AXON ENTERPRISE, INC.

Previous wording

The following discussion and analysis of our financial condition as of June 30, 2025, and results of operations for the three and six months ended June 30, 2025 and 2024, 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 amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on May 7, 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 as a result of certain factors, including but not limited to those described under “Part II, Item 1A. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements” on page ii of this Quarterly Report on Form 10-Q.

Current wording

The following discussion and analysis of our financial condition as of September 30, 2025, and results of operations for the three and nine months ended September 30, 2025 and 2024, 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 amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on May 7, 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 as a result of certain factors, including but not limited to those described under “Part II, Item 1A. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements” on page ii of this Quarterly Report on Form 10-Q.

Previous wording

Our revenues for the three months ended June 30, 2025 were $668.5 million, an increase of $165.3 million, or 32.8%, from the three months ended June 30, 2024. We had loss from operations of $1.0 million, compared to income from operations of $33.8 million for the same period in the prior year. Gross margin dollars increased $97.6 million and decreased as a percentage of revenue to 60.4% from 60.8% compared to the three months ended June 30, 2024. The decrease was primarily driven by higher stock-based compensation expense in the current period. Excluding the impacts of stock-based compensation expense, acquired intangibles amortization in cost of goods sold, andpayroll taxes related to 2024 Employee XSP vesting, adjusted gross margin increased to 63.3% for the three months ended June 30, 2025 compared to 63.1% for the three months ended June 30, 2024. Operating expenses increased by $132.4 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $36.1 million included a$75.0 million tax benefit, partially offset by a noncash unrealized loss of $30.9 million related to our marketable securities. Net income of $41.5 million for the three months ended June 30, 2024 included a noncash unrealized gain of $7.8 million on our investment in marketable securities.

Current wording

Our revenues for the three months ended September 30, 2025 were $710.6 million, an increase of $166.4 million, or 30.6%, from the three months ended September 30, 2024. We had loss from operations of $2.1 million, compared to income from operations of $24.1 million for the same period in the prior year. Gross margin dollars increased $96.6 million and decreased as a percentage of revenue to 60.1% from 60.8% compared to the three months ended September 30, 2024. Adjusted gross margin decreased to 62.7% for the three months ended September 30, 2025 compared to 63.2% for the same period in the prior year, primarily driven by global tariffs and a higher mix of Platform Solutions revenue, partially offset by Software and Services. Operating expenses increased by $122.8 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net loss of $2.2 million included a $17.9 million tax provision, net realized and unrealized gains of$14.6 million related to our strategic investments, and a net realized and unrealized gain of $8.3 million related to our marketable securities. Net income of $67.0 million for the three months ended September 30, 2024 included a noncash unrealized gain of $44.0 million on our investment in marketable securities.

Previous wording

Our revenues for the six months ended June 30, 2025 were $1.3 billion, an increase of $309.1 million, or 32.1%, from the six months ended June 30, 2024. We had loss from operations of $9.8 million, compared to income from operations of $50.2 million for the same period in the prior year. Gross margin dollars increased $204.7 million and increased as a percentage of revenue to 60.5% from 58.6% compared to the six months ended June 30, 2024. Excluding the impacts of stock-based compensation expense, acquired intangibles amortization in cost of goods sold, andpayroll taxes related to 2024 Employee XSP vesting, adjusted gross margin increased to 63.4% for the six months ended June 30, 2025 compared to 63.1% for the same period in the prior year, primarily due to higher software revenue mix. Operating expenses increased by $264.7 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $124.1 million included net realized and unrealized gains of $166.0 million related to our strategic investments and a$54.6 milliontax 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, as discussed further within Note 10. Net income of $174.8 million for the six months ended June 30, 2024 included a realized gain of $42.3 million related to our acquisition in Fusus, an unrealized gain of $75.8 million related to a strategic investment, and a noncash unrealized gain of $29.6 million on our investment in marketable securities.

Current wording

Our revenues for the nine months ended September 30, 2025 were $2.0 billion, an increase of $475.4 million, or 31.5%, from the nine months ended September 30, 2024. We had loss from operations of $12.0 million, compared to income from operations of $74.3 million for the same period in the prior year. Gross margin dollars increased $301.3 million and increased as a percentage of revenue to 60.4% from 59.4% compared to the nine months ended September 30, 2024. The increase was primarily driven by leverage on stock-based compensation expense and intangibles amortization. Adjusted gross margin remained consistent at 63.2% for the nine months ended September 30, 2025 compared to the same period in the prior year. Operating expenses increased by $387.6 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $121.9 million included net realized and unrealized gains of $180.6 million related to our strategic investments and a $36.7 million tax benefit, partially offset by a net realized and unrealized loss of 46.0 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, as discussed further within Note 10. Net income of $241.9 million for the nine months ended September 30, 2024 included a realized gain of $42.3 million related to our acquisition in Fusus, unrealized gains of $76.2 million related to our strategic investments, and a noncash unrealized gain of $73.6 million on our investment in marketable securities.

Previous wording

The following table presents data from our consolidated statements of operations and comprehensive income as wellas the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (dollars in thousands):

Current wording

The following table presents data from ourconsolidated statements of operations and comprehensive income (loss) as wellas the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (loss) (dollars in thousands):

Previous wording

International revenue increased compared to the prior year June 30, 2024 comparative period, primarily driven by increased sales in our Americas region.

Current wording

International revenue increased compared to the prior year September 30, 2024 comparative period, primarily driven by increased sales in our EMEA region.

Previous wording

Net sales for the Connected Devices segment increased 28.6% for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. The increase of $34.7 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $17.7 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $31.2 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment.

Current wording

Net sales for the Connected Devices segment increased 23.6% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase of $34.3 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $18.0 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $25.1 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment, virtual reality training, and fleet systems.

Previous wording

Net sales for the Softwareand Services segment increased 38.8% for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. 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 $81.7 million.

Current wording

Net sales for the Software and Services segment increased 41.1% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. 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 $88.9 million.

Previous wording

As a percentage of net sales, gross margin for the Software and Services segment increased to 75.6% from 74.1% for the three months ended June 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization, andpayroll taxes related to 2024 Employee XSP vesting, increased to 78.9% for the three months ended June 30, 2025, compared to 76.6% for the three months ended June 30, 2024. The increase in both measures was primarily driven by higher software mix.

Current wording

As a percentage of net sales, gross margin for the Software and Services segment increased to 73.8% from 73.5% for the three months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense and acquired intangibles amortization, increased to 76.8% for the three months ended September 30, 2025, compared to 76.3% for the three months ended September 30, 2024. The increase was primarily driven by higher software mix.

Previous wording

Stock-based compensation expense increased $33.6 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Current wording

Stock-based compensation expense increased $19.8 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Previous wording

Sales and marketing expense increased $6.3 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to increased commissions and in-person events.

Current wording

Sales and marketing expense increased $5.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to increased commissions.

Previous wording

Stock-based compensation expense increased $26.8 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Current wording

Stock-based compensation expense increased $22.0 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Previous wording

(1)Reflects the unrealized loss on marketable securities during the three months ended June 30, 2025, as discussed within Note 3.

Current wording

(1)Reflects the net realized and unrealized gain on marketable securities, during the three months ended September 30, 2025, as discussed within Note 3.

Previous wording

Provision for (benefit from) income taxes and effective tax rates were as follows (dollars in thousands):

Current wording

Provision for income taxes and effective tax rates were as follows (dollars in thousands):

Previous wording

We recorded net income of $36.1 million for the three months ended June 30, 2025 compared to net income of $41.5 million for thethree months ended June 30, 2024. Net income per basic share was $0.46 for the three months ended June 30, 2025 compared to $0.55 net income per basic share for thethree months ended June 30, 2024. Net income per diluted share was $0.44 for the three months ended June 30, 2025 compared to $0.53 net income per diluted share for thethree months ended June 30, 2024.

Current wording

We recorded net loss of $2.2 million for the three months ended September 30, 2025 compared to net income of $67.0 million for the three months ended September 30, 2024. Net income (loss) per basic share was $(0.03) for the three months ended September 30, 2025 compared to $0.89 for the three months ended September 30, 2024. Net income (loss) per diluted share was $(0.03) for the three months ended September 30, 2025 compared to $0.86 for the three months ended September 30, 2024.

Previous wording

The following table presents data from our consolidated statements of operations and comprehensive income as well as the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (dollars in thousands):

Current wording

The following table presents data from our consolidated statements of operations and comprehensive income (loss) as well as the percentage relationship to total net sales of items included in our consolidated statements of operations and comprehensive income (loss) (dollars in thousands):

Previous wording

Net sales for the Connected Devices segment increased 27.4% for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The increase of $65.6 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $38.1 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $50.4 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and virtual reality training.

Current wording

Net sales for the Connected Devices segment increased 26.0% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase of $99.9 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $56.1 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $75.5 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and virtual reality training.

Previous wording

Net sales for the Software and Services segment increased 38.8% for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. 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 $155.0 million.

Current wording

Net sales for the Software and Services segment increased 39.6% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. 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 $243.9 million.

Previous wording

As a percentage of net sales, gross margin for the Connected Devices segment increased to 49.3% from 47.7% for the six months ended June 30, 2025 and 2024, respectively. The increase was primarily due to higher stock-based compensation expense for thesix months ended June 30, 2024. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense, acquired intangibles amortization, andpayroll taxes related to 2024 Employee XSP vesting, was 51.9% for the six months ended June 30, 2025, compared to 53.8% for thesix months ended June 30, 2024. The decrease is primarily driven by increased mix from Platform Solutions.

Current wording

As a percentage of net sales, gross margin for the Connected Devices segment increased to 49.5% from 49.4% for the nine months ended September 30, 2025 and 2024, respectively. The increase was primarily due to lower stock-based compensation expense. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense, acquired intangibles amortization, inventory step-up amortization related to acquisitions and payroll taxes related to 2024 Employee XSP vesting, was 52.0% for the nine months ended September 30, 2025, compared to 54.0% for the nine months ended September 30, 2024. The decrease is primarily driven by global tariffs and higher mix of Platform Solutions revenue.

Previous wording

As a percentage of net sales, gross margin for the Software and Services segment increased to 75.0% from 74.1% for the six months ended June 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization, and payroll taxes related to 2024 Employee XSP vesting, increased to 78.3% for the six months ended June 30, 2025, compared to 76.4% for the six months ended June 30, 2024. The increase was primarily driven by higher software mix.

Current wording

As a percentage of net sales, gross margin for the Software and Services segment increased to 74.5% from 73.9% for the nine months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization and payroll taxes related to 2024 Employee XSP vesting, increased to 77.8% for the nine months ended September 30, 2025, compared to 76.3% for the nine months ended September 30, 2024. The increase was primarily driven by higher software mix.

Previous wording

Stock-based compensation expense increased $81.7 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Current wording

Stock-based compensation expense increased $101.6 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Previous wording

Sales and marketing expense increased $9.5 million in comparison to the prior year June 30, 2024 comparable period, which was primarily attributable to increased commissions and in-person events.

Current wording

Sales and marketing expense increased $14.5 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to increased commissions.

Previous wording

Stock-based compensation expense increased$60.5 million in comparison to the prior year June 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Current wording

Stock-based compensa tion expense increased $82.4 million in comparison to the prior year September 30, 2024 comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.

Previous wording

(1)Reflects the unrealized loss on marketable securities during the six months ended June 30, 2025, as discussed within Note 3.

Current wording

(1)Reflects the net realized and unrealized loss on marketable securities during the nine months ended September 30, 2025, as discussed within Note 3.

Previous wording

The effective tax rate is (78.5)% for the six months ended June 30, 2025, compared to 19.6% for the six months ended June 30, 2024. The change is attributable to the favorable impact of stock-based compensation and R&D tax credits. These were partially offset by higher tax expense related to the executive compensation limitation under IRC Section 162(m), increased unrecognized tax benefits, and the absence of a prior year gain related to an investment transaction not recognized for tax. The overall change in the effective tax rate also reflects the impact of lower pre-tax book income in the current period, which magnifies the relative effect of permanent and discrete items.

Current wording

The effective tax rate was (43.1)% for the nine months ended September 30, 2025, compared to 18.6% for the nine months ended September 30, 2024. The change is attributable to the net tax benefit related to stock-based compensation and R&D tax credits. These were partially offset by increased unrecognized tax benefits. The overall change in the effective tax rate also reflects the impact of lower pre-tax book income in the current period, which magnifies the relative effect of permanent and discrete item.

Previous wording

We recorded net income of $124.1 million for the six months ended June 30, 2025 compared to net income of $174.8 million for the six months ended June 30, 2024. Net income per basic share was $1.60 for the six months ended June 30, 2025 compared to $2.32 net income per basic share for the six months ended June 30, 2024. Net income per diluted share was $1.52 for the six months ended June 30, 2025 compared to $2.26 net income per diluted share for the six months ended June 30, 2024.

Current wording

We recorded net income of $121.9 million for the nine months ended September 30, 2025 compared to net income of $241.9 million for the nine months ended September 30, 2024. Net income per basic share was $1.57 for the nine months ended September 30, 2025 compared to $3.20 for the nine months ended September 30, 2024. Net income per diluted share was $1.48 for the nine months ended September 30, 2025 compared to $3.12 for the nine months ended September 30, 2024.

Previous wording

•Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments, marketable securities, and mark-to-market on our non-qualified deferred compensation liabilities; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; inventory step-up amortization related to acquisitions; certain litigation costs and recoveries related to (1) antitrust cases we consider to be non-recurring and outside of our core operating results and (2) litigation matters for acquired companies that were unresolved at the date of the acquisition; payroll taxes related to 2024 Employee XSP vesting; and other unusual, non-recurring pre-tax items that are not considered representative of our underlying operating performance (listed in the tables below).

Current wording

•Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments, marketable securities, and mark-to-market on our non-qualified deferred compensation liabilities; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; transaction and integration costs related to strategic investments and acquisitions, including the change in fair value of contingent consideration arrangements; inventory step-up amortization related to acquisitions; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; losses incurred as a result of the disposal, abandonment, and impairment of property, equipment and intangible assets; payroll taxes related to 2024 Employee XSP vesting and 2018 CEO Performance Award option exercises; and other unusual, non-recurring pre-tax items that are not considered representative of our underlying operating performance (listed in the tables below).

Previous wording

EBITDA and adjusted EBITDA reconcile to net income as follows (in thousands):

Current wording

EBITDA and adjusted EBITDA reconcile to net income (loss) as follows (in thousands):

Previous wording

As a result of the Segment Realignment, we have recast adjusted gross margin for the three and six months ended June 30, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):

Current wording

As a result of the Segment Realignment, we have recast adjusted gross margin for the three and nine months ended September 30, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):

Previous wording

Our most significant source of liquidity continues to be funds generated by operating activities and available cash andcash equivalents and short-term investments. As of June 30, 2025, we had $615.5 million of cash and cash equivalents, an increase of $160.7 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of June 30, 2025, we had $1.5 billion of available-for-sale investments, an increase of $1.1 billion from December 31, 2024 primarily as a result of investment activity following the issuance of the Senior Notes in March 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the issuance.

Current wording

Our most significant source of liquidity continues to be funds generated by operating activities and available cash andcash equivalents and short-term investments. As of September 30, 2025, we had $1.4 billion of cash and cash equivalents, an increase of $969.0 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of September 30, 2025, we had $952.8 million of available-for-sale investments, an increase of $619.6 million from December 31, 2024 primarily as a result of investment activity following the issuance of the Senior Notes in March 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the issuance.

Previous wording

In addition, our Credit Agreement is available for additional working capital needs or investment opportunities. The Credit Agreement provides for a senior unsecured multi-currency revolving credit facility in an aggregate principal amount of up to $300.0 million, $50.0 million of which is available for the issuance of letters of credit. As of June 30, 2025, and December 31, 2024, respectively, 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, 2025, we had letters of credit outstanding of approximately $8.9 million under the facility and available borrowing of $291.1 million. Refer to Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our Credit Agreement and outstanding letters of credit.

Current wording

In addition, our Credit Agreement is available for additional working capital needs or investment opportunities. The Credit Agreement provides for a senior unsecured multi-currency revolving credit facility in an aggregate principal amount of up to $300.0 million, $50.0 million of which is available for the issuance of letters of credit. As of September 30, 2025, and December 31, 2024, respectively, 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 September 30, 2025, we had letters of credit outstanding of approximately $8.9 million under the facility and available borrowing of $291.1 million. Refer to Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

Previous wording

As of June 30, 2025, we have an aggregate of $1.75 billion of Senior Notes outstanding. As of June 30, 2025, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 14% of our total revenue for the six months ended June 30, 2025, and approximately 19% and 6% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of June 30, 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our Senior Notes.

Current wording

As of September 30, 2025, we have an aggregate of $1.75 billion of Senior Notes outstanding. As of September 30, 2025, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 13% of our total revenue for the nine months ended September 30, 2025, and approximately 9% and 5% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of September 30, 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

Previous wording

Furthermore, during the six months ended June 30, 2025, we sold 250,000 shares of our common stock under our ATM. We generated approximately $185.8 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $183.6 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $2.2 million. Refer to Note 12 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our ATM.

Current wording

Furthermore, during the nine months ended September 30, 2025, we sold approximately 0.5 million shares of our common stock under our ATM. We generated approximately $366.3 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $362.1 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $4.2 million. Refer to Note 12 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

Previous wording

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.

Current wording

We believe we have access to additional fina ncing. 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.

Previous wording

Net cash provided by operating activities for the six months ended June 30, 2025 consisted of net income of $124.1 million, a net add-back of non-cash income statement items of $188.5 million and a $378.5 million net change in operating assets and liabilities. Primary drivers of the non-cash items include stock-based compensation expense for employee equity programs, debt inducement expense related to the induced conversion for our 2027 Notes, fair value adjustments for the net realized and unrealized gains and losses on our strategic investments and marketable securities, and deferred income taxes. The realized and unrealized gains on our strategic investments and related warrants were primarily related to an observable price change and subsequent sale of one of our strategic investments. The change in receivables and contract assets was primarily due to increased sales, as well as the timing of invoicing and cash collections. The change in inventory and accounts payable was primarily due to advanced raw material purchases for Axon Body 4 and TASER 10 CEDs to support future sales. The change in deferred income taxes was primarily driven by a reduction in unrealized investment gains and the realization of previously unrealized investment gains. The change in other, net is primarily driven by supplier prepayments, receivables for income tax and interest in connection with our Senior Notes.

Current wording

Primary drivers of the non-cash items include $425.6 million of stock-based compensation expense for employee equity programs, $28.6 million of debt inducement expense related to the induced conversion for our 2027 Notes and $56.2 million of depreciation and amortization, partially offset by $134.6 million in fair value adjustments for net realized and unrealized gains and losses on our strategic investments and marketable securities and $53.7 million for deferred income taxes. The realized and unrealized gains on our strategic investments and related warrants were primarily related to an observable price change and subsequent sale for one of our strategic investments and a liquidation event for a separate strategic investment. The change in deferred income taxes was primarily driven by a reduction and realization of previously unrealized investment gains, partially offset by the deduction of certain previously capitalized R&D costs as a result of OBBBA.

Previous wording

Net cash used in investing activities was $1.1 billion for the six months ended June 30, 2025 compared to $91.9 million for thesix months ended June 30, 2024. The net investing cash outflow is primarily driven by $1.8 billion of investment purchases, including $1.5 billion for short-term investments and $244.3 million for strategic investments, and $47.8 million for purchases of property and equipment. The cash outflow was partially offset by $416.0 million of proceeds from calls, maturities and sales of available-for-sale investments and $340.7 million of proceeds from the sale of strategic investments. The increase in net cash outflow compared to prior period is primarily driven by greater available-for-sale and strategic investment activity in the current period, partially offset by the decrease in cash paid for business acquisitions.

Current wording

Net cash used in investing activities was $498.5 million for the nine months ended September 30, 2025 compared to $48.8 million for the nine months ended September 30, 2024. The net investing cash outflow is primarily driven by $2.0 billion of investment purchases, including $1.8 billion for short-term investments and $249.1 million for strategic investments, and $74.5 million for purchases of property and equipment. The cash outflow was partially offset by $1.3 billion of proceeds from calls, maturities and sales of available-for-sale and marketable securities investments and $376.7 million of proceeds from the sale and liquidation of strategic investments. The increase in net cash outflow compared to prior period is primarily driven by greater available-for-sale and strategic investment activity in the current period, partially offset by the decrease in cash paid for business acquisitions.

Previous wording

Net cash provided by financing activities was $1.3 billion for the six months ended June 30, 2025 compared to cash used by financing activities of $4.9 million for thesix months ended June 30, 2024. The financing cash inflow was partially driven by gross proceeds of $1.8 billion from the Senior Notes issuance and net proceeds of $184 million from our ATM equity offering program. The proceeds were partially offset by $407.5 million of principal payments related to the induced conversion for our 2027 Notes, $24.7 million of transaction costs related to the induced conversion, debt issuance, and revolver modifications, and payments totaling $192.8 million for income and payroll taxes on behalf of employees who net-settled stock awards during the period. The increase in income and payroll tax payments in the period is largely driven by the vesting of Tranche 1 of the 2024 Employee XSP program vesting.

Current wording

Net cash provided by financing activities was $1.5 billion for the nine months ended September 30, 2025 compared to cash used in financing activities of $12.6 million for the nine months ended September 30, 2024. The financing cash inflow was partially driven by gross proceeds of $1.8 billion from the Senior Notes issuance and net proceeds of $362.2 million from our ATM equity offering program. The proceeds were partially offset by $407.5 million of principal payments related to the conversions for our 2027 Notes, $26.9 million of transaction costs related to the induced conversion, debt issuance, and revolver modifications, and payments totaling $209.6 million for income and payroll taxes on behalf of employees who net-settled stock awards during the period. The increase in income and payroll tax payments in the period is largely driven by the vesting of Tranche 1 of the 2024 Employee XSP program.

Previous wording

Our critical accounting estimates are discussed in our amended 2024 Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024. There have been no significant changes to these critical accounting estimates for the six months ended June 30, 2025. Refer to Note 1 in Part I, Item 1 of this Quarterly Report on Form 10-Q for any additional details regarding our significant accounting policies.

Current wording

Our critical accounting estimates are discussed in our amended 2024 Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024. There have been no significant changes to these critical accounting estimates for the nine months ended September 30, 2025.