AXON ENTERPRISE, INC. (AXON) · Quarterly Report (10-Q) SEC Filing

PART I - FINANCIAL INFORMATION Item 1. Financial Statements 1 Table of Contents AXON ENTERPRISE, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, 2026December 31, 2025 (Unaudited) ASSETS Current assets: Cash and cash equivalents$597,704 $1,201,147 Short-term investments75,703 505,417 Marketable securities19,126 27,213 Accounts and notes receivable, net of allowance of $4,949 and $4,198 as of June 30, 2026 and December 31, 2025, respectively 768,637 777,486 Contract assets, net750,950 582,630 Inventory486,556 341,811 Prepaid expenses190,682 149,800 Other current assets115,347 127,548 Total current assets3,004,705 3,713,052 Property and equipment, net341,507 330,979 Deferred tax assets, net345,500 359,803 Intangible assets, net281,583 196,972 Goodwill1,898,827 1,370,189 Long-term notes receivable, net1,597 6,066 Long-term contract assets, net296,458 178,249 Strategic investments853,842 416,833 Other long-term assets457,138 428,170 Total assets$7,481,157 $7,000,313 LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable$269,957 $139,086 Accrued liabilities423,932 510,538 Current portion of deferred revenue670,740 714,708 Current portion of notes payable, net 80,552 Customer deposits16,477 16,156 Other current liabilities17,131 9,107 Total current liabilities1,398,237 1,470,147 Deferred revenue, net of current portion385,659 359,902 Liability for unrecognized tax benefits26,587 24,376 Long-term deferred compensation33,094 23,675 Long-term lease liabilities101,658 98,942 Long-term notes payable, net1,731,817 1,730,170 Other long-term liabilities129,568 50,443 Total liabilities3,806,620 3,757,655 Commitments and contingencies (Note 11) Stockholders equity: Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively Common stock, $0.00001 par value; 200,000,000 shares authorized, 101,510,494 shares issued and 81,235,921 shares outstanding as of June 30, 2026, and 200,000,000 shares authorized, 100,444,971 shares issued and 80,211,537 shares outstanding as of December 31, 2025 1 1 Additional paid-in capital2,735,708 2,475,035 Treasury stock at cost, 20,274,573 shares and 20,233,434 shares as of June 30, 2026 and December 31, 2025, respectively (180,164)(157,242) Retained earnings1,135,409 936,670 Accumulated other comprehensive loss(16,417)(11,806) Total stockholders equity3,674,537 3,242,658 Total liabilities and stockholders equity$7,481,157 $7,000,313 The accompanying notes are an integral part of these consolidated financial statements. 2 Table of Contents AXON ENTERPRISE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (in thousands, except per share data) (unaudited) Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Net sales from products$506,553 $376,360 $959,374 $717,256 Net sales from services397,836 292,178 752,360 554,915 Net sales904,389 668,538 1,711,734 1,272,171 Cost of product sales243,861 193,507 476,017 363,688 Cost of service sales114,081 71,288 211,984 139,001 Cost of sales357,942 264,795 688,001 502,689 Gross margin546,447 403,743 1,023,733 769,482 Operating expenses: Selling, general and administrative290,982 242,212 550,075 465,721 Research and development208,687 162,567 397,637 313,590 Total operating expenses499,669 404,779 947,712 779,311 Income (loss) from operations46,778 (1,036)76,021 (9,829) Interest income6,815 23,253 17,426 33,857 Interest expense(28,101)(28,686)(56,744)(36,507) Other income (loss), net7,192 (32,414)196,202 81,987 Income (loss) before provision for income taxes32,684 (38,883)232,905 69,508 Provision for (benefit from) income taxes3,257 (75,000)34,166 (54,589) Net income$29,427 $36,117 $198,739 $124,097 Net income per common and common equivalent shares: Basic$0.37 $0.46 $2.47 $1.60 Diluted$0.36 $0.44 $2.41 $1.52 Weighted average number of common and common equivalent shares outstanding: Basic80,57377,99980,36377,448 Diluted82,54182,06282,51881,782 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Net income$29,427 $36,117 $198,739 $124,097 Foreign currency translation adjustments(5,147)5,159 (4,500)5,517 Unrealized gain (loss) on available-for-sale investments 73 (111)(51) Comprehensive income$24,280 $41,349 $194,128 $129,563 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents AXON ENTERPRISE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (in thousands, except share data) (unaudited) Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders Equity SharesAmountSharesAmount Balance, December 31, 202580,211,537$1 $2,475,035 20,233,434$(157,242)$936,670 $(11,806)$3,242,658 Issuance of common stock under employee plans, net189,933 (12,169) (12,169) Stock-based compensation 134,701 134,701 Issuance of replacement awards in connection with acquisitions 1,345 1,345 Conversion of convertible debt and shares received from convertible note hedge, net170,731 22,97941,139(22,922) 57 Tax effect of redemption and voluntary conversions of convertible debt (2,327) (2,327) Net income 169,312 169,312 Other comprehensive income, net 536 536 Balance, March 31, 202680,572,201$1 $2,619,564 20,274,573$(180,164)$1,105,982 $(11,270)$3,534,113 Issuance of common stock 237,240 100,259 100,259 Issuance of common stock under employee plans, net425,853 (128,331) (128,331) Stock-based compensation 143,996 143,996 Issuance of common stock for business combination contingent consideration627 220 220 Net income 29,427 29,427 Other comprehensive loss, net (5,147)(5,147) Balance, June 30, 202681,235,921$1 $2,735,708 20,274,573$(180,164)$1,135,409 $(16,417)$3,674,537 Common StockAdditional Paid-in CapitalTreasury StockRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders Equity SharesAmountSharesAmount Balance, December 31, 202476,619,331$1 $1,689,781 20,220,227$(155,947)$812,014 $(18,184)$2,327,665 Issuance of common stock under employee plans, net190,558 (5,035) (5,035) Stock-based compensation 140,239 140,239 Induced conversion of convertible debt1,038,259 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 stock250,000 183,643 183,643 Issuance of common stock under employee plans, net404,893 (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, 202578,503,041 $1 $1,964,953 20,220,227 $(155,947)$936,111 $(12,718)$2,732,400 The accompanying notes are an integral part of these consolidated financial statements. 4 Table of Contents AXON ENTERPRISE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, 20262025 Cash flows from operating activities: Net income$198,739 $124,097 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Stock-based compensation278,697 279,483 Gain on strategic investments and marketable securities, net(197,873)(111,754) Debt inducement expense 28,666 Depreciation and amortization62,824 36,610 Provision for bad debts and inventory2,630 6,254 Deferred income taxes11,456 (70,065) Other noncash items18,466 19,278 Change in assets and liabilities: Receivables and contract assets(256,919)(212,833) Inventory(145,099)(48,098) Deferred revenue(35,334)(51,143) Accounts payable, accrued and other liabilities105,531 21,175 Prepaid expenses and other assets(54,558)(87,580) Net cash used in operating activities(11,440)(65,910) Cash flows from investing activities: Purchases of investments(302,844)(1,793,862) Business combinations, net of cash acquired(551,593)(3,809) Proceeds from call, maturity, and sale of investments434,345 756,654 Purchases of property and equipment(44,174)(47,815) Other, net(1,496)83 Net cash used in investing activities(465,762)(1,088,749) Cash flows from financing activities: Net proceeds from equity offering100,477 183,960 Principal payments for conversion and redemption of convertible debt(81,110)(407,453) Income and payroll tax payments for net-settled stock awards(140,192)(192,835) Payments to third parties for debt issuance, amendment, conversion and redemption activity(964)(24,735) Proceeds from issuance of notes 1,750,000 Other, net(829)(76) Net cash (used in) provided by financing activities(122,618)1,308,861 Effect of exchange rate changes on cash and cash equivalents(3,949)6,497 Net change in cash and cash equivalents(603,769)160,699 Cash and cash equivalents and restricted cash, beginning of period1,213,393 466,763 Cash and cash equivalents and restricted cash, end of period$609,624 $627,462 Supplemental disclosures: Cash and cash equivalents$597,704 $615,496 Restricted cash (Note 1)11,920 11,966 Total cash, cash equivalents and restricted cash shown in the statements of cash flows$609,624 $627,462 Cash paid for interest$54,124 $1,204 Leased assets obtained in exchange for new operating lease liabilities$8,502 $5,554 Property and equipment purchases in accounts payable and accrued liabilities$8,051 $3,060 Expense for induced conversion of convertible debt, debt offering and revolver modification$ $33,725 The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents 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, 2025, as filed on our 2025 Annual Report on Form 10-K. 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 2025 Annual Report on Form 10-K for the year ended December 31, 2025. Our results of operations for the three and six months ended June 30, 2026 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 June 30, 2026, the aggregate balances in such accounts were $0.5 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 Australia, Canada, Germany, and the United Kingdom, among others. To manage the related credit exposure, management continually monitors the creditworthiness of the financial institutions where we have deposits. Segment Information As described further within our 2025 Annual Report on Form 10-K, we have two reportable segments: Connected Devices and Software and Services. Our chief operating decision maker ( CODM ) is our Chief Executive Officer. The segment measure of profit and loss is adjusted gross margin, as the CODM allocates resources and assesses performance based on review of adjusted gross margin by segment. 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. For additional details, refer to Note 13. Restricted Cash Restricted cash balances were $11.9 million and $12.2 million as of June 30, 2026 and December 31, 2025, respectively. The restricted cash balance at June 30, 2026 includes a $9.7 million payment held in escrow related to the planned construction of our headquarters building in Arizona. Restricted cash also includes funds held in international bank accounts for various operating and financing activities. 6 Table of Contents 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): Six Months Ended June 30, 20262025 Balance, beginning of period$10,858 $8,284 Utilization of reserve(7,411)(4,202) Warranty expense6,855 6,794 Balance, end of period$10,302 $10,876 Income per Common Share Basic income per common share is computed by dividing net income 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 ). These items are excluded from the computation of diluted net income per share in periods in which the effect would be antidilutive. For additional information regarding our 2027 Notes and 2027 Warrants, refer to Note 8. 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 June 30,Six Months Ended June 30, 2026202520262025 Numerator for basic and diluted earnings per share: Net income$29,427 $36,117 $198,739 $124,097 Denominator: Weighted average shares outstanding80,573 77,999 80,363 77,448 Dilutive effect of stock-based awards1,462 1,729 1,358 1,721 Dilutive effect of 2027 Notes (1) 820 47 1,210 Dilutive effect of 2027 Warrants506 1,514 750 1,403 Diluted weighted average shares outstanding82,541 82,062 82,518 81,782 Net income per common share: Basic$0.37 $0.46 $2.47 $1.60 Diluted$0.36 $0.44 $2.41 $1.52 7 Table of Contents (1)We redeemed all of our remaining outstanding 2027 Notes during the three months ended March 31, 2026, and we repurchased a portion of the 2027 Notes during the three months ended March 31, 2025. Accordingly, the dilutive impact to the six months ended June 30, 2026 and June 30, 2025 related to the 2027 Notes is weighted for (a) the number of days between the beginning of the period and the respective closing dates of each transaction, which includes the total amount of shares issuable upon a conversion of all of the 2027 Notes outstanding as of the beginning of the respective periods, and (b) subsequent to the respective closing dates, which includes the amount of shares issuable upon a conversion of the 2027 Notes that remain after each respective transaction. No 2027 Notes remained outstanding following settlement of the aforementioned redemption. Refer to Note 8 for additional details. Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so would be antidilutive are as follows (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Stock-based awards3,277 3,854 3,237 3,871 2027 Notes 415 429 2027 Warrants2,156 1,503 1,912 1,614 Total potentially dilutive securities5,433 5,772 5,149 5,914 Accounting Guidance and Disclosure Rules - Recently Adopted In September 2025, the Financial Accounting Standards Board ( 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 our Annual Report on Form 10-K for the year ending December 31, 2026. We elected to early adopt this ASU in the first quarter of 2026 on a fully prospective basis. The adoption of this standard did not result in any material impacts to 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 assets. The provisions of ASU 2025 05 are effective for annual periods beginning after December 15, 2025. We adopted this standard in the first quarter of 2026. The adoption of this standard did not result in any material impacts to our consolidated financial statements. Accounting Guidance and Disclosure Rules - Not Yet Adopted Refer to Note 1 to the consolidated financial statements in our 2025 Annual Report on Form 10-K for a discussion of applicable standards issued and not yet adopted. Relevant new unadopted standards issued subsequent to our most recent Annual Report are included below. In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). ASU 2026-02 establishes recognition, measurement, presentation, and disclosure requirements for environmental credits and environmental credit obligations. The provisions of ASU 2026-02 are effective for our Quarterly Report on Form 10-Q for the quarter ending March 31, 2028 and subsequent interim and annual periods thereafter, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements. 8 Table of Contents Note 2 Revenues Nature of Products and Services The following table presents our revenues by primary product and service offering and reportable segment (in thousands): Three Months Ended June 30, 2026Three Months Ended June 30, 2025 Connected DevicesSoftware and ServicesTotalConnected DevicesSoftware and ServicesTotal TASER (1) $261,321 $ $261,321 $216,234 $ $216,234 Personal Sensors (2) 95,392 95,392 92,819 92,819 Platform Solutions (3) 149,840 149,840 67,307 67,307 Software and Services 397,836 397,836 292,178 292,178 Total$506,553 $397,836 $904,389 $376,360 $292,178 $668,538 Six Months Ended June 30, 2026Six Months Ended June 30, 2025 Connected DevicesSoftware and ServicesTotalConnected DevicesSoftware and ServicesTotal TASER (1) $494,174 $ $494,174 $411,729 $ $411,729 Personal Sensors (2) 204,143 204,143 181,224 181,224 Platform Solutions (3) 261,057 261,057 124,303 124,303 Software and Services 752,360 752,360 554,915 554,915 Total$959,374 $752,360 $1,711,734 $717,256 $554,915 $1,272,171 (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. The following table presents our revenues disaggregated by geography (dollars in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 United States$742,307 82 %$537,373 80 %$1,388,834 81 %$1,066,756 84 % Other countries162,082 18 131,165 20 322,900 19 205,415 16 Total$904,389 100 %$668,538 100 %$1,711,734 100 %$1,272,171 100 % Revenue Recognized from Contract Liabilities During the six months ended June 30, 2026 and 2025, we recognized revenue of $524.8 million and $456.2 million, respectively, from our beginning contract liabilities balance as of December 31, 2025 and 2024, respectively. Refer to our consolidated balance sheets for additional details regarding our receivables, contract assets and contract liabilities from contracts with customers. Remaining Performance Obligations As of June 30, 2026, we had approximately $9.8 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 June 30, 2026. We currently expect to recognize approximately 20% - 25% of this balance over the next 12 months, and expect the remainder to be substantially recognized over the following ten years, subject to risks related to delayed deployments, budget appropriation or other contract cancellation clauses. 9 Table of Contents Note 3 Cash, Cash Equivalents and Investments The following tables summarize our cash, cash equivalents, marketable securities and available-for-sale debt investments at June 30, 2026 and December 31, 2025 (in thousands): As of June 30, 2026 Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueCash and Cash EquivalentsMarketable SecuritiesShort-Term Investments Cash$262,275$ $ $262,275$262,275$ $ Level 1: Money market funds293,215 293,215293,215 13,1006,026 19,126 19,126 306,3156,026 312,341293,21519,126 Level 2: Term deposits117,917 117,91742,214 75,703 117,917 117,91742,214 75,703 Total$686,507$6,026$ $692,533$597,704$19,126$75,703 During the six months ended June 30, 2026, proceeds from the sale of available-for-sale securities were $70.5 million. As of June 30, 2026, we held no available-for-sale debt investments with unrealized losses. During the six months ended June 30, 2026, net proceeds from the sales of marketable securities were $3.7 million, representing net realized gains of $1.7 million from the time of purchase. During the three and six months ended June 30, 2026, we recorded an unrealized gain of $1.1 million and loss of $4.5 million on marketable securities still held as of the reporting date, respectively. We recorded unrealized losses on marketable securities of $30.9 million and $54.3 million, respectively, for the same periods in the prior year. As of December 31, 2025 Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueCash and Cash EquivalentsMarketable SecuritiesShort-Term Investments Cash$168,294 $ $ $168,294 $168,294 $ $ Level 1: Money market funds821,711 821,711 821,711 Marketable securities15,093 12,120 27,213 27,213 U.S. Treasury bills231,766 69 231,835 200,200 31,635 Agency bonds6,456 3 6,459 6,459 Subtotal1,075,026 12,192 1,087,218 1,021,911 27,213 38,094 Level 2: Term deposits385,942 385,942 10,942 375,000 Corporate bonds72,322 42 (3)72,361 72,361 Commercial paper18,462 18,462 18,462 Certificates of deposit1,500 1,500 1,500 Subtotal478,226 42 (3)478,265 10,942 467,323 Total$1,721,546 $12,234 $(3)$1,733,777 $1,201,147 $27,213 $505,417 10 Table of Contents As of December 31, 2025, we had $9.7 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 Inventory Inventory consisted of the following at June 30, 2026 and December 31, 2025 (in thousands): June 30, 2026December 31, 2025 Raw materials$214,857 $152,680 Work-in-process 13,537 8,866 Finished goods258,162 180,265 Total inventory$486,556 $341,811 Note 5 Goodwill and Intangible Assets The changes in the carrying amount of goodwill for the six months ended June 30, 2026 were as follows (in thousands): Connected DevicesSoftware and ServicesTotal Balance, beginning of period$51,249 $1,318,940 $1,370,189 Goodwill acquired4,581 524,733 529,314 Purchase accounting adjustments 63 63 Foreign currency translation adjustments(114)(625)(739) Balance, end of period$55,716 $1,843,111 $1,898,827 Intangible assets (other than goodwill) consisted of the following at June 30, 2026 and December 31, 2025 (in thousands): June 30, 2026December 31, 2025 Useful LifeGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount Amortizable (definite-lived) intangible assets: Developed technology3 8 years $262,122 $(63,653)$198,469 $183,122 $(44,399)$138,723 Customer relationships5 10 years 68,231 (12,748)55,483 41,329 (8,960)32,369 Issued trademarks3 23 years 11,986 (5,377)6,609 9,900 (3,856)6,044 Issued patents8 26 years 3,002 (1,641)1,361 3,017 (1,602)1,415 Domain names5 10 years 4,568 (2,968)1,600 3,043 (2,738)305 Total amortizable349,909 (86,387)263,522 240,411 (61,555)178,856 Non-amortizable (indefinite-lived) intangible assets: In-process research and development (1) 16,600 16,600 16,600 16,600 Trademarks1,068 1,068 1,068 1,068 Patents and trademarks pending393 393 448 448 Total non-amortizable18,061 18,061 18,116 18,116 Total intangible assets$367,970 $(86,387)$281,583 $258,527 $(61,555)$196,972 (1)During the six months ended June 30, 2026, no in-process research and development costs were placed into service. During the six months ended June 30, 2025, approximately $15.3 million has been placed into service. 11 Table of Contents Amortization expense of intangible assets for the three and six months ended June 30, 2026 was $13.4 million and $24.9 million, respectively. Amortization expense of intangible assets for the three and six months ended June 30, 2025 was $6.7 million and $13.3 million, respectively. Estimated amortization for intangible assets with definite lives for the remaining six months of 2026, the next five years ended December 31, and thereafter, is as follows (in thousands): 2026 remaining$26,872 202752,521 202850,289 202947,336 203035,726 203118,341 Thereafter32,437 Total$263,522 Note 6 Strategic Investments During the six months ended June 30, 2026, we closed a series of transactions to acquire additional equity interests in an existing strategic investee for an aggregate amount of $189.8 million. We also recognized a gain of $158.8 million related to an observable price change for existing investments in the same strategic investee. During the six months ended June 30, 2026, we also acquired equity interests in a separate strategic investee for an aggregate amount of $49.9 million. During the six months ended June 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. 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 for cash consideration of $340.7 million in the same strategic investee, which was received during the six months ended June 30, 2025. Previously unrealized gains of $320.8 million were realized from the collective sales, net of $1.3 million of transaction costs. The following table presents the carrying value of our strategic investments at June 30, 2026 and December 31, 2025 (in thousands): June 30, 2026December 31, 2025 Equity securities: Non-marketable equity securities (1) $848,099 $416,236 Debt securities: Non-marketable debt securities5,743 597 Total strategic investments$853,842 $416,833 (1)As of June 30, 2026 and December 31, 2025, the carrying value of our strategic investments held under the equity method of accounting was $24.5 million and $1.6 million, respectively. 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 June 30, 2026 were $176.0 million and $15.4 million, respectively. As of June 30, 2026 and December 31, 2025, the carrying value of our variable interest assets in unconsolidated non-public variable interest entities was $126.1 million and $9.4 million, respectively. These balances reflect the maximum exposure to loss, which is limited to the carrying value of the interest. 12 Table of Contents The following table summarizes the gains and losses associated with our strategic investments during the three and six months ended June 30, 2026 and 2025 (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Realized gains recognized on strategic investments during the period, net$240 $47,339 $37,971 $320,817 Reversal of prior period cumulative unrealized (gains) losses, net, for securities sold during the period (47,339) (160,736) Unrealized gains on strategic investments still held at the reporting date (1) 5,566 751 164,435 7,991 Unrealized losses, including impairments, on strategic investments still held at the reporting date (1) (97)(2,048)(97)(2,048) Income (loss) from strategic investments, net$5,709 $(1,297)$202,309 $166,024 (1)Includes immaterial income (losses) from strategic investments held under the equity method of accounting, as well as immaterial unrealized gains (losses) for debt security strategic investments. Note 7 Accrued Liabilities Accrued liabilities consisted of the following at June 30, 2026 and December 31, 2025 (in thousands): June 30, 2026December 31, 2025 Accrued commissions$85,240 $150,811 Accrued third-party product costs69,022 73,497 Accrued salaries and benefits34,189 35,251 Accrued income and other taxes33,011 27,339 Accrued professional and IT fees32,578 24,359 Accrued bonus32,435 78,403 Accrued interest31,837 31,855 Accrued inventory in transit25,648 15,728 Accrued cloud hosting fees15,380 14,049 Accrued warranty expense10,302 10,858 Other accrued expenses54,290 48,388 Total accrued liabilities$423,932 $510,538 13 Table of Contents Note 8 Debt Notes payable, net, consisted of the following at June 30, 2026 and December 31, 2025 (in thousands): June 30, 2026December 31, 2025 2030 Notes$1,000,000 $1,000,000 2033 Notes750,000 750,000 2027 Notes 81,110 Total principal1,750,000 1,831,110 Unamortized debt issuance costs(18,183)(20,388) Total carrying amount of notes payable, net1,731,817 1,810,722 Less: current portion (1) (80,552) Long-term notes payable, net$1,731,817 $1,730,170 (1)During the six months ended June 30, 2026, we redeemed and settled conversions in respect of all of our remaining outstanding 2027 Notes. 2030 and 2033 Notes In March 2025, we issued $1.0 billion aggregate principal amount of 6.125% Senior Notes due 2030 (the 2030 Notes ) and $750.0 million aggregate principal amount of 6.250% Senior Notes due 2033 (the 2033 Notes and, together with the 2030 Notes, the Senior Notes ) in a private offering. Interest expense related to the Senior Notes was as follows (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Contractual interest expense$27,031 $27,031 $54,062 $33,038 Amortization of debt issuance costs830 779 1,647 950 Total interest expense$27,861 $27,810 $55,709 $33,988 The estimated fair value of our outstanding Senior Notes at June 30, 2026 and December 31, 2025 is as follows (in thousands): June 30, 2026December 31, 2025 2030 Notes$1,018,680 $1,036,830 2033 Notes769,688 779,768 2027 Notes In December 2022, we issued $690.0 million aggregate principal amount of our 0.50% Convertible Senior Notes due 2027 (the 2027 Notes ) in a private offering. During the year ended December 31, 2025, we entered into and closed separate, privately negotiated exchange agreements with certain holders of the 2027 Notes to exchange $604.3 million aggregate principal amount of the 2027 Notes for consideration consisting of cash and shares of our common stock. We had $81.1 million aggregate principal amount of 2027 Notes outstanding as of December 31, 2025. As of December 31, 2025, the total estimated fair value of the 2027 Notes was $204.0 million. 14 Table of Contents In December 2025, we delivered a notice of redemption to redeem all of our outstanding 2027 Notes in February 2026 at a redemption price equal to 100% of the principal amount of the notes to be redeemed, together with accrued and unpaid interest. Holders of the 2027 Notes were able to convert their notes prior to the redemption date for cash up to the principal amount of any notes being converted and shares of our common stock for any conversion obligation in excess of the principal amount. We redeemed $0.8 million aggregate principal amount of the 2027 Notes on February 10, 2026, and we settled conversions in respect of $80.3 million aggregate principal amount of the 2027 Notes on February 11, 2026, with $80.3 million in cash and 211,870 shares of our common stock. We also received 41,139 shares from option counterparties in connection with partial termination of the Note Hedge and Warrants in February 2026, as discussed further below. As a result, we have no 2027 Notes outstanding following settlement of the aforementioned redemption as of June 30, 2026. Interest expense related to the 2027 Notes was as follows (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Contractual interest expense$ $353 $44 $1,133 Amortization of debt issuance costs 332 558 1,079 Total interest expense$ $685 $602 $2,212 Convertible Note Hedge To reduce the impact of potential economic dilution upon conversion of the 2027 Notes, in December 2022, 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. As of June 30, 2026, 2,642,030 shares remain covered by the Note Hedge, which is subject to automatic exercise at expiration on December 15, 2027, unless earlier terminated. Convertible Note Warrants Proceeds (in thousands)Initial SharesStrike PriceFirst Expiration 2027 Warrants$124,269 3,016,680$338.86 March 15, 2028 In December 2022, 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 can 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, unless earlier terminated. As of June 30, 2026, 2,662,063 shares remain subject to the Warrants. Line of Credit Our credit agreement provides for a senior unsecured multi-currency revolving credit facility (the Credit Agreement ) which includes 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), as well as availability for the issuance of letters of credit of $50.0 million. As of June 30, 2026, 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 June 30, 2026, we had letters of credit outstanding of approximately $9.1 million under the facility and available borrowing of $290.9 million, excluding amounts available under the accordion feature. As of June 30, 2026, we are in compliance with the associated covenants under the Credit Agreement. 15 Table of Contents Note 9 Income Taxes Effective Tax Rate The overall effective tax rate for the three months ended June 30, 2026 was 10.0%. This rate differs from the federal statutory rate due to the net tax benefit related to stock-based compensation and R&D tax credits, partially offset by increases in uncertain tax positions. The effective tax rate was favorably impacted by a $14.3 million net tax benefit related to stock-based compensation for stock awards that vested during the three months ended June 30, 2026. By comparison, our overall effective tax rate for the three months ended June 30, 2025 was 192.9%. This rate differed from the federal statutory rate due to the net tax benefit related to stock-based compensation and R&D tax credits, partially offset by increases in uncertain tax positions and state taxes net of federal benefit. The effective tax rate was favorably impacted by a $56.7 million net tax benefit related to stock-based compensation for stock awards that vested during the three months ended June 30, 2025. The overall effective tax rate for the six months ended June 30, 2026 was 14.7%. This rate differs from the federal statutory rate due to the net tax benefit related to stock-based compensation, R&D tax credits and a gain on a related investment transaction not recognized for tax, partially offset by increases in uncertain tax positions and state taxes net of federal benefit. The effective tax rate was favorably impacted by a $23.1 million net tax benefit related to stock-based compensation for stock awards that vested during the six months ended June 30, 2026. By comparison, our overall effective tax rate for the six months ended June 30, 2025 was (78.5)%. This rate differed from the federal statutory rate due to the net tax benefit related to stock-based compensation and R&D tax credits, partially offset by increases in uncertain tax positions and state taxes net of federal benefit. The effective tax rate was favorably impacted by a $68.8 million net tax benefit related to stock-based compensation for stock awards that vested during the six months ended June 30, 2025. Note 10 Stockholders Equity Our stock-based compensation program includes grants of service-based restricted stock units ( RSUs ), performance-based restricted stock units ( PSUs ), and performance-based stock options ( stock options ) under the Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan (the Amended 2022 Plan ) and grants of eXponential stock units ( XSUs ) under the Axon Enterprise, Inc. Employee eXponential Stock Plan (the Employee XSP ) and the CEO Performance Award. With the exception of the Employee XSP as discussed further below, there were no significant changes to our RSUs, PSUs and stock options during the six months ended June 30, 2026. Employee XSP and CEO Performance Award The Employee XSP includes an approved pool of approximately 4.5 million shares of common stock reserved for grants of XSUs to employees. Approximately 0.9 million XSUs remain available to grant to employees under this program as of June 30, 2026. A total of approximately 0.5 million XSUs were granted during the six months ended June 30, 2026. Shareholders previously approved a grant of 679,102 XSUs for the CEO Performance Award on May 10, 2024. On January 23, 2026, the Compensation Committee of the Board of Directors approved the addition of two incremental tranches to the Employee XSP. Consistent with prior tranches, Tranches 8 and 9 are performance-based and contingent upon achievement of stock price goals, operational goals, and minimum service requirements. These three independent vesting conditions are described in the following table: 16 Table of Contents Operational Goals (1) (in millions) Stock Price GoalMinimum Service Requirement Tranche (2) RevenueAdj. EBITDAEmployee XSPCEO Performance AwardGoal Expiration 1$1,834 or$382 and$247.40 andJune 2025December 2028December 31, 2026 22,293 or497 and309.25 andDecember 2025December 2028December 31, 2027 32,866 or611 and386.56 andJune 2026December 2029December 31, 2028 43,583 or792 and483.20 andDecember 2026December 2029December 31, 2029 54,479 or1,035 and604.00 andJune 2027December 2030December 31, 2030 65,599 or1,347 and755.00 andDecember 2027December 2030December 31, 2031 76,999 or1,697 and943.75 andJune 2028December 2030December 31, 2032 88,753 or2,135 and1,179.69 andDecember 2029 December 31, 2033 910,940 or2,681 and1,474.61 andJune 2031 December 31, 2034 (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. In connection with certain acquisitions which were completed in the first quarter of 2026, the operational goals were adjusted as required by the terms of the Employee XSP and CEO Performance Award grant agreements for the respective tranches. (2) Tranches 1, 2, and 3 vested in June 2025, December 2025, and June 2026, respectively. As of June 30, 2026, for certain grantees, the shares acquired upon vesting of Tranche 3 remain 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. Stock-based Compensation Expense The following table summarizes the composition of stock-based compensation expense for the three and six months ended June 30, 2026 and 2025 (in thousands): Three Months Ended June 30,Six Months Ended June 30, 2026202520262025 Cost of product and service sales$11,341 $12,561 $22,050 $25,448 Selling, general and administrative expenses70,988 72,187 137,507 143,534 Research and development expenses61,667 54,496 119,140 110,501 Total stock-based compensation expense (1) $143,996 $139,244 $278,697 $279,483 (1)For the six months ended June 30, 2026, stock-based compensation expense included $0.7 million in non-recurring severance costs. Total non-recurring severance costs for the six months ended June 30, 2026 of $2.7 million also include $2.0 million of severance payments and employee benefits. The majority of these costs were recorded in selling, general and administrative expenses. 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 three months ended June 30, 2026, we sold approximately 0.2 million shares of our common stock under our ATM. We generated approximately $101.2 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $100.3 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $0.9 million. As of June 30, 2026, approximately $0.2 million of these costs were not yet paid. As of June 30, 2026, there were approximately 1.0 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. 17 Table of Contents Stock Incentive Plan In May 2024, our shareholders approved 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 2.6 million shares of our common stock available for grant under the Amended 2022 Plan as of June 30, 2026. Note 11 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 product liability litigation concerning the use of our products. We are currently named as a defendant in two such 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. 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 and us involving certain drone technology. Airspace seeks injunctive relief and treble damages in an unspecified amount. Infringement is denied and the litigation is stayed pending our validity challenges to all three asserted patents in the United States Patent and Trademark Office, which instituted review last fall. A decision is expected in October 2026. Separately, pending in the Western District of Texas (Case No. 1:24-cv-1497) is a patent infringement suit filed by CentralSquare Technologies LLC ( CST ) against Carbyne, Inc. and Carbyne, LTD (jointly Carbyne ) relating to 911 technology. CST seeks injunctive relief and damages in an unspecified amount. Carbyne, which we acquired on February 18, 2026, denies infringement and has countersued CST for infringement of its own patent. Trial is set for May 2027. 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. 18 Table of Contents Based on our assessment of outstanding litigation and claims as of June 30, 2026, 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. However, 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 June 30, 2026, we had outstanding letters of credit issued under our credit facility of $9.1 million that are expected to expire through 2029. We also had outstanding letters of credit of $0.7 million that do not draw against our credit facility. Additionally, we had $8.1 million of outstanding surety bonds as of June 30, 2026, with expiration dates ranging through 2029. Note 12 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 (1) Foreign Currency TranslationTotal Balance, December 31, 2025$83 $(11,889)$(11,806) Other comprehensive income (loss)(111)647 536 Balance, March 31, 2026(28)(11,242)(11,270) Other comprehensive loss (5,147)(5,147) Balance, June 30, 2026$(28)$(16,389)$(16,417) Foreign Currency TranslationTotal Balance, December 31, 2024$(30)$(18,154)$(18,184) Other comprehensive income (loss)(124)358 234 Balance, March 31, 2025(154)(17,796)(17,950) Other comprehensive income73 5,159 5,232 Balance, June 30, 2025$(81)$(12,637)$(12,718) (1)Amounts are net of immaterial tax impacts. 19 Table of Contents Note 13 Segment Data Information relative to our reportable segments was as follows (in thousands): Three Months Ended June 30, 20262025 Connected DevicesSoftware and ServicesTotalConnected DevicesSoftware and ServicesTotal Net sales$506,553 $397,836 $904,389 $376,360 $292,178 $668,538 Cost of sales(243,861)(114,081)(357,942)(193,507)(71,288)(264,795) Other segment items (1) 7,646 15,030 22,676 9,550 9,685 19,235 Adjusted gross margin$270,338 $298,785 $569,123 $192,403 $230,575 $422,978 Other segment items (1) (22,676)(19,235) Selling, general and administrative(290,982)(242,212) Research and development(208,687)(162,567) Interest income6,815 23,253 Interest expense(28,101)(28,686) Other income (loss), net7,192 (32,414) Income (loss) before provision for income taxes$32,684 $(38,883) (1) Other segment items includes adjustments for noncash stock-based compensation expense, amortization of acquired intangible assets, compensation taxes related to Employee XSP vesting, and non-recurring severance costs to arrive at the profit measure used by the CODM. Six Months Ended June 30, 20262025 Connected DevicesSoftware and ServicesTotalConnected DevicesSoftware and ServicesTotal Net sales$959,374 $752,360 $1,711,734 $717,256 $554,915 $1,272,171 Cost of sales(476,017)(211,984)(688,001)(363,688)(139,001)(502,689) Other segment items (1) 15,297 27,014 42,311 18,970 18,722 37,692 Adjusted gross margin$498,654 $567,390 $1,066,044 $372,538 $434,636 $807,174 Other segment items (1) (42,311)(37,692) Selling, general and administrative(550,075)(465,721) Research and development(397,637)(313,590) Interest income17,426 33,857 Interest expense(56,744)(36,507) Other income, net196,202 81,987 Income before provision for income taxes$232,905 $69,508 (1) Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of acquired intangible assets, compensation taxes related to Employee XSP vesting, non-recurring severance costs, and inventory step-up amortization related to acquisitions to arrive at the profit measure used by the CODM. 20 Table of Contents 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 June 30, 20262025 Connected DevicesSoftware and ServicesTotalConnected DevicesSoftware and ServicesTotal Depreciation and amortization $12,429 $9,037 $21,466 $8,310 $4,098 $12,408 Significant noncash items: Stock-based compensation expense 5,516 5,825 11,341 7,583 4,978 12,561 Warranty reserve expense3,766 3,766 3,015 3,015 Provisions for inventory (223) (223)995 995 Six Months Ended June 30, 20262025 Connected DevicesSoftware and ServicesTotalConnected DevicesSoftware and ServicesTotal Depreciation and amortization$24,195 $17,052 $41,247 $17,595 $8,057 $25,652 Significant noncash items: Stock-based compensation expense11,291 10,553 21,844 15,059 10,389 25,448 Warranty reserve expense6,855 6,855 6,794 6,794 Provisions for inventory714 714 1,841 1,841 Note 14 Business Combinations The consolidated financial statements include the operating results from each acquisition from the date of acquisition noted below. Supplemental pro forma information has not been presented as the effects of the business combinations during the three and six months ended June 30, 2026 were not material to our consolidated financial statements. 2026 Business Combinations Carbyne On February 18, 2026, we acquired the remaining 89.3% interest in Carbyne Ltd. ( Carbyne ), a leading cloud-native emergency communications and response platform. Net of cash acquired and equity consideration attributable to pre-combination service, total cash paid in the business combination was approximately $551.7 million. Incremental consideration transferred was approximately $563.2 million. The acquisition aligns with our mission and positions us to accelerate next-generation public safety communications and emergency response solutions. We recorded acquisition-related transaction and integration costs of $3.0 million and $9.0 million during the three and six months ended June 30, 2026, respectively. Our existing interest of approximately 10.7% had a fair value at the acquisition date of $67.5 million, which resulted in a non-taxable gain of $38.0 million. The purchase price allocation is subject to revision during the measurement period for purchase accounting adjustments to balances such as intangible assets, pre-acquisition legal contingencies, working capital, and income tax assets and liabilities, and is expected to be completed by the first quarter of 2027. During the three months ended June 30, 2026, we recorded immaterial measurement period adjustments. Based on the current purchase price allocation, including measurement period adjustments, we have recorded $523.3 million of goodwill, $108.2 million of identifiable intangible assets, $10.1 million of acquired cash, and assumed $8.7 million of other net liabilities, excluding deferred taxes. We also recorded net deferred tax liabilities of $2.2 million. 21 Table of Contents As of the acquisition date, the identifiable intangible assets included $79.0 million of developed technology, $27.1 million of customer relationships, and $2.1 million of trademarks. The fair values of the intangible assets were calculated using the multi-period excess earnings method for the developed technology, the distributor method for customer relationships, and the relief-from-royalty method for the trademarks. The significant assumptions used to estimate the fair value of the developed technology included projected revenues, estimated economic life of 8 years, and an appropriate discount rate. The significant assumptions used to estimate the fair value of the customer relationships included projected revenues, customer attrition rates, distributor margins, and appropriate discount rates. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 7.9 years. The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Carbyne are included in our Software and Services reportable segment following the business combination. 2025 Business Combinations Prepared On October 1, 2025, we acquired the remaining 99.2% interest in Invictus Apps, Inc. ( Prepared ), a leading provider of AI-powered emergency communications software. Net of cash acquired and equity consideration attributable to pre-combination service, total cash paid in the business combination was approximately $624.1 million. Incremental consideration transferred was approximately $728.2 million. The acquisition aligns with our mission and positions us to accelerate next-generation public safety communications and emergency response solutions. Acquisition-related transaction and integration costs were immaterial for the three and six months ended June 30, 2026. Our existing interest of approximately 0.8% had a fair value at the acquisition date of $6.2 million, which resulted in a non-taxable gain of $2.2 million. The purchase price allocation is subject to revision during the measurement period for normal closing activities, such as income tax filings and settlement of escrow balances, which is expected to be completed by the third quarter of 2026. During the six months ended June 30, 2026, we recorded immaterial measurement period adjustments. Based on the current purchase price allocation, including measurement period adjustments, we have recorded $598.3 million of goodwill, $98.9 million of acquired cash, $47.5 million of identifiable intangible assets, and assumed $0.9 million of other net liabilities, excluding deferred taxes. We also recorded net deferred tax liabilities of $9.4 million. As of the acquisition date, the identifiable intangible assets included $37.0 million of developed technology, $7.3 million of customer relationships, and $3.2 million of trademarks. The fair values of the intangible assets were calculated using the relief-from-royalty method for the developed technology, the multi-period excess earnings method for customer relationships, and the relief-from-royalty method for the trademarks. The significant assumptions used to estimate the fair value of the developed technology included projected revenues, the selected royalty rate, estimated economic life of 5 years, and an appropriate discount rate. The weighted average amortization period of the acquired intangible assets as of the acquisition date was 5 years. The goodwill associated with this business combination is primarily attributable to synergies that are expected to be achieved from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the consolidated results of Prepared are included in our Software and Services reportable segment following the business combination. 22 Table of Contents 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 June 30, 2026, and results of operations for the three and six months ended June 30, 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 June 30, 2026 were $904.4 million, an increase of $235.9 million, or 35.3%, from the three months ended June 30, 2025. We had income from operations of $46.8 million, compared to loss from operations of $1.0 million for the same period in the prior year. Gross margin dollars increased $142.7 million reflecting consistent percentage of revenue at 60.4%, when compared to the three months ended June 30, 2025. Adjusted gross margin decreased to 62.9% for the three months ended June 30, 2026 compared to 63.3% for the same period in the prior year. The decrease in gross margin and adjusted gross margin was primarily driven by a higher mix of professional services revenue and scaling new product offerings, partially offset by tariff refunds received in the quarter. Operating expenses increased by $94.9 million, primarily reflecting increased headcount and investments in AI and other initiatives to support business growth. Net income of $29.4 million included a $3.3 million tax provision, income from strategic investments, net, of $5.7 million, and a net realized and unrealized gain of $1.1 million related to our marketable securities. Net income of $36.1 million for the three months ended June 30, 2025 included a $75.0 million tax benefit, partially offset by a noncash unrealized loss of $30.9 million related to our marketable securities. Our revenues for the six months ended June 30, 2026 were $1.7 billion, an increase of $439.6 million, or 34.6%, from the six months ended June 30, 2025. We had income from operations of $76.0 million, compared to loss from operations of $9.8 million for the same period in the prior year. Gross margin dollars increased $254.3 million and decreased as a percentage of revenue to 59.8% from 60.5% compared to the six months ended June 30, 2025. Adjusted gross margin decreased to 62.3% for the six months ended June 30, 2026 compared to 63.4% for the same period in the prior year. The decrease in gross margin and adjusted gross margin was primarily due to a higher mix of professional services revenue and scaling new product offerings, partially offset by tariff refunds received in the quarter. Operating expenses increased by $168.4 million, primarily reflecting increased headcount and investments in AI and other initiatives to support business growth. Net income of $198.7 million included net realized and unrealized gains of $202.3 million related to our strategic investments and a $34.2 million tax provision, partially offset by a noncash unrealized loss of $4.4 million related to our marketable securities. Net income of $124.1 million for the six months ended June 30, 2025 included net realized and unrealized gains of $166.0 million related to our strategic investments and a $54.6 million tax benefit, partially offset by a noncash unrealized loss of $54.3 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. On February 20, 2026, the Supreme Court determined that tariffs imposed under the International Emergency Economic Powers Act ( IEEPA ) were unauthorized. During the three months ended June 30, 2026, we received $47.4 million in refunds. Of this amount, $18.1 million had been previously expensed in 2025 to cost of sales and the remaining is associated with amounts primarily classified as inventory and property and equipment, net, for which the majority would have been expensed in the current year. 23 Table of Contents Results of Operations Three Months Ended June 30, 2026 Compared to the Three Months Ended June 30, 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 June 30, 20262025 Net sales from products$506,55356.0 %$376,36056.3 % Net sales from services397,83644.0 292,17843.7 Net sales904,389100.0 668,538100.0 Cost of product sales243,86127.0 193,50728.9 Cost of service sales114,08112.6 71,28810.7 Cost of sales357,94239.6 264,79539.6 Gross margin546,44760.4 403,74360.4 Operating expenses: Selling, general and administrative290,98232.2 242,21236.2 Research and development208,68723.1 162,56724.4 Total operating expenses499,66955.3 404,77960.6 Income (loss) from operations46,7785.1 (1,036)(0.2) Interest income6,8150.8 23,2533.5 Interest expense(28,101)(3.1)(28,686)(4.3) Other income (loss), net7,1920.9 (32,414)(4.8) Income (loss) before provision for income taxes32,6843.7 (38,883)(5.8) Provision for (benefit from) income taxes3,2570.4 (75,000)(11.2) Net income$29,4273.3 %$36,1175.4 % The following table presents our revenues disaggregated by geography (dollars in thousands): Three Months Ended June 30, 20262025 United States$742,307 82 %$537,373 80 % Other countries162,082 18 131,165 20 Total$904,389 100 %$668,538 100 % International revenue increased compared to the prior year June 30, 2025 comparative period, primarily driven by increased sales in our EMEA region. 24 Table of Contents Net Sales Net sales by product line were as follows (dollars in thousands): Three Months Ended June 30,Dollar ChangePercent Change 20262025 Connected Devices segment: TASER (1) $261,321 28.9 %$216,234 32.3 %$45,087 20.9 % Personal Sensors (2) 95,392 10.5 92,819 13.9 2,573 2.8 Platform Solutions (3) 149,840 16.6 67,307 10.1 82,533 122.6 Total Connected Devices segment506,553 56.0 376,360 56.3 130,193 34.6 Total Software and Services segment397,836 44.0 292,178 43.7 105,658 36.2 Total net sales$904,389 100.0 %$668,538 100.0 %$235,851 35.3 % (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 34.6% for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase of $45.1 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $2.6 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $82.5 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment. Net sales for the Software and Services segment increased 36.2% for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase in the aggregate number of users and growing adoption of our premium solutions by existing customers drove the majority of the increase of $105.7 million. Gross Margin As a percentage of net sales, gross margin for the Connected Devices segment increased to 51.9% from 48.6% for the three months ended June 30, 2026 and 2025, respectively. Adjusted gross margin for the Connected Devices segment was 53.4% for the three months ended June 30, 2026, compared to 51.1% for the three months ended June 30, 2025. The increase in gross margin and adjusted gross margin was primarily driven by tariff refunds, partially offset by increased mix to counter-drone equipment. As a percentage of net sales, gross margin for the Software and Services segment decreased to 71.3% from 75.6% for the three months ended June 30, 2026 and 2025, respectively. Adjusted gross margin for the Software and Services segment decreased to 75.1% for the three months ended June 30, 2026, compared to 78.9% for the three months ended June 30, 2025. The decrease in gross margin and adjusted gross margin was primarily driven by a higher mix of professional services revenue and scaling new product offerings. Selling, General and Administrative Expenses SG&A expenses were as follows (dollars in thousands): Three Months Ended June 30,Dollar ChangePercent Change 20262025 Total selling, general and administrative expenses$290,982 $242,212 $48,770 20.1 % As a percentage of net sales32.2%36.2% Salaries, benefits and bonus expense increased $12.0 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to an increase in headcount. 25 Table of Contents Sales and marketing expense increased $8.9 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to increased commissions. Other SG&A expenses increased $27.9 million in comparison to the prior year June 30, 2025 comparable period, primarily driven by increased advisory expenses of $8.7 million, increased travel expenses of $5.4 million, and increased technology license expenses of $4.4 million as a result of the continued adoption of AI initiatives. Research and Development Expenses R&D expenses were as follows (dollars in thousands): Three Months Ended June 30,Dollar ChangePercent Change 20262025 Total research and development expenses$208,687$162,567$46,12028.4 % As a percentage of net sales23.1 %24.3 % Salaries, benefits and bonus expense increased $20.1 million in comparison to the prior year June 30, 2025 comparable period, which was primarily attributable to an increase in headcount. Stock-based compensation expense increased $7.2 million in comparison to the prior year June 30, 2025 comparable period, primarily driven by increased headcount. Other R&D expenses increased $18.8 million in comparison to the prior year June 30, 2025 comparable period, primarily driven by an increase in engineering expenses of $6.2 million and an increase in technology license expenses of $5.1 million as a result of the continued adoption of AI initiatives. Interest Income (Expense), Net Interest income (expense), net, was as follows (in thousands): Three Months Ended June 30, 20262025 Interest income$6,815 $23,253 Interest expense(28,101)(28,686) Total interest income (expense), net$(21,286)$(5,433) Other Income (Loss), Net Other income (loss), net, was as follows (in thousands): Three Months Ended June 30, 20262025 Income (loss) from strategic investments, net (1) $5,709 $(1,297) Realized and unrealized gain (loss) on marketable securities, net (2) 1,075 (30,870) Gain (loss) on foreign currency transactions, net577 (413) Other, net(169)166 Other income (loss), net$7,192 $(32,414) (1)Reflects the net realized and unrealized income (loss) associated with our strategic investments, during the three months ended June 30, 2026 and 2025, as discussed within Note 6. (2)Reflects the net realized and unrealized gain (loss) on marketable securities, during the three months ended June 30, 2026 and 2025, as discussed within Note 3. 26 Table of Contents Provision for (Benefit from) Income Taxes The effective tax rate was 10.0%, for the three months ended June 30, 2026, compared to 192.9% for the three months ended June 30, 2025. The decrease in effective tax rate for the quarter was primarily driven by a less favorable net tax benefit related to stock-based compensation, R&D tax credits and an increase in pre-tax book income, which reduced the relative impact of other permanent and discrete items. Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands): Three Months Ended June 30, 20262025Change Income before provision for income taxes$32,684 $(38,883)$71,567 Provision for (benefit from) income taxes$3,257 $(75,000)$78,257 Effective tax rate10.0 %192.9 % Net Income We recorded net income of $29.4 million for the three months ended June 30, 2026 compared to net income of $36.1 million for the three months ended June 30, 2025. Net income per basic share was $0.37 for the three months ended June 30, 2026 compared to $0.46 for the three months ended June 30, 2025. Net income per diluted share was $0.36 for the three months ended June 30, 2026 compared to $0.44 for the three months ended June 30, 2025. Six Months Ended June 30, 2026 Compared to the Six Months Ended June 30, 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): Six Months Ended June 30, 20262025 Net sales from products$959,37456.0 %$717,25656.4 % Net sales from services752,36044.0 554,91543.6 Net sales1,711,734100.0 1,272,171100.0 Cost of product sales476,01727.8 363,68828.6 Cost of service sales211,98412.4 139,00110.9 Cost of sales688,00140.2 502,68939.5 Gross margin1,023,73359.8 769,48260.5 Operating expenses: Selling, general and administrative550,07532.1 465,72136.6 Research and development397,63723.3 313,59024.6 Total operating expenses947,71255.4 779,31161.2 Income (loss) from operations76,0214.4 (9,829)(0.7) Interest income17,4261.0 33,8572.7 Interest expense(56,744)(3.3)(36,507)(2.9) Other income, net196,20211.5 81,9876.4 Income before provision for income taxes232,90513.6 69,5085.5 Provision for (benefit from) income taxes34,1662.0 (54,589)(4.3) Net income$198,73911.6 %$124,0979.8 % 27 Table of Contents The following table presents our revenues disaggregated by geography (dollars in thousands): Six Months Ended June 30, 20262025 United States$1,388,834 81 %$1,066,756 84 % Other countries322,900 19 205,415 16 Total$1,711,734 100 %$1,272,171 100 % International revenue increased compared to the prior year June 30, 2025 comparative period, primarily driven by increased sales in our EMEA region. Net Sales Net sales by product line were as follows (dollars in thousands): Six Months Ended June 30,Dollar ChangePercent Change 20262025 Connected Devices segment: TASER (1) $494,174 28.9 %$411,729 32.4 %$82,445 20.0 % Personal Sensors (2) 204,143 11.8 181,224 14.2 22,919 12.6 Platform Solutions (3) 261,057 15.3 124,303 9.8 136,754 110.0 Total Connected Devices segment959,374 56.0 717,256 56.4 242,118 33.8 Total Software and Services segment752,360 44.0 554,915 43.6 197,445 35.6 Total net sales$1,711,734 100.0 %$1,272,171 100.0 %$439,563 34.6 % (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 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 33.8% for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase of $82.4 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $22.9 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $136.8 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment. Net sales for the Software and Services segment increased 35.6% for the six months ended June 30, 2026 compared to the six months ended June 30, 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 $197.4 million. Gross Margin As a percentage of net sales, gross margin for the Connected Devices segment increased to 50.4% from 49.3% for the six months ended June 30, 2026 and 2025, respectively. Adjusted gross margin for the Connected Devices segment was 52.0% for the six months ended June 30, 2026, compared to 51.9% for the six months ended June 30, 2025. The increase in gross margin and adjusted gross margin was primarily driven by tariff refunds, partially offset by increased mix to counter-drone equipment. As a percentage of net sales, gross margin for the Software and Services segment decreased to 71.8% from 75.0% for the six months ended June 30, 2026 and 2025, respectively. Adjusted gross margin for the Software and Services segment decreased to 75.4% for the six months ended June 30, 2026, compared to 78.3% for the six months ended June 30, 2025. The decrease in gross margin and adjusted gross margin was primarily driven by a higher mix of professional services revenue and scaling new product offerings. 28 Table of Contents Selling, General and Administrative Expenses SG&A expenses were as follows (dollars in thousands): Six Months Ended June 30,Dollar ChangePercent Change 20262025 Total selling, general and administrative expenses$550,075 $465,721 $84,354 18.1 % As a percentage of net sales32.1%36.6% Salaries, benefits and bonus expense increased $22.8 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to an increase in headcount. Sales and marketing expense increased $19.1 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to increased commissions. Other SG&A expenses increased $42.4 million in comparison to the prior year June 30, 2025 comparable period, primarily attributable to increased advisory expenses of $17.8 million and increased travel expenses of $8.0 million. Research and Development Expenses R&D expenses were as follows (dollars in thousands): Six Months Ended June 30,Dollar ChangePercent Change 20262025 Total research and development expenses$397,637$313,590$84,04726.8 % As a percentage of net sales23.2 %24.6 % Salaries, benefits and bonus expense increased $41.5 million in comparison to the prior year June 30, 2025 comparable period, which was primarily attributable to an increase in headcount. Stock-based compensation expense increased $8.6 million in comparison to the prior year June 30, 2025 comparable period, partially attributable to increased headcount. Other R&D expenses increased $33.9 million in comparison to the prior year June 30, 2025 comparable period, primarily driven by $13.0 million of increased engineering expenses and $6.5 million of increased technology license expenses as a result of the continued adoption of AI initiatives. Interest Income (Expense), Net Interest income (expense), net, was as follows (in thousands): Six Months Ended June 30, 20262025 Interest income$17,426 $33,857 Interest expense(56,744)(36,507) Total interest income (expense), net$(39,318)$(2,650) 29 Table of Contents Other Income, Net Other income (loss), net, was as follows (in thousands): Six Months Ended June 30, 20262025 Income from strategic investments, net (1) $202,309 $166,024 Realized and unrealized loss on marketable securities, net (2) (4,436)(54,270) Loss on foreign currency transactions, net(1,589)(1,216) Induced conversion of convertible debt (28,666) Other, net(82)115 Other income, net$196,202 $81,987 (1)Reflects the net realized and unrealized income associated with our strategic investments, during the six months ended June 30, 2026 and 2025, as discussed within Note 6. (2)Reflects the net realized and unrealized loss on marketable securities, during the six months ended June 30, 2026 and 2025, as discussed within Note 3. Provision for Income Taxes The effective tax rate was 14.7%, for the six months ended June 30, 2026, compared to (78.5)% for the six months ended June 30, 2025. The increase in effective tax rate for the six months ended June 30, 2026 was primarily driven by a less favorable net tax benefit related to stock-based compensation, R&D tax credits and an increase in pre-tax book income, which reduced the relative impact of other permanent and discrete items. Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands): Six Months Ended June 30, 20262025Change Income before provision for income taxes$232,905 $69,508 $163,397 Provision for (benefit from) income taxes$34,166 $(54,589)$88,755 Effective tax rate14.7 %(78.5)% Net Income We recorded net income of $198.7 million for the six months ended June 30, 2026 compared to net income of $124.1 million for the six months ended June 30, 2025. Net income per basic share was $2.47 for the six months ended June 30, 2026 compared to $1.60 for the six months ended June 30, 2025. Net income per diluted share was $2.41 for the six months ended June 30, 2026 compared to $1.52 for the six months ended June 30, 2025. 30 Table of Contents 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. Furthermore, beginning in the quarterly period ended June 30, 2026, we updated the calculation of Adjusted EBITDA and Adjusted Gross Margin to exclude additional jurisdiction-specific compensation-related taxes incurred as a direct result of Employee XSP vesting events. This update expands upon our existing adjustment, which was historically limited to payroll taxes related to Employee XSP vesting events. For all comparable prior periods presented, our adjustment does not include any incremental jurisdiction-specific compensation-related taxes, as the impact of this change on historical periods was determined to be de minimis. Accordingly, compensation taxes related to Employee XSP vesting for all comparable prior periods has not been recast and solely reflects adjustment for payroll taxes incurred. 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; compensation taxes related to Employee XSP vesting; 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; compensation taxes related to Employee XSP vesting; 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. 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. 31 Table of Contents EBITDA and adjusted EBITDA reconcile to net income as follows (in thousands): Three Months EndedSix Months Ended June 30, 2026June 30, 2025June 30, 2026June 30, 2025 Net income$29,427 $36,117 $198,739 $124,097 Depreciation and amortization31,615 19,324 60,961 38,519 Interest expense28,101 28,686 56,744 36,507 Investment interest income(6,815)(23,253)(17,426)(33,857) Provision for (benefit from) income taxes3,257 (75,000)34,166 (54,589) EBITDA$85,585 $(14,126)$333,184 $110,677 Non-GAAP adjustments: Other (income) loss, net(7,192)32,167 (196,202)(83,088) Stock-based compensation expense144,320 139,244 278,005 279,483 Transaction costs related to strategic investments and acquisitions4,560 2,230 11,048 4,957 Compensation taxes related to Employee XSP vesting9,417 9,782 9,532 9,782 Litigation and regulatory costs1,886 774 3,220 2,823 Severance costs (1) 681 2,730 Non-qualified deferred compensation liability adjustments2,767 1,561 2,137 1,561 607 Adjusted EBITDA$242,024 $171,632 $443,654 $326,802 (1)For the three and six months ended June 30, 2026, non-recurring severance costs of $0.7 million and $2.7 million, respectively, consisted of stock-based compensation, cash payments and employee benefits. Adjusted gross margin reconciles to gross margin as follows (in thousands): Three Months Ended June 30, 20262025 Connected DevicesSoftware and ServicesTotal Connected DevicesSoftware and ServicesTotal Gross margin$262,692$283,755$546,447$182,853$220,890$403,743 Stock-based compensation expense5,5165,82511,3417,5834,97812,561 Amortization of acquired intangible assets1,7298,57210,3011,3333,8535,186 Compensation taxes related to Employee XSP vesting4266331,0596348541,488 Severance costs (1) (25) (25) Adjusted gross margin$270,338$298,785$569,123$192,403$230,575$422,978 Gross margin %51.9 %71.3 %60.4 %48.6 %75.6 %60.4 % Adjusted gross margin %53.4 %75.1 %62.9 %51.1 %78.9 %63.3 % (1)For the three months ended June 30, 2026, non-recurring severance costs recorded to cost of service and product sales consisted of adjustments for cash payments and employee benefits. 32 Table of Contents Six Months Ended June 30, 20262025 Connected DevicesSoftware and ServicesTotal Connected DevicesSoftware and ServicesTotal Gross margin$483,357$540,376$1,023,733$353,568$415,914$769,482 Stock-based compensation expense11,29110,55321,84415,05910,38925,448 Amortization of acquired intangible assets3,45915,80819,2672,6707,47910,149 Compensation taxes related to Employee XSP vesting4266331,0596348541,488 Severance costs (1) 12120141 Inventory step-up amortization 607 607 Adjusted gross margin$498,654$567,390$1,066,044$372,538$434,636$807,174 Gross margin %50.4 %71.8 %59.8 %49.3 %75.0 %60.5 % Adjusted gross margin %52.0 %75.4 %62.3 %51.9 %78.3 %63.4 % (1)For the six months ended June 30, 2026, non-recurring severance costs recorded to cost of service and product sales consisted of stock-based compensation, cash payments and employee benefits. Liquidity and Capital Resources Summary June 30, 2026December 31, 2025Dollar Change Cash and cash equivalents$597,704 $1,201,147 $(603,443) Available-for-sale investments75,703 505,417 (429,714) Total $673,407 $1,706,564 $(1,033,157) Our most significant source of liquidity typically includes funds generated by operating activities and available cash and cash equivalents and short-term investments. As of June 30, 2026, we had $0.6 billion of cash and cash equivalents, a decrease of $603.4 million from December 31, 2025. As of June 30, 2026, we had $75.7 million of available-for-sale investments, a decrease of $429.7 million from December 31, 2025, primarily due to sales and maturities of available-for-sale securities during the period. Refer to Note 3 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details. In addition, our Credit Agreement is available for additional working capital needs or investment opportunities. As of June 30, 2026, we had letters of credit outstanding of approximately $9.1 million under the facility and available borrowing of $290.9 million. Refer to Note 8 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details. As of June 30, 2026, we have an aggregate of $1.75 billion of Senior Notes outstanding. As of June 30, 2026, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 20% of our total revenue for the six months ended June 30, 2026, and approximately 21% and 8% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of June 30, 2026. Refer to Note 8 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details. We believe we have access to additional financing. However, there is no assurance that such funding will be available on terms acceptable to us, or at all. We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements, including capital expenditures, working capital requirements, potential acquisitions or investments, income and payroll tax payments for net-settled stock awards, and other liquidity requirements through at least the next 12 months. Going forward, we expect to continue to be an opportunistic issuer of debt securities and may issue new debt securities from time to time to fund our growth or refinance future debt maturities, among other things. In addition, from time to time, we may acquire our debt securities through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may from time to time determine, for cash or other consideration. 33 Table of Contents Cash Flows The following table summarizes our cash flows from operating, investing and financing activities (in thousands): Six Months Ended June 30,Dollar Change 20262025 Operating activities$(11,440)$(65,910)$54,470 Investing activities(465,762)(1,088,749)622,987 Financing activities(122,618)1,308,861 (1,431,479) Effect of exchange rate changes on cash and cash equivalents(3,949)6,497 (10,446) Net increase (decrease) in cash and cash equivalents and restricted cash$(603,769)$160,699 $(764,468) Operating activities Net cash used in operating activities was $11.4 million for the six months ended June 30, 2026 compared to net cash used in operating activities of $65.9 million for the six months ended June 30, 2025. The net operating cash outflow for the six months ended June 30, 2026 includes net income of $198.7 million, a net add-back of non-cash income statement items of $176.2 million and a $386.4 million net change in operating assets and liabilities. Primary drivers of the non-cash items include $278.7 million of stock-based compensation expense for employee equity programs and $62.8 million of depreciation and amortization, partially offset by $197.9 million in fair value adjustments for net realized and unrealized gains and losses on our strategic investments and marketable securities. The realized and unrealized gains on our strategic investments were primarily related to an observable price change for one of our investees. The change in operating assets and liabilities includes $256.9 million of receivables and contract assets primarily due to increased sales, as well as the timing of invoicing and cash collections, $39.6 million of inventory and accounts payable primarily driven by advanced raw material purchases for TASER 10 CEDs and counter-drone equipment, and $35.3 million of deferred revenue. Investing activities Net cash used in investing activities was $465.8 million for the six months ended June 30, 2026 compared to $1.1 billion for the six months ended June 30, 2025. The net investing cash outflow is primarily driven by $551.6 million for business combinations, which is substantially all related to the Carbyne acquisition, $302.8 million for investment purchases, which includes $302.1 million of strategic investments purchases, and $44.2 million for purchases of property and equipment. The cash outflow was partially offset by $434.3 million of proceeds from calls, maturities and sales of available-for-sale and marketable securities investments. The decrease in net cash outflow compared to the prior period is primarily driven by reduced investments in available-for-sale securities, partially offset by the cash paid in the current year for the acquisition of Carbyne. Financing activities Net cash used in financing activities was $122.6 million for the six months ended June 30, 2026 compared to net cash provided by financing activities of $1.3 billion for the six months ended June 30, 2025. The financing cash outflow in the current period was primarily driven by $140.2 million of income and payroll tax payments made on behalf of employees who net-settled stock awards during the period, as well as $0.3 million which remains unpaid as of the six months ended June 30, 2026. The outflow was further driven by $81.1 million of principal payments related to the redemption of our 2027 Notes. Financing cash inflow for the period includes $100.5 million of net cash proceeds from our ATM equity offering program, considering any unpaid issuance costs as of June 30, 2026. The change in financing cash flow compared to the prior period primarily reflects gross proceeds of $1.8 billion from the Senior Note issuance, partially offset by principal payments of $407.5 million related to the induced conversion of our 2027 Notes during the six months ended June 30, 2025. 34 Table of Contents Critical Accounting Estimates Our management s discussion and analysis of our financial condition and results of operation is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. While we do not believe that a change in these estimates is reasonably likely, there can be no assurance that our actual results will not differ from these estimates. Our critical accounting estimates are discussed in our 2025 Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no significant changes to these critical accounting estimates for the six months ended June 30, 2026. 35 Table of Contents Item 3. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We historically invested in various financial instruments which have consisted principally of money market accounts, certificates of deposit, and corporate and municipal bonds with a typical long-term debt rating of A or better by any nationally recognized statistical rating organization, denominated in U.S. dollars. All of our cash equivalents and investments are treated as available-for-sale . Based on investment positions as of June 30, 2026, no investments are subject to interest rate risk. Additionally, we have access to a $300.0 million line of credit borrowing facility which bears interest at 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. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit, which totaled $9.1 million at June 30, 2026. At June 30, 2026, there was no amount outstanding under the line of credit, and the available borrowing under the line of credit was $290.9 million. We have not borrowed any funds under the line of credit since its inception; however, should we need to do so in the future, such borrowings could be subject to adverse or favorable changes in the underlying interest rate. There have been no other material changes in our primary risk exposures or management of risks since the prior year. Exchange Rate Risk Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, in each case compared to the U.S. dollar, related to transactions by our foreign subsidiaries. The majority of our sales to international customers are transacted in foreign currencies and therefore are subject to exchange rate fluctuations on these transactions. The cost of our products to our customers increases when the U.S. dollar strengthens against their local currency, and we may have more sales and expenses denominated in foreign currencies in future years which could increase our foreign exchange rate risk. Additionally, intercompany sales to our non-U.S. dollar functional currency international subsidiaries are transacted in U.S. dollars which could increase our foreign exchange rate risk caused by foreign currency transaction gains and losses. To date, we have not engaged in any currency hedging activities. However, we may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, the prohibitive economic cost of hedging particular exposures. As such, fluctuations in currency exchange rates could harm our business in the future. There have been no other material changes in our primary risk exposures or management of risks since the prior year. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and Chief Financial Officer are responsible for the evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of June 30, 2026. 36 Table of Contents Remediation of Previously Identified Material Weakness As disclosed in Part II, Item 9A of our 2025 Annual Report on Form 10-K, we previously identified a material weakness in our internal control over financial reporting related to revenue recognition for customer contracts. Specifically, the Company did not design and maintain controls to update its revenue recognition policies to reflect changes in product offerings or terms and conditions of arrangements with customers to ensure revenue was appropriately recognized and disclosed in accordance with GAAP. In response to this material weakness, we previously completed the design and implementation of control activities to i) periodically assess our revenue accounting policies, ii) make updates to the policies to reflect changes in product offerings or terms and conditions of the arrangements with customers, and iii) monitor and appropriately account for our existing and new revenue streams. During the second quarter of 2026, we completed the necessary testing of these control activities and determined they have been appropriately designed and implemented and have operated effectively for a sufficient period of time to conclude that the material weakness has been remediated as of June 30, 2026. Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings The discussion in Note 11 to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein. Item 1A. Risk Factors There have been no significant changes to the risk factors outlined in our Annual Report on Form 10-K for the year ended December 31, 2025. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures None. 37 Table of Contents Item 5. Other Information The table below describes the contracts, instructions or written plans for the purchase or sale of securities adopted or terminated by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended June 30, 2026, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). Name and TitleActionDate of Termination or AdoptionExpiration DateAggregate Number of Securities to be Sold Joshua Isner, President Termination (1) May 29, 2026December 31, 2026135,466 (2) Jeffrey Kunins, Chief Product Officer and Chief Technology Officer AdoptionMay 22, 2026December 31, 202615,839 (2) Joshua Isner, President AdoptionJune 1, 2026December 31, 2026100,390 (2) Isaiah Fields, Chief Legal Officer AdoptionJune 12, 2026March 30, 202710,337 (2) (1)Trading arrangement was originally adopted on March 4, 2026. (2)Reflects the maximum number of shares to be sold, excluding the effect of shares withheld for taxes. No other Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (as defined by Item 408(c) of Regulation S-K) were entered into, modified, or terminated by our directors or officers during such period.