; non-recurring severance costs, including employee cash payments, equity, and related benefits; and inventory step-up amortization related to acquisitions.
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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 as follows (in thousands):
| Three Months Ended | |||||||||||||||||
| March 31, 2026 | December 31, 2025 | March 31, 2025 | |||||||||||||||
| Net income | $ | 169,312 | $ | 2,745 | $ | 87,980 | |||||||||||
| Depreciation and amortization | 29,346 | 26,960 | 19,195 | ||||||||||||||
| Interest expense | 28,643 | 28,819 | 7,821 | ||||||||||||||
| Investment interest income | (10,611) | (17,633) | (10,604) | ||||||||||||||
| Provision for (benefit from) income taxes | 30,909 | (68,982) | 20,411 | ||||||||||||||
| EBITDA | $ | 247,599 | $ | (28,091) | $ | 124,803 | |||||||||||
| Non-GAAP adjustments: | |||||||||||||||||
| Other (income) loss, net | (189,010) | 4,880 | (115,255) | ||||||||||||||
| Stock-based compensation expense | 133,685 | 184,516 | 140,239 | ||||||||||||||
| Transaction costs related to strategic investments and acquisitions | 6,488 | 5,857 | 2,727 | ||||||||||||||
Severance costs (1) | 2,049 | 31,816 | — | ||||||||||||||
| Litigation and regulatory costs | 1,334 | 1,266 | 2,049 | ||||||||||||||
| Non-qualified deferred compensation liability adjustments | (630) | 484 | — | ||||||||||||||
| Payroll taxes related to Employee XSP vesting | 115 | 4,986 | — | ||||||||||||||
| Loss on disposal, abandonment, and impairment of property, equipment and intangible assets, net | — | 629 | — | ||||||||||||||
| Inventory step-up amortization | — | — | 607 | ||||||||||||||
| Adjusted EBITDA | $ | 201,630 | $ | 206,343 | $ | 155,170 | |||||||||||
(1)For the three months ended March 31, 2026, non-recurring severance costs of $2.0 million consisted of stock-based compensation, cash payments and employee benefits.
Adjusted gross margin reconciles to gross margin as follows (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| Connected Devices | Software and Services | Total | Connected Devices | Software and Services | Total | ||||||||||||||||||||||||||||||
| Gross margin | $ | 220,665 | $ | 256,621 | $ | 477,286 | $ | 170,715 | $ | 195,024 | $ | 365,739 | |||||||||||||||||||||||
| Stock-based compensation expense | 5,775 | 4,728 | 10,503 | 7,476 | 5,411 | 12,887 | |||||||||||||||||||||||||||||
| Amortization of acquired intangible assets | 1,730 | 7,236 | 8,966 | 1,337 | 3,626 | 4,963 | |||||||||||||||||||||||||||||
Severance costs (1) | 146 | 20 | 166 | — | — | — | |||||||||||||||||||||||||||||
| Inventory step-up amortization | — | — | — | 607 | — | 607 | |||||||||||||||||||||||||||||
| Adjusted gross margin | $ | 228,316 | $ | 268,605 | $ | 496,921 | $ | 180,135 | $ | 204,061 | $ | 384,196 | |||||||||||||||||||||||
| Gross margin % | 48.7 | % | 72.4 | % | 59.1 | % | 50.1 | % | 74.2 | % | 60.6 | % | |||||||||||||||||||||||
| Adjusted gross margin % | 50.4 | % | 75.8 | % | 61.6 | % | 52.8 | % | 77.7 | % | 63.6 | % | |||||||||||||||||||||||
(1)For the three months ended March 31, 2026, non-recurring severance costs recorded to cost of service and product sales of $0.2 million consisted of stock-based compensation, cash payments and employee benefits.
27
Liquidity and Capital Resources
Summary
| March 31, 2026 | December 31, 2025 | Dollar Change | |||||||||||||
| Cash and cash equivalents | $ | 458,921 | $ | 1,201,147 | |||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-05 | Isner Joshua | PRESIDENT | Sell | -13,000 ×19 | $488.45 | -$6,349,888 |
| 2026-06-04 | Coughlin Elizabeth Reid | Chief Human Officer | Sell | -1,554 | $485.00 | -$753,690 |
| 2026-06-04 | Brooks Cameron | CHIEF REVENUE OFFICER | Sell | -1,242 | $500.00 | -$621,000 |
| 2026-06-04 | SMITH PATRICK W | CHIEF EXECUTIVE OFFICER | Sell | -20,000 | $500.00 | -$10,000,000 |
| 2026-06-02 | Bagley Brittany | COO & CFO | Sell | -5,969 | $485.00 | -$2,894,965 |
| 2026-06-01 | Williams Jeri | Director | Sell | -629 ×2 | $469.64 | -$295,403 |
| 2026-06-01 | Kalinowski Caitlin Elizabeth | Director | Sell | -564 ×8 | $478.97 | -$270,140 |
| 2026-05-22 | Fields Isaiah | Chief Legal Officer | Sell | -2,000 | $400.00 | -$800,000 |
| 2026-03-17 | Williams Jeri | Director | Sell | -157 | $490.00 | -$76,930 |
| 2026-03-17 | Nardini Erika | Director | Sell | -198 | $506.58 | -$100,303 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-08-04 10-Q expected by 2026-08-06 (in 50 days)
- ~2026-11-04 10-Q expected by 2026-11-06 (in 142 days)
- ~2027-02-24 10-K expected by 2027-02-25 (in 254 days)
- ~2027-05-06 10-Q expected by 2027-05-08 (in 325 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-07 10-Q Quarterly Report
- 2026-05-06 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-16 DEF 14A Proxy Statement
- 2026-04-10 8-K Officer/Director Change
- 2026-03-11 8-K Officer/Director Change
- 2026-02-25 10-K Annual Report
- 2026-02-24 8-K Earnings Release; Financial Statements and Exhibits
- 2026-02-13 8-K Other Events; Financial Statements and Exhibits
- 2026-02-04 8-K/A Other Events; Financial Statements and Exhibits
- 2025-12-18 8-K Other Events; Financial Statements and Exhibits
- 2025-12-17 8-K/A Unregistered Equity Sale; Other Events; Financial Statements and Exhibits
- 2025-12-10 8-K Unregistered Equity Sale; Other Events; Financial Statements and Exhibits
- 2025-11-05 10-Q Quarterly Report
- 2025-11-04 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-02 8-K Officer/Director Change